USBC, Inc.
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
USBC$0.37+2.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-13.
0001074828-26-000027
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001074828-26-000065
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 87 previous paragraphs and 109 current paragraphs.
46 unchanged; 37 reworded; 20 added; 4 removed; 0 previous and 6 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Under the terms of the MLA, the required initial margin ratio is 150% of the outstanding borrowings at the time of each loan draw, which is equivalent to a maximum loan-to-value ratio of approximately 66.7%. If the margin ratio declines to 130% or lower, the Lender will issue a margin call requiring us to either post additional Bitcoin collateral or partially repay outstanding borrowings within 24 hours in order to restore compliance with the required margin ratio. Under the MLA, if the margin ratio declines to 120% or lower and we do not timely cure the deficiency in accordance with the terms of the MLA, the Lender may exercise its contractual rights with respect to the collateral, including liquidation rights. In addition, under the MLA, we may request the release of excess collateral if the margin ratio exceeds 170% for two consecutive days, subject to the terms and conditions of the MLA. The fair value of pledged Bitcoin collateral is determined by the Lender based on the applicable Bitcoin market spot rate. Under the MLA, the "applicable Bitcoin market spot rate" is defined as the spot rate, as of the applicable date or time of determination, for the applicable digital currency published on CFBenchmarks.com, the website of CF Benchmarks Ltd., which publishes digital asset reference rates, or such other reference spot rate as may be mutually agreed by the parties to the MLA from time to time. When a valuation is required to be determined by the Lender under the MLA, the applicable Bitcoin market spot rate at the applicable time of determination is used by the Lender to determine the fair value of the pledged Bitcoin collateral. The "applicable date or time of determination" refers to the date and time at which the Lender is required to determine the fair value of the pledged Bitcoin collateral pursuant to the collateral valuation and maintenance provisions of the MLA, (e.g., at the point in time when the Lender is required to value the collateral or assess a collateral ratio for a margin-related event under the MLA).
Current report
The collateral valuation and maintenance provisions of the MLA provide that, prior to each loan advance, we must pledge Bitcoin collateral sufficient to satisfy the Required Margin Ratio specified in the applicable Loan Term Sheet. Thereafter, the Margin Ratio is determined based on the fair value of the pledged Bitcoin collateral and the Total Loan Balance. The Lender continuously monitors the collateral ratio of the MLA against the CF Benchmarks reference price feed to assess compliance with the collateral requirements under the MLA. If the Margin Ratio falls to or below the applicable Collateral Call Margin Ratio, the Lender may issue a collateral call requiring the Borrower to restore the Required Margin Ratio. If the Margin Ratio falls to or below the applicable Liquidation Ratio, the Lender may liquidate the pledged Bitcoin collateral in accordance with the terms of the MLA. The MLA also permits the Borrower to request the return of excess pledged Bitcoin collateral when the applicable Collateral Return Margin Ratio specified in the applicable Loan Term Sheet has been satisfied. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty. The MLA has an initial one-year term and automatically renews for successive one-year terms unless terminated in accordance with its terms. We may terminate the MLA at any time, and either party may terminate the MLA upon 30 days' written notice, provided that any outstanding loans remain in effect until repaid or otherwise terminated in accordance with the MLA.
Current report
As of July 31, 2026, a decline of approximately 22.3% in the value of pledged Bitcoin collateral, assuming no repayment or additional collateral posting, would have reduced the collateral coverage ratio to the 130% collateral call margin ratio. No collateral calls, mandatory repayments, or liquidation events had occurred under the MLA as of July 31, 2026.
Current report
Proceeds from the MLA are being used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we reimburse Vast's wholly-owned subsidiary, Vast Bank, for the costs of performing certain strategic, operational and administrative services that support the development of our tokenized deposit platform, subject to the reimbursement cap of $10.5 million contained in the Agreement. The Agreement expires on December 31, 2026. As of July 31, 2026, we had incurred approximately $5.1 million in reimbursements of actual development-related costs in accordance with the terms of the Agreement. The Agreement may be terminated by us without cause upon 60 days' prior written notice. Either party may terminate the Affiliate Services Agreement immediately upon written notice if the other party breaches the Agreement and fails to cure such breach within 15 days after written notice. Either party may also terminate the Agreement if a state or federal regulatory authority requests or directs the terminating party to terminate the Agreement, or criticizes or challenges the terminating party's actions under the Agreement during a regulatory examination or otherwise.
