ZeroStack Corp.

ZeroStack Corp.

Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026(In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

1. NATURE OF OPERATIONS

ZeroStack Corp. (the "Company" or "ZeroStack") (with its subsidiaries, the "Group") was incorporated as Flora Growth Corp. under the laws of the Province of Ontario, Canada on March 13, 2019. The Company, which filed articles of amendment to change its name to ZeroStack Corp. on January 29, 2026, is a decentralized artificial intelligence ("AI") treasury company that is investing in the future of AI infrastructure through strategic ownership in$0G, the native token of the 0G Chain, a layer-1 blockchain designed to enable users to deploy and operate decentralized AI applications and data ("0G Tokens", each a "0G Token" or "0G"), and an AI-focused asset management company. The Company is also a global pharmaceutical distributor through its wholly owned subsidiary Phatebo GmbH ("Phatebo"). The Company's registered office and principal place of business is located at 40 King Street, W Suite 2400, Toronto, Ontario, M5H 3S1, Canada.

2. BASIS OF PRESENTATION

These unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Annual Report"). These unaudited condensed interim consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.

These unaudited condensed interim consolidated financial statements apply the same accounting policies as those used in the financial statements included in the 2025 Annual Report, except as noted below.

Blocker Securities Contribution Agreements and Blocker Stockholders' Agreement

On March 31, 2026, Texas Blocker Corp. ("Texas Blocker"), a Texas corporation that was formed by Daniel Reis-Faria and Dany Vaiman, the Chief Executive Officer and Chief Financial Officer, respectively, of the Company, for the purpose of facilitating the Exchange (as defined below), entered into securities contribution agreements (the "Securities Contribution Agreements") with certain investors (the "Investors") pursuant to which the Investors contributed an aggregate of 142,232,948 0G Tokens in exchange for an aggregate of 9,104,614 shares of common stock, $0.001 par value, of Texas Blocker (the "Blocker Shares") issued on a private placement basis (the "Contribution"). The fair market value of each Token was deemed to be $0.7549 and the fair market value of each Blocker Share was deemed to be $11.7931 in accordance with the valuation mutually agreed upon by Texas Blocker and the Investors. Each Blocker Share is to be exchanged on a one-for-one basis for one ZeroStack Share or ZeroStack Pre-funded Warrant pursuant to the Share Exchange Agreement (each as defined and described below).

The Securities Contribution Agreements include customary representations, warranties and covenants by Texas Blocker and the Investors for an agreement of its type. Additionally, Texas Blocker has agreed to provide the Investors with customary indemnification against certain liabilities.

Closing of the Contribution occurred on March 31, 2026.

Concurrent with entering into the Securities Contribution Agreements, each of the Investors entered into a stockholders' agreement by and among Texas Blocker and the other Investors (the "Stockholders' Agreement") and a share exchange agreement by and among Texas Blocker, ZeroStack and the other Investors (the "Share Exchange Agreement").

Under the Stockholders' Agreement, the Investors agreed to not transfer any of their Blocker Shares unless (i) pursuant to the Share Exchange Agreement, (ii) to an Affiliate (as defined in the Stockholders' Agreement) of such Investor, subject to unanimous approval of the stockholders of Texas Blocker ("Unanimous Stockholder Approval") and the approval of the Board of Directors of Texas Blocker, which consists of Daniel Reis-Faria and Dany Vaiman ("Board Approval") or (iii) to any other person, subject to Unanimous Stockholder Approval and Board Approval. Additionally, without Unanimous Stockholder Approval, Texas Blocker is not able to enter into any commitment to conduct any business or transaction that is not (i) in furtherance of the Exchange and the other transactions contemplated by the Share Exchange Agreement, (ii) related to the staking of 0G Tokens owned or acquired after the date of signing the Stockholders' Agreement by Texas Blocker or (iii) to pay a management fee to ZeroStack or engage in another tax-planning arrangement as determined by the Board of Directors of Texas Blocker.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

Share Exchange Agreement

On March 31, 2026, concurrent with the execution of the Securities Contribution Agreements and Stockholders' Agreement, ZeroStack entered into the Share Exchange Agreement with Texas Blocker and the Investors. Under the terms of the Share Exchange Agreement, ZeroStack was to issue an aggregate of 9,104,614 Common Shares (the "ZeroStack Shares") and/or pre-funded warrants of the Company (the "ZeroStack Pre-funded Warrants" and together with the ZeroStack Shares, the "ZeroStack Securities") in exchange for an aggregate of 9,104,614 Blocker Shares, being all the issued and outstanding shares of Texas Blocker (the "Exchange"). Upon consummation of the Exchange, Texas Blocker was to become a wholly-owned subsidiary of ZeroStack.

The respective obligations of ZeroStack and the Investors to consummate the Exchange are subject to the satisfaction or waiver (if applicable) of a number of customary conditions for an agreement of its type including, but not limited to: (i) approval of the shareholders of ZeroStack (the "ZeroStack Shareholder Approval") to issue the ZeroStack Securities under the applicable rules of the Nasdaq Stock Market LLC (the "Nasdaq") and (ii) approval of the stockholders of Texas Blocker by written consent resolution to exchange the Blocker Shares for the ZeroStack Securities. Additionally, ZeroStack agreed to file a re-sale registration statement on Form S-3 registering the ZeroStack Shares, ZeroStack Pre-funded Warrants and the Common Shares issuable upon exercise of the ZeroStack Pre-funded Warrants. The Share Exchange Agreement includes customary representations, warranties and covenants by ZeroStack, Texas Blocker and the Investors for an agreement of its type.

Upon closing of the Exchange, which is expected to occur on or around July 14, 2026, Texas Blocker will become a wholly-owned subsidiary of ZeroStack and ZeroStack will be classified as a U.S. domestic corporation for U.S. federal income tax purposes pursuant to Section 7874(b) of the U.S. Internal Revenue Code of 1986, as amended. Because of the obligations of ZeroStack and the Investors described above, Texas Blocker was not a subsidiary ZeroStack as of March 31, 2026. Moreover, the Company does not hold a variable interest in Texas Blocker because it does not have an explicit interest or support arrangement that absorbs Texas Blocker's variability and there is no implicit arrangement through related parties that transfers Texas Blocker's economic variability to ZeroStack. Because the Company does not hold a variable interest in Texas Blocker as of March 31, 2026, the Company did not consolidate Texas Blocker.

The Executive Chairman of the Company's board of directors, Michael Heinrich, was the Chief Executive Officer of Zero Gravity Labs Inc. ("Zero Gravity") at the closing of the Contribution. Zero Gravity owns 51% of Texas Blocker as of March 31, 2026.

Revenue recognition

The Company began staking its 0G Tokens on January 21, 2026. Therefore, the provision of validating blockchain transactions is now an output of the Company's ordinary activities. The Company maintains control over the staked 0G Tokens as they remain in the Company's wallets and the Company has the right to direct their use. However, because the node that completes the validation is owned and operated by the third-party validator, the Company acts as an agent to the service of validating blockchain transactions. Therefore, it records the staking rewards as revenue on a net of a 2.0% commission basis.

Each separate validation under the validator contract represents a performance obligation. The transaction consideration the Company receives, the digital asset awards, is a non-cash consideration, which the Company measures at fair value. The Company will utilize a daily aggregation with daily average price valuation method, which aggregates the total 0G Tokens earned each day multiplied by the closing price of 0G on the Company's principal market, Kraken. The satisfaction of the performance obligation for transaction verification services occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are deposited to the Company's wallet. At that point, revenue is recognized.

The Company now relies on staking revenue as part of its ongoing operations and on converting its staking rewards to cash to meet its working capital requirements. The current staking network conditions and protocol-level reward mechanics should not be viewed as fixed, guaranteed, or indicative of future results. Staking yields may fluctuate and could decrease materially or be eliminated due to a variety of factors, including but not limited to:

• changes in network participation rates or total staked supply;

• modifications to protocol reward structures or governance decisions;

• smart contract or protocol-level risks;

• market price volatility of the underlying digital assets;

• technical, security, or operational risks affecting the blockchain network; and

• regulatory developments or changes in applicable laws and guidance.

Significant Judgments over the accounting for cryptocurrency and assessment of control over the 0G protocol

The Company holds cryptocurrency associated with the 0G protocol and accounts for such assets at fair value in accordance with applicable U.S. GAAP. The determination of the appropriate accounting model for these cryptocurrency holdings requires significant judgment, particularly in assessing whether the Company, either individually or together with related parties, controls the underlying protocol. In evaluating whether it controls the 0G protocol, management considered a range of qualitative and quantitative factors, including the Company's governance participation, decision-making authority, and the structure of the protocol's governance mechanisms. Key considerations included:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

• Governance Voting Power: The Company holds less than 67% of the governance voting power of the 0G protocol. While significant, this ownership level does not provide the Company with unilateral decision-making authority.

• Supermajority Requirements: Substantive protocol decisions require approval by approximately 67% of governance voting power. This supermajority threshold prevents the Company from independently directing or effecting governance outcomes.

• Distribution of Remaining Voting Interests: The remaining governance tokens are widely held among third parties, including several holders or groups with meaningful voting interests. These parties are not subject to the Company's direction, and no arrangements exist that would allow the Company to coordinate or control their voting behavior.

• Absence of Special Governance Rights: The Company does not have any preferential rights, enhanced voting privileges, or other contractual mechanisms that would provide it with disproportionate influence over protocol decisions.

• Influence versus Control: Management considered whether its ownership interest, combined with its participation in the ecosystem, could result in de facto control. The Company determined that, while it may exert influence as a significant participant, it does not have the ability to direct the activities of the protocol in a manner consistent with control.

Based on the above analysis, management concluded that the Company does not control the 0G protocol. Accordingly, the Company continues to account for its cryptocurrency holdings associated with the protocol at fair value.

This assessment involves significant judgment and is subject to ongoing evaluation. Changes in governance structures, voting thresholds, ownership concentrations, or relationships among token holders could result in a different conclusion. If the Company were to determine that it controls the protocol in the future, it would be required to change its accounting model for the related cryptocurrency holdings from fair value to a cost less impairment model, which could materially affect the Company's financial position and results of operations.