Current report
Upon termination by us, we are responsible for certain reasonable, pre-approved third-party termination costs, subject to specified limitations. Specified limitations mean that we are not responsible for internal overhead, lost profits, unamortized internal costs, or severance or other employee-related termination payments unless expressly approved in advance in writing by us. These provisions are intended to ensure that, if we terminate the Bank Services, Vast Bank is reimbursed for certain unavoidable third-party costs that arise directly from the termination, while limiting our responsibility to documented, reasonable costs that were anticipated by the parties or approved in advance. Certain reasonable, pre-approved third-party termination costs mean that, in the event we terminate the Agreement with respect to the Bank Services, we shall be responsible for reimbursing Vast Bank for reasonable, documented, unavoidable, and non-cancelable third-party costs actually incurred by Vast Bank solely as a direct result of such termination, to the extent such costs were either expressly contemplated by this Agreement or approved in advance in writing by us. Examples of these costs include non-cancelable implementation fees, subscription commitments, software licensing fees, platform access fees, onboarding and integration costs, or other contractual obligations payable to third-party service providers that are directly attributable to the terminated services.
Current report
On June 12, 2026, our Board of Directors approved a proposal to effect a reverse stock split of our outstanding common stock (the "Reverse Split") at a ratio ranging from 1-for-2 to 1-for-5. Our Board's primary purpose for approving and recommending the Reverse Split is to make our common stock more attractive to investors, provide for a stronger investor base, and to increase the per share price and bid price of our common stock to maintain compliance with the NYSE American continued listing requirements. On June 15, 2026, Goldeneye, the holder of approximately 92.2% of the voting power of our outstanding common stock, approved the Reverse Split by written consent in lieu of a special meeting of stockholders. The Reverse Split will not reduce the number of authorized shares of our common stock, and no fractional shares will be issued. We will determine the exact ratio and timing of the Reverse Split, which may be effected, if at all, within twelve (12) months following June 15, 2026. On June 22, 2026, we filed a preliminary Information Statement on Schedule 14C with the SEC, and a definitive Information Statement on Schedule 14C with the SEC on July 13, 2026. On July 20, 2026, we commenced mailing the Definitive Information Statement to stockholders of record in accordance with Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The Reverse Split will not become effective until the applicable Rule 14c-2 notice period has expired and the effective date of the Reverse Split has been determined. Once effective, the Reverse Split will have the effect of decreasing the number of shares of our common stock issued, but will have no effect on the number of shares of common stock we are authorized to issue.
Current report
Following the successful completion of Phase 1 of the delivery strategy, we initiated Phase 2 of the delivery strategy. Phase 2 is intended to expand testing to additional invited participants, build upon the core technical infrastructure established during Phase 1 and focus on advancing the platform toward commercial readiness through continued product development, operational integration, ecosystem expansion, and regulatory and operational readiness activities. The principal milestone for Phase 2 is to achieve operational readiness to support an initial commercial launch, subject to receipt of any required approvals.
Current report
As part of these ongoing product enhancements, we have developed USBC Pay, that supports merchant payments and settlement on the USBC tokenized deposit platform. USBC Pay represents the payment functionality of the USBC tokenized deposit platform and is intended to expand the use of tokenized deposits for everyday payment transactions as we advance through future phases of our product delivery strategy. USBC Pay is designed to enable eligible users to initiate blockchain-based U.S. dollar payment transactions between consumers and merchants directly through the USBC ledger without touching legacy card rails or ACH for point-of-sale transactions. We have developed the initial version of the USBC Pay functionality for iOS and Android devices and continue to focus on enhancements for the functionality.
Current report
We continue to advance iterative product enhancements, operational readiness, and subsequent phases of the delivery strategy in preparation for a future public launch, which remains subject to regulatory, operational, market, board, and bank partner considerations. Phase 3 is intended to support the initial commercial launch of the tokenized-deposit product through selected distribution partners. Phase 4 is intended to support broader commercialization through additional product functionality, integrations and distribution channels.