Going concern

The accompanying unaudited condensed interim consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these unaudited condensed interim consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The Group had cash of $2.3 million and an accumulated deficit of $314.4 million at March 31, 2026 and incurred a net loss of $36.7 million for the three months then ended. In prior years, the Company believed that its level of cash was not sufficient to continue investing in growth, while at the same time meeting its obligations as they became due, and these conditions raised substantial doubt regarding the Group's ability to continue as a going concern for a period of at least one year from the date of issuance of those consolidated financial statements. With the closing of the private equity offerings in the third and fourth quarters of 2025, the Company believes that its existing cash and the staking rewards from its unrestricted digital assets are and will be sufficient to meet its working capital requirements and future obligations for at least one year after the issuance date of these consolidated financial statements.

Basis of consolidation

These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. At March 31, 2026, the Company's subsidiaries and respective ownership percentages have not changed from December 31, 2025.

3. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

On September 20, 2025, the Company entered into an Equity Transfer and Debt Repayment Agreement (the "Agreement") with a group of investors (the "Investors"), which included Clifford Starke and Sammy Dorf, each of whom were directors of the Company at the time of the transaction, and Dany Vaiman, the Company's chief financial officer. Under the Agreement, the Investors acquired assets from the Company relating to the Company's hemp and cannabis related businesses, including Just Brands LLC, Just Brands FL LLC, Just Brands International LTD, High Roller Private Label LLC (together with Just Brands LLC, Just Brands FL LLC, Just Brands International LTD ("JustCBD"), Vessel Brand Inc., Vessel Brand Canada Inc. (together with Vessel Brand Inc., "Vessel"), United Beverage Distribution Inc. ("United"), Klokken Aarhus Inc., Rangers Pharmaceuticals A/S (together with Klokken Aarhus Inc., "Klokken"), TruHC Pharma GmbH ("TruHC"), Australian Vaporizers Pty LTD and the Company's investment in an early-stage European cannabis company (collectively the "Cannabis Business"). The sale of the Cannabis Business occurred following signing on September 26, 2025.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The consideration received by the Company for the sale of the Cannabis Business consisted of the cancellation by the Investors of all of the Company's obligations pursuant to promissory notes owed to the Investors with five year maturities held by the Company with an aggregate amount of principal and accrued interest of approximately $2.2 million.

The sale enabled the Company to concentrate on its international pharmaceutical distribution business. The sale was part of several strategic changes to become a digital assets treasury company.

The following table summarizes the major classes of line items included in loss from discontinued operations, net of tax, for the three months ended March 31, 2026 and 2025:

The following table summarizes the significant operating and investing items related to the Cannabis Business for the three months ended March 31, 2026 and 2025:

The subsidiaries sold included TruHC, Klokken Aarhus Inc. and Rangers Pharmaceuticals A/S, which were part of the commercial and wholesale segment; Just Brands LLC, Just Brands FL LLC, Just Brands International LTD, High Roller Private Label LLC, Vessel Brand Inc., Vessel Brand Canada Inc., United and Australian Vaporizers Pty LTD which made up the entirety of the house of brands segment; and the Company's investment in an early stage European cannabis company which was part of the Company's corporate segment.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The Company applies significant judgement in determining whether a disposal meets the criteria to present as held for sale at the reporting date, and whether the disposal represents a strategic shift that has (or will have) a major effect on its operations and financial results in order to be classified as a discontinued operation. The criteria evaluated are both quantitative and qualitative in nature, to evaluate the significance of the disposal relative to the operations of the Company as a whole. The Company has determined this disposition represents a strategic shift in operations that will have a major effect on the Company's operations and financial results, and accordingly, has been presented as discontinued operations.

4. INSOLVENCY AND DECONSOLIDATION OF CERTAIN SUBSIDIARIES

On March 14, 2025, each of Franchise Global Health Inc. ("FGH"), Franchise Cannabis Corp., CBDMed Therapeutics Inc., Harmony Health One Inc., 1200325 B.C. Ltd., and Fayber Technologies Inc. (collectively, the "Canadian Insolvent Entities") made a voluntary assignment in bankruptcy pursuant to section 49 Bankruptcy and Insolvency Act (Canada) in the Ontario Superior Court of Justice (the "Ontario Court"). On March 14, 2025, the Ontario Court appointed a trustee of the estate of each of the Canadian insolvent entities.

On March 18, 2025, ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG (together "the German Insolvent Entities") each made filings for insolvency proceedings under German insolvency laws in the Constance Regional Court (the "German Court"). On March 18, 2025, the German Court appointed a trustee of the estate of each of the German insolvent entities.

The trustees have been appointed by the respective courts and the trustees have assumed and will continue to exercise control over all assets and liabilities of the Insolvent Entities. The assets of the Insolvent Entities will be liquidated for distribution in accordance with the priorities established by the courts. The Company expects that no distributions will be available in the Insolvent Entities' liquidation.

Each of the Canadian insolvent entities and the German Insolvent Entities was a direct or indirect subsidiary of the Company and was part of the Company's acquisition of FGH in December 2022. As a result of the insolvencies, the Company concluded that it no longer controls the Insolvent Entities for accounting purposes as of March 14, 2025, in accordance with ASC Topic 810, and, therefore, deconsolidated all assets and liabilities of the Insolvent Entities during the three months ended March 31, 2025 from the Company's financial statements. Subsequent to the deconsolidation, the Company accounted for its investment in the Insolvent Entities using the cost method of accounting, which was recorded at $nil in the Company's condensed interim consolidated statements of financial position as of March 31, 2026. The Insolvent Entities' results of operations were removed from the Company's condensed interim consolidated statements of loss and comprehensive loss beginning March 14, 2025. The historical financial results for the Insolvent Entities have not been classified as a discontinued operation because it does not represent a strategic shift with a major effect on the Company's operations and financial results.

The following table provides the combined carrying value of assets and liabilities of Insolvent Entities that were deconsolidated on March 14, 2025:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The gain on deconsolidation of Insolvent Entities is recorded in gain on disposal of Insolvent Entities in the unaudited condensed interim consolidated statement of loss and comprehensive loss for the three months ended March 31, 2025.

The contingencies and indemnification receivable relate to a legal claim filed against FGH, which was covered under an indemnification agreement between the Company and the former Chief Executive Officer and shareholder of FGH. The voluntary assignment in bankruptcy of FGH triggered an automatic stay on the related legal proceedings.

**5. ** TRADE AND AMOUNTS RECEIVABLE

The Company's trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at March 31, 2026 and December 31, 2025 consists of trade accounts receivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes ("HST"), as well as Value Added Tax ("VAT") from various jurisdictions, and other receivables.

Changes in the trade accounts receivable allowance for the three months ended March 31, 2026 relate to establishing an allowance for expected credit losses. There was less than $0.1 million in write-offs of trade receivables for the three months ended March 31, 2026, (2025 - $nil). The Company has no amounts written off that are still subject to collection enforcement activity as at March 31, 2026. The aging of the Company’s trade accounts receivable is as follows:

6. INVENTORY

Inventory is comprised of the following:

For the three months ended March 31, 2026, the Company recorded inventory impairment as a write-down to cost of sales in the amount of less than $0.1 million (2025 - $nil).

7. DIGITAL ASSETS

On March 31, 2026, the Company entered into a note settlement agreement (the "Note Settlement Agreement") with Zero Gravity Labs Inc. ("Zero Gravity") pursuant to which the Zero Gravity Convertible Note (as defined below) was settled. As part of the settlement, the Company transferred 50,000,000 0G tokens to Zero Gravity to satisfy all outstanding principal and interest associated with the Zero Gravity Convertible Note. See Note 9.

The Company began staking its 0G tokens on January 21, 2026 with a third-party validator. For the three months ended March 31, 2026, the Company earned total rewards of 4,364,724 0G tokens, or $2.8 million, net of a 2% commission paid to the validator (2025 -nil). See Note 17.

As of March 31, 2026, the Company's digital assets consist of the following:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

As of March 31, 2026, of the Company's 77,783,151 0G tokens,50,000,000 were subject to protocol-imposed unbonding restrictions and were not transferable or available for use until completion of the unbonding period. The unbonding period ended on April 2, 2026.

The following table presents a reconciliation of the fair values of the Company's investments in digital assets for the three months ended March 31, 2026:

The Company recorded $24.4 million in realized losses on the use of digital assets for the repayment under stipulations of the Zero Gravity Convertible Note for the three months ended March 31, 2026. See Note 9.

In accordance with ASC Topic 820, Fair Value Measurement, the Company measures the fair value of its digital assets based on the quoted end-of-day price on the measurement date for a single digital asset on an active trading platform. Management has determined that Kraken, an active exchange market, represents the principal market for the 0G and BTC that it holds, and the end-of-day quoted price is both readily available and representative of fair value (Level 1 inputs).

The Company recorded a net loss of $60.7 million in the value of its digital assets for the three months ended March 31, 2026, which was reported in the loss from changes in fair value of digital assets in the unaudited condensed interim consolidated statements of loss and comprehensive loss.

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

Depreciation expense was less than $0.1 million for the three months ended March 31, 2026, (2025 - less than $0.1 million) and was recorded in other expenses, net in the unaudited condensed interim consolidated statements of loss and comprehensive loss.

9. DEBT

The Company's debt consisted of the following:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

Zero Gravity Convertible Note

On October 23, 2025, the Company received 50,000,000 0G Tokens from Zero Gravity in exchange for an unsecured convertible note in an aggregate original principal amount of 50,000,000 0G Tokens (the "Zero Gravity Convertible Note"). The Zero Gravity Convertible Note, which was to mature on September 22, 2035 and contained an option for the Company to prepay at any time by delivering the 0G Tokens back to the holder without penalty, was valued at $87.9 million on October 23, 2025. The Company elected the fair value option under ASC 825-10-50-28 and accordingly measured the instrument at fair value at each reporting period with changes in fair value recognized in the changes in financial instruments fair value line on the consolidated statements of loss and comprehensive loss. The fair value of the Zero Gravity Convertible Note was determined using a Monte Carlo simulation incorporating Brownian motion, which simulates a distribution of stock prices of the Company and the 0G Token prices throughout the term of the notes. The significant inputs to the valuation include an 9.9-year term to maturity, the closing value of 0G on October 23, 2025 ($1.76), the closing price of the Common Shares on October 23, 2025 ($13.87), a discount rate of 21.0%, a risk-free rate of return of 3.63%, a volatility of 102% based on the available historical volatility of Solana calculated from its historical daily returns, a contractual conversion price of $33.34, and an 8.0% interest rate on the note.