Current report
Following public launch and subject to applicable legal, regulatory and onboarding requirements, developers and partners are expected to be able to integrate the USBC network into mobile and web-based applications, enabling eligible customers to access and transfer tokenized deposits through supported digital interfaces.
Current report
Vast Bank, USBC and Uphold (the "Parties") shall each be entitled to a proportionate revenue share under the terms set forth in the Tri-Party Agreement. Deposit Revenue shall be calculated monthly based on the anticipated yield attributable to the tokenized deposit balances allocated to each asset category as determined by Vast in its sole discretion. The anticipated yield for each category shall be multiplied by the portion of Tokenized Deposit Balances allocated to such category to determine total Deposit Revenue for the applicable period. USBC, as the revenue share agent, is responsible for preparing and delivering a monthly revenue share statement to each of the Parties to enable payment of the proportionate revenue share, net of allocated program expenses incurred in operating and supporting the tokenized deposit network, such as costs related to payments and other transaction types, risk management, and third-party processing. Except as otherwise provided in the Tri-Party Agreement, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf, or assessed against it or on its behalf, in performing its obligations under the Tri-Party Agreement. See the Tri-Party Agreement filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on January 26, 2026.
Current report
The Tri-Party Agreement has an initial term of one (1) year following the general commercial launch of the tokenized deposit program on the Uphold platform and automatically renews for successive one (1) year terms unless timely notice of non-renewal is provided by either Party. The Tri-Party Agreement may also be terminated upon the occurrence of specified events, including an uncured material breach, insolvency or bankruptcy, certain force majeure events, or if a governmental authority directs a party to cease or materially limit its performance, and provides for an orderly transition or wind-down of the program following termination.
Current report
Three Months Ended June 30, 2026 compared to June 30, 2025
Current report
Six Months Ended June 30, 2026 compared to June 30, 2025
Current report
(in thousands)
Current report
Other Expense, Net. Other expense, net for the six months ended June 30, 2026 was $30,221,000, compared to $1,646,000 for the comparable prior-year period, an increase of $28,575,000. The significant increase in other expense, net compared to the prior-year period was primarily driven by the change in fair value of digital assets of $29.7 million and a $2.5 million provision for credit losses, partially offset by derivative income, net of $2.2 million generated from option premiums collected under our Bitcoin treasury trading strategy, and a $1.4 million reduction in interest expense as a result of higher non-cash financing-related charges in the prior year period, primarily related to repricing and extensions of convertible securities. There was no derivative income, net generated during the prior year period since we commenced buying and selling call options on our Bitcoin holdings during the fourth fiscal quarter of 2025.
Current report
Net Loss. We reported a net loss of $46,343,000 for the six months ended June 30, 2026, compared with a net loss of $5,108,000 for the comparable prior-year period, an increase of $41,235,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $29.7 million, provision for credit losses of $2.5 million, operational expenses for tokenized deposit program offering development of $9.3 million, non-cash stock-based compensation expense of $10.4 million, professional fees and other public company and advisory costs of $5.2 million, partially offset by a deferred income tax benefit of $12.0 million.
Current report
As of June 30, 2026, we had cash and cash equivalents (excluding restricted cash) of $3.0 million and working capital of $(15.4) million. The negative working capital position was primarily driven by the $15.0 million loan payable and costs incurred during the six months ended June 30, 2026, to develop the tokenized deposit program. Operational expenses for the tokenized deposit program offering development were $9.3 million (including $6.3 million incurred under agreements with affiliated service providers) and professional fees of $5.2 million associated with our development initiatives.
Current report
Net cash used in investing activities during the six months ended June 30, 2026 was $225,000, reflecting the secured financing disbursed in connection with the divestiture of the sensor technology business completed on March 27, 2026. For further details, see the section entitled "Divestiture Transaction" below.
Current report
We recognized incremental stock-based compensation expense of $964,930 during the six months ended June 30, 2026 related to the repricing of 82,000,000 stock options from an exercise price of $1.10 per share to $0.37 per share during the six months ended June 30, 2026, in accordance with ASC 718.