The Zero Gravity Convertible Note accrued interest payable in 0G Tokens, or in cash at $3.00 per 0G Token at the holder's option, at a rate of eight percent (8.0%) per annum, payable quarterly in arrears on March 31, June 30, September 30 and December 31 (each such date, an "Interest Payment Date"). At the Company's option, with respect to any Interest Payment Date through and including September 30, 2026, accrued interest for the applicable period could be paid in-kind by capitalizing and adding such accrued interest to the outstanding 0G Token principal amount. The Zero Gravity Convertible Note was denominated in 0G Tokens. However, at maturity, the original principal of the note was to be repayable in 0G whereas the holder could demand interest in either 0G Tokens or in cash at $3.00 per 0G Token. Shareholder approval of the issuance of the Common Shares underlying the Zero Gravity Convertible Note was obtained at the Shareholder Meeting, which occurred on December 19, 2025, and the Zero Gravity Convertible Note and accrued and unpaid interest became convertible into Common Shares at a conversion ratio of the U.S. Dollar Value (as defined in the Zero Gravity Convertible Note) of Tokens divided by $33.34, subject to updates in accordance with the terms of the Zero Gravity Convertible Note. This conversion was also limited to a 4.99% maximum ownership percentage of the number of Common Shares outstanding immediately after giving effect of such issuance. The 0G Tokens related to the Zero Gravity Convertible Note contained restrictions that prevented the Company from selling the 0G Tokens or the related staking rewards unless it obtains prior written consent from Zero Gravity.

As of December 31, 2025, the total outstanding amount on the Zero Gravity Convertible Note was 51,000,000 0G Tokens with a fair value of $50.7 million. The reduction in outstanding amount from the date of issuance was due mainly to a fair value adjustment of $37.1 million. The fair value of the Zero Gravity Convertible Note was determined as the lower of the prepayment amount and the fair value using a Monte Carlo simulation incorporating Brownian motion, which simulates a distribution of stock prices of the Company and the 0G Token prices throughout the term of the notes. The significant inputs to the valuation included an 9.7-year term to maturity, the closing value of 0G on December 31, 2025 ($0.98), the closing price of the Common Shares on December 31, 2025 ($6.26), a discount rate of 21.5%, a risk-free rate of return of 3.84%, a volatility of 101% based on the available historical volatility of Solana calculated from its historical daily returns, a contractual conversion price of $33.34, and an 8.0% interest rate on the note.

On March 31, 2026, the Company entered into the Note Settlement Agreement with Zero Gravity pursuant to which the Zero Gravity Convertible Note issued to Zero Gravity was settled. The Note Settlement Agreement provided that upon payment by ZeroStack to Zero Gravity on or before March 31, 2026 of 50,000,000 0G Tokens, then ZeroStack would be deemed to have paid the entire principal and interest of the Zero Gravity Convertible Note in full and ZeroStack shall have no further obligations under the Zero Gravity Convertible Note and it shall be deemed to be satisfied.

As of the date of settlement of March 31, 2026, the total outstanding amount on the Zero Gravity Convertible Note was 52,020,000 0G Tokens with a fair value of $27.7 million. The fair value of the Zero Gravity Convertible Note was determined as the lower of the prepayment amount and the fair value using a Monte Carlo simulation incorporating Brownian motion, which simulated a distribution of stock prices of the Company and the 0G Token prices throughout the term of the notes. The significant inputs to the valuation included an 9.5-year term to maturity, the closing value of 0G on March 31, 2026 ($0.493), the closing price of the Common Shares on March 31, 2026 ($6.18), a discount rate of 22.7%, a risk-free rate of return of 3.91%, a volatility of 100% based on the available historical volatility of Solana calculated from its historical daily returns, a contractual conversion price of $33.34, and an 8.0% interest rate on the note. The amount for the Zero Gravity Convertible Note was measured as a Level 3 fair value financial instrument within the fair value hierarchy.

The Company recorded a gain on the settlement of the Zero Gravity Convertible Note of $3.1 million, which was recorded in the changes in financial instruments fair value line on theunaudited condensed interim consolidated statements of loss and comprehensive loss for the three months ended March 31, 2026.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The Executive Chairman of the Company's board of directors, Michael Heinrich, was the Chief Executive Officer of Zero Gravity at the time of issuance and settlement of the Zero Gravity Convertible Note.

Euro credit facility

The Company, through its Phatebo subsidiary, has credit facilities totaling 2.4 million Euro, or $2.7 million (December 31, 2025 -2.4 million Euro, or $2.8 million), at three different banks in Germany. These arrangements are open-ended without predetermined maturity dates. Principal and interest payments are due at the end of the respective terms, with interest payable either monthly or at the end of the term, depending on the lending institution. Interest rates can be adjusted every three to six months. As of March 31, 2026, the total outstanding amount on these credit facilities was 2.4 million Euro, or $2.7 million (December 31, 2025 -2.3 million Euro, or $2.7 million) with a weighted average interest rate of 8.12% and due within the next twelve months. These credit facilities are secured by various guarantees, including payment guarantees upon default.

Phatebo short term borrowing

On March 26, 2026, Phatebo, a wholly owned subsidiary of the Company, entered into a short-term loan agreement with an individual lender. Under the terms of the agreement, Phatebo borrowed 0.3 million EUR ($0.4 million), which was funded in a single advance. The loan matures four weeks from the date of funding and is repayable in a single lump-sum payment at maturity. The loan provides for a fixed interest charge of €65,000 for the contractual term. The total contractual repayment amount at maturity is 0.4 million EUR ($0.5 million). The loan is secured by substantially all current assets and fixed assets of Phatebo. Interest expense is recognized over the contractual term of the loan using the effective interest method and is included in interest expense in the accompanying unaudited condensed consolidated statements of operations. The outstanding principal balance and the accrued interest payable is classified as current portion of debt in the accompanying unaudited condensed interim consolidated statement of financial position as of March 31, 2026.

Although the loan carries a fixed interest charge rather than a stated annual interest rate, the Company considers the borrowing to represent a high-cost, short-term financing arrangement entered into to meet near-term working capital needs.

See Note 18 for subsequent settlement of the Phatebo short term borrowing.

Maturities

The following table shows the maturities of the Company's debt instruments outstanding as of March 31, 2026.

10. LEASES

The Company's leases primarily consist of administrative real estate leases in Germany and the United States. Management has determined all the Company's leases are operating leases through March 31, 2026. Information regarding the Company's leases is as follows:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

Maturities of operating lease liabilities as of March 31, 2026 are as follows:

Some of the Company's leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to five years. The lease liabilities above include renewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2026.

In March 2025, the Company began leasing 10,400 sq. ft. of warehouse and office space in Hilzingen, Germany, for $1,000 a month, pursuant to a lease agreement that expires in February 2030.

11. SHARE CAPITAL

The Company had the following significant Common Share transactions:

Three months ended March 31, 2026

AT THE MARKET ("ATM") OFFERING

On September 23, 2025, the Company entered into an ATM sales agreement (the "Sales Agreement") with Revere Securities LLC (the "Agent") pursuant to which the Company may sell from time to time, at its option, Common Shares through the Agent in its capacity as sales agent. The sale of Common Shares, if any, will be made under the Company's Registration Statement, by any method that is deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act.

Subject to the terms and conditions of the Sales Agreement, the Agent is to use its commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Capital Market, to sell on the Company's behalf all of the Common Shares requested to be sold by the Company. The Company may instruct the Agent not to sell Common Shares if the sales cannot be effected at or above the price designated by the Company in any such instruction. The Company or the Agent may suspend the offering of Common Shares being made through the Agent under the Sales Agreement upon proper notice to the other parties.

Unless otherwise agreed between the Company and the Agent, settlement for sales of the Common Shares are to occur on the first trading day following the date on which any sales are made. Sales of the Common Shares are to be settled through the facilities of The Depository Trust Company or by such other means as the Company and the Sales Agents may agree.

The aggregate compensation payable to the Agent, in cash, upon each sale of Common Shares through the Agent pursuant to the Sales Agreement, is an amount equal to:(i) 3.00% of the first $150 million in aggregate gross proceeds from the sale of Common Shares, (ii) 2.00% of the next $350 million in aggregate gross proceeds from the sale of the Common Shares, and (iii) 1.25% of any gross proceeds in excess of $500 million from the sale of the Common Shares. In addition, the Company has agreed in the Sales Agreement to provide indemnification and contribution to the Agent against certain liabilities, including liabilities under the Securities Act, in addition to certain other covenants, representations and warranties customary for an agreement of this type.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The Company is not obligated to make any sales of common shares under the Sales Agreement. The offering of common shares pursuant to the Sales Agreement will terminate upon the termination of the Sales Agreement by the Company or by the Agent, only with respect to itself, under the circumstances specified in the Sales Agreement.

The Company issued a total of 18,265 Common Shares at an average purchase price of $6.29 per share for gross proceeds of $0.1 million in the three months ended March 31, 2026.

Three months ended March 31, 2025

FEBRUARY PAYMENT TO UNITED OWNERS

The Company issued 23,688 of its Common Shares valued at $0.8 million to certain prior owners of United, which included Clifford Starke and Sammy Dorf, each of whom were directors of ZeroStack at the time (the "ZeroStack Directors"), and Mr. Vaiman (together with the ZeroStack Directors, the "Related Parties"), as part of the Company's acquisition of 100% of the issued and outstanding common shares of United on February 4, 2025.

12. SHARE BASED COMPENSATION

The Company's 2022 Incentive Compensation Plan (the "2022 Plan") and its previous "'rolling" stock option plan (the "Prior Plan") are described in the Company's 2025 Form 10-K. The 2022 Plan was amended to increase the number of shares issuable thereunder from 64,103 to 115,385 shares at the Company's annual and special shareholder meeting on June 30, 2025. And on December 19, 2025 the 2022 Plan was amended, again, to increase the number of shares issuable thereunder from 115,385 to 1,506,892 shares.

OPTIONS

Stock options granted under the Prior Plan are non-transferable and non-assignable and may be granted for a term not exceeding five years. Under the 2022 Plan, stock options may be granted with a term of up to ten years and in the case of all stock options, the exercise price may not be less than 100% of the fair market value of a Common Share on the date the award is granted. Stock option vesting terms are subject to the discretion of the Compensation Committee of the Company's Board of Directors (the "Committee"). Common shares are newly issued from available authorized shares upon exercise of awards. The Company no longer makes new grants of stock options under the Prior Plan.