Removed paragraphs (4)
Previous report
This MD&A focuses on the specific factors that affected our financial condition, results of operations, liquidity and capital resources during the three months ended March 31, 2026, including the impact of our digital‑asset treasury strategy, tokenized deposit program offering development expenditures, public‑company compliance requirements, and the impact of the Goldeneye capital investment. Our operating results for the three months ended March 31, 2026 also reflect our ongoing investment in the tokenized deposit program offering initiative, newly-established banking and technology service provider partnerships, and the divestiture of the legacy sensor technology business.
Previous report
On March 18, 2026, we entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”), pursuant to which the Company may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. Borrowings under the MLA are solely secured by Bitcoin collateral held in custody with Payward Financial, Inc. and subject to collateral maintenance requirements based on specified margin ratios. On March 20, 2026, we entered into a term sheet for a fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA maturing on March 18, 2027. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it is more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.
Previous report
On March 18, 2026, our Board of Directors approved the repricing of all outstanding stock options, including (i) options originally granted in August 2025 and subsequently repriced in October 2025 to $1.10 per share, (ii) options granted in October 2025 with an exercise price of $1.10 per share, and (iii) options granted in October 2025 with an exercise price of $0.87 per share. The repricing reduced the exercise price of all such awards to $0.37 per share. No changes were made to the vesting schedules or contractual terms of these awards.
Previous report
There were no investing transactions completed during the three months ended March 31, 2026.
Reworded paragraphs (37)
Previous wording
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes in Part I, Item1 of this Quarterly Report on Form 10-Q for the three months ended March 31, 2026. Unless otherwise indicated or the context otherwise requires, references to "USBC," "we," "us," "our," and the "Company" refer to USBC, Inc.
Current wording
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026. Unless otherwise indicated or the context otherwise requires, references to "USBC," "we," "us," "our," and the "Company" refer to USBC, Inc.
Previous wording
The discussion contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties and are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance, tokenized deposit program development, digital asset treasury strategy, anticipated events and trends affecting our business, the broader economy and other future conditions, and our interpretation of applicable state and federal securities laws and other laws and regulations relating to digital assets. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Investors should not consider non-GAAP financial measures referred to in this discussion in isolation or as substitutes for financial information presented in compliance with GAAP. Explanation of non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measure is included in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed in this report and as set forth in the section entitled "Risk Factors" in Part I, Item 1A, of our Transition Report on Form-10K for the transition period from October 1, 2025 to December 31, 2025, filed with the SEC on March 25, 2026.
Current wording
The discussion contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties and are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance, tokenized deposit program development, digital asset treasury strategy, anticipated events and trends affecting our business, the broader economy and other future conditions, and our interpretation of applicable state and federal securities laws and other laws and regulations relating to digital assets. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Investors should not consider non-GAAP financial measures referred to in this discussion in isolation or as substitutes for financial information presented in compliance with GAAP. Explanation of non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measure is included in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed in this report and as set forth in the section entitled "Risk Factors" in Part I, Item 1A, of our Transition Report on Form-10-K for the transition period from October 1, 2025 to December 31, 2025, filed with the SEC on March 25, 2026, as updated in the section entitled "Risk Factors" contained in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026.
Previous wording
USBC, Inc. ("USBC" or the "Company") is a publicly traded technology company focused on the development of transformative financial services, including digital assets and banking solutions. A key focus of USBC is the further development of the USBC tokenized deposit program offering, a U.S.-dollar denominated tokenized deposit that operates on blockchain technology and is embedded with digital identity. USBC has also implemented a Bitcoin treasury strategy to bolster pre-launch development and research across its various divisions. With a focus on identity, inclusion, innovation, and risk management, USBC is dedicated to creating long-term stockholder value in a rapidly evolving financial landscape.
Current wording
USBC, Inc. ("USBC" or the "Company") is a publicly traded technology company focused on the development of transformative financial services, including digital assets and banking solutions. A key focus of USBC is the further development of the USBC tokenized deposit program offering, a U.S. dollar-denominated tokenized deposit that operates on blockchain technology and incorporates digital identity. The USBC tokenized deposit offering combines the regulatory protections of traditional bank deposits with the efficiency and programmability of blockchain-based payments. USBC continues to advance subsequent phases of the product delivery strategy in preparation for a future public launch. USBC has also implemented a Bitcoin treasury strategy to bolster pre-launch development and research across its various divisions. With a focus on identity, inclusion, innovation, and risk management, USBC is dedicated to creating long-term stockholder value in a rapidly evolving financial landscape.