Information relating to share options outstanding and exercisable as at March 31, 2026 and December 31, 2025 is as follows:

The fair value of stock options issued in years prior to December 31, 2024 were determined at the time of issuance using the Black-Scholes option pricing model. The stock options issued in the year ended December 31, 2025 were determined at the time of issuance using a Monte Carlo simulation incorporating Brownian motion, which simulates a distribution of stock prices for the Company throughout the term of the stock options, based on certain assumptions of stock price behavior. The significant inputs to the valuation include a 10-year term to expiration, the closing price of the Common Shares on the December 19, 2025 grant date ($7.31), a risk-free rate of return of 4.12% per annum, and a volatility of 102% based on the historical volatility of Solana calculated from its historical daily returns.

The total expense related to the options granted in the three months ended March 31, 2026 was $2.8 million (2025 -nil). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The options granted in 2025 vest based on the Company's volume weighted average price ("VWAP") of the Company's common shares as follows:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

At March 31, 2025 the total remaining stock option cost for nonvested awards is expected to be $4.8 million over a weighted average future period of 0.3 years until the awards vest. A total of 1,178,020 options issued in 2025 are to vest based on the VWAP of the Company's common shares, as described above, provided if the award holder is still employed or engaged by the Company or the twelve-month anniversary of the date the award holder's service ceased. A total of 235,604 of those options vested during the three months ended March 31, 2026.

RESTRICTED STOCK AWARDS

Restricted stock is a grant of Common Shares which may not be sold or disposed of, and which is subject to such risks of forfeiture and other restrictions as the Committee, in its discretion, may impose. A participant granted restricted stock generally has all of the rights of a shareholder of the Company, unless otherwise determined by the Committee. Subject to certain exceptions, the vesting of restricted stock awards is subject to the holder's continued employment or engagement through the applicable vesting date. Unvested restricted stock awards will be forfeited if the holder's employment or engagement ceases during the vesting period and may, in certain circumstances, be accelerated. The Company values restricted stock awards based on the closing share price of the Common Shares as of the date of grant. The fair value of the restricted stock award is recorded as expense over the vesting period.

Information relating to restricted stock awards outstanding as at March 31, 2026 and December 31, 2025:

The total expense related to the restricted stock awards in the three months ended March 31, 2026 was less than $0.1 million (2025 - less than $0.1 million). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

As of March 31, 2026, the Company had no unrecognized compensation expense related to restricted stock awards.

STOCK APPRECIATION RIGHTS ("SARs")

SARs grant a right to receive, upon exercise thereof, the excess of the fair market value of one Common Share on the date of exercise over the grant price of the SAR. The grant price of a SAR shall not be less than 100% of the fair market value of a Common Share on the date of the grant. SARs generally vest over a period of zero to three years and have a term of ten or eleven years. The SARS granted by the Company to date are only payable in Common Shares and have no cash payments options.

Information relating to SARs outstanding at March 31, 2026 and December 31, 2025 is as follows:

The total expense related to SARs granted in the three months ended March 31, 2026 was less than $0.1 million (2025 - $0.2 million, respectively). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The share based compensation expense of the SARs granted in prior years will be recognized in tranches over the derived service period, ranging from zero to one year, provided that the recipient is still employed or engaged by the Company.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

13. WARRANTS

2025 PRIVATE PLACEMENT

As discussed in the 2025 Annual Report, the Company issued an aggregate of 3,004,249 pre-funded warrants to purchase one Common Share at an exercise price of $0.0001 ("PIPE Pre-Funded Warrants") and 105,666 Common Share purchase warrants to purchase one Common Share at an exercise price of $25.19 ("PIPE Warrants") on September 26, 2025, in connection with the first closing of a private placement offering ("PIPE Offering"). The Company issued another 5,962,681 PIPE Pre-Funded Warrants and 1,586 PIPE Warrants on October 9, 2025, in connection with the second closing of the PIPE Offering. Subject to shareholder approval, which occurred on December 19, 2025, each PIPE Pre-Funded Warrant entitles the holder to purchase one Common Share at an exercise price of $0.0001, and each PIPE Warrant entitles the holder to purchase one Common Share at an exercise price of $25.19. The PIPE Pre-Funded Warrants have no expiry date, whereas the PIPE Warrants expire 1,825 days after shareholder approval.

The PIPE Pre-Funded Warrants and the PIPE Warrants are classified as equity because they are freestanding financial instruments, are immediately exercisable, permit the holder to receive a fixed number of the Common Shares and do not provide any guarantee of value or return.

There were 1,366,939 PIPE Pre-Funded Warrants exercised during the three months ending March 31, 2026, and the total number of PIPE Pre-Funded Warrants outstanding was 7,530,471 as of March 31, 2026, all of which were vested were exercisable and have no expiry date.

The following summarizes the number of warrants outstanding as of March 31, 2026, excluding the Pre-Funded Warrants:

14. COMMITMENTS AND CONTINGENCIES

Provisions

The Company's provisions and contingent liabilities consist of the following as of March 31, 2026:

The legal dispute balance as of March 31, 2026 involves a legal proceeding that was brought against the Company and Vessel Brand Inc., which was formerly a wholly owned subsidiary of the Company, by the lessor of the warehousing and office space in Carlsbad, CA on June 2, 2025, in the Superior Court of California, County of San Diego. The lessor is claiming breach of lease and written guaranty agreements by the Company and is seeking damages for $1.3 million in unpaid rent,10% interest on its damages, and reasonable attorneys' fees of the lessor. The Company has assessed the claims and concluded that it is probable that a liability has been incurred and the Company is able to reasonably estimate the loss of $1.3 million. As a result, without acknowledgement (explicitly or implicitly) of any amount of liability arising from this claim, the Company recognized a provision of $1.3 million to reflect the value of the claim. At March 31, 2026, this balance was included in the contingencies line on the consolidated statement of financial position.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

Legal proceedings

The Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time to time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probable ultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as at March 31, 2026.