Previous wording
In August 2025, following the closing of a controlling-interest acquisition by Goldeneye 1995 LLC (an affiliate of our Chairman and Chief Executive Officer, Greg Kidd), the Company changed its corporate name to USBC, Inc. and its ticker symbol to “USBC” on the NYSE American effective August 15, 2025. Until August 2025, the Company operated under the name Know Labs, Inc. and was primarily focused on non-invasive diagnostic and sensor technologies. Our corporate evolution reflects a strategic pivot to a financial-services and digital-assets platform. Under the leadership of Chairman and Chief Executive Officer, Greg Kidd, USBC develops transformative financial services, including digital assets and banking solutions as well as non-invasive health monitoring research.
Current wording
On August 6, 2025, following the closing of a strategic controlling-interest acquisition by Goldeneye 1995 LLC (an affiliate of our Chairman and Chief Executive Officer, Greg Kidd), the Company changed its corporate name to USBC, Inc. and its ticker symbol to “USBC” on the NYSE American. Until August 2025, the Company operated under the name Know Labs, Inc. and was primarily focused on non-invasive diagnostic and sensor technologies. Our corporate evolution reflects a strategic pivot to a financial services and digital assets platform.
Previous wording
On March 27, 2026, we completed the divestiture of our legacy non-invasive sensor technology business pursuant to a Stock Purchase Agreement entered into by and among USBC, Inc. its wholly owned subsidiary, Particle, Inc., Particle Acquisition Corporation, an entity controlled by Ronald P. Erickson, former Chairman, President and CEO of Know Labs, Inc. (the "Buyer"). As part of the divestiture transaction, we agreed to provide the Buyer with limited operating capital to fund a portion of its operating expenses until the Buyer secures permanent equity financing. Additional information regarding the Stock Purchase Agreement and our commitment to extend a short-term secured line of credit to the Buyer in connection with the divestiture transaction is incorporated by reference from the Current Report on Form 8-K filed on April 2, 2026.
Current wording
On March 27, 2026, we completed the divestiture of our legacy non-invasive sensor technology business pursuant to a Stock Purchase Agreement entered into by and among USBC, Inc., its wholly owned subsidiary, Particle, Inc., and Particle Acquisition Corporation, an entity controlled by Ronald P. Erickson, former Chairman, President and CEO of Know Labs, Inc. (the "Buyer"). As part of the divestiture transaction, we agreed to provide the Buyer with limited operating capital to fund a portion of its operating expenses until the Buyer secures permanent equity financing. As of June 30, 2026, we had advanced $225,000 of the total amount committed under the credit facility, which matures on September 23, 2026, with an option to extend the maturity date for one additional period of one hundred eighty (180) days upon prior written notice. Additional information regarding the Stock Purchase Agreement and our commitment to extend a short-term secured line of credit to the Buyer in connection with the divestiture transaction is incorporated by reference from the Current Report on Form 8-K filed on April 2, 2026.
Previous wording
Our tokenized deposit program offering is being developed as an integrated platform comprising a permissioned blockchain ledger, a digital identity layer, wallet and consumer-facing mobile and web applications, a bank operations console, and developer portal designed to support future third-party developer integrations. Phase 1 testing of the product delivery strategy is progressing and development activity continues to advance across vendor coordination, infrastructure build-out, and platform integration, with the Company engaging specialized partners to support key components of the product offering. Results to date are informing the Company's evaluation of timing for subsequent phases of the product delivery strategy and the ultimate retail product launch.
Current wording
Our tokenized deposit program offering is being developed as an integrated platform comprising a permissioned blockchain ledger, a digital identity layer, wallet and consumer-facing mobile and web applications, a bank operations console, and developer portal designed to support future third-party developer integrations. Following the successful completion of Phase 1 of the delivery strategy, the Company initiated Phase 2 of its delivery strategy. Phase 2 is intended to expand testing to additional invited participants, build upon the core technical infrastructure established during Phase 1 and focus on advancing the platform toward commercial readiness through continued product development, operational integration, ecosystem expansion, and regulatory and operational readiness activities. The principal milestone for Phase 2 is to achieve operational