15. LOSS PER SHARE

The Company calculates basic loss per share based upon the weighted average number of Common Shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential Common Shares outstanding during the period. The calculation of diluted earnings per share excludes all potential Common Shares, with the exception of Pre-Funded Warrants, if their inclusion would have an anti-dilutive effect. Restricted stock award recipients under the 2022 Plan have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing earnings per share. A total of 7,530,471 Pre-funded Warrants are included in the computing earnings per share because the exercise price of the Pre-funded Warrants is nominal and there are no conditions that must be satisfied prior to their exercise.

16. FINANCIAL INSTRUMENTS

Fair value

The Company's financial instruments measured at amortized cost as at March 31, 2026 and December 31, 2025 consist of cash, restricted cash, trade and amounts receivable, trade payables, contingencies, other accrued liabilities, lease liabilities, and certain debt. The amounts reflected in the consolidated statements of financial position approximate fair value due to the short-term maturity of these instruments.

Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:

Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities

Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and

Level 3 - inputs for the instruments are not based on any observable market data.

As valuations of investments for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company's financial condition or operating results.

The following tables present information about the Company's financial instruments and their classifications as at March 31, 2026 and December 31, 2025 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.

Fair value measurements at March 31, 2026 using:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The $50.7 million change in the Level 3 convertible notes payable was due to the settlement of the Zero Gravity Convertible Note which was valued at $27.7 million on the date of settlement. The remaining $26.1 million was recorded as a gain in the changes in financial instruments fair value on the unaudited condensed interim consolidated statements of loss and comprehensive loss.

Concentration risk

Management considers concentration risk with counterparties considering the level of purchases and sales of its business segments (Note 17).

At March 31, 2026, the Company held approximately $38.3 million of 0G cryptocurrency, representing approximately 85% of total assets. The Company maintains custody of substantially all its 0G holdings with a limited number of digital asset custodians and transacts primarily through a limited number of digital asset trading platforms.

Accordingly, the Company is exposed to concentration risk associated with the operational performance, financial condition, and regulatory compliance of these custodians and trading platforms. If any such custodian or trading platform were to experience financial distress, cybersecurity incidents, operational disruptions, insolvency, loss of required licenses, or other adverse developments, the Company could experience delays in accessing its assets, incur losses, or be required to transfer assets to alternative service providers, which may not be available on commercially reasonable terms.

Management monitors the financial and operational condition of its custodians and trading counterparties; however, no assurance can be provided that such measures would prevent losses in the event of failure or disruption of these counterparties. Any such event could have a material adverse effect on the Company's financial position, results of operations, and cash flows.

**17. **SEGMENTED INFORMATION

The Company formerly reported its financial results for the followingtwo operating segments, which were also its reportable segments: commercial and wholesale (primarily Phatebo), which sell pharmaceutical products, and house of brands, which sold a mix of products across multiple categories including food and beverage, cannabis accessories and technology, personal care and wellness. The Company disposed of the entirety of the house of brands segment on September 26, 2025. Moreover, the Company began implementing an expansion strategy focused on identifying and pursuing complimentary growth opportunities within the global digital asset market in 2025. As a result of this strategy, management re-evaluated its segment reporting structure and determined that a new segment, digital assets, would be created in the year ended December 31, 2025. As a result, the Company now has only two operating segments, commercial and wholesale and digital assets in 2026. These segments reflect how the Company's operations are managed, how the Company's Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured. The chief operating decision maker uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the segment or into other parts of the Company, such as for acquisitions. Net income is used to monitor actual results versus budget and prior year, which is used to assess the performance of the segment.

The Company operates its distribution business within its Germany subsidiary. The Company operates its digital assets business primarily within its United States subsidiary.

The following table shows information regarding the Company's segments for the three months ended March 31, 2026.

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The following table shows information regarding the Company's segments for the three months ended March 31, 2025.

(1) Other segment items include professional fees, other expenses (net), and foreign exchange loss (gain).

Other significant items and disaggregation by geographic area:

ZeroStack Corp.Notes to the unaudited condensed interim consolidated financial statementsFor the three months ended March 31, 2026 (In thousands of United States dollars, except number of shares, units and tokens and per share and per unit amounts, or as indicated)

The $2.8 million digital asset revenue represents the Company's 0G staking rewards. The Company began staking on January 21, 2026 and earned total rewards of 4,364,724 0G tokens, net of a 2% commission paid to the validator, for the three months ended March 31, 2026.

18. SUBSEQUENT EVENTS

DIGITAL ASSET VALUATION

The Company holds 74,918,066 0G Tokens with a fair value of $41.3 million utilizing the closing price on April 27, 2026.

SETTLEMENT OF PHATEBO SHORT TERM BORROWING

On April 21, 2026, the Company paid 0.4 million EUR ($0.4 million) in a single lump-sum payment for the outstanding principal and interest on the Phatebo short term borrowing entered into on March 26, 2026 with an individual lender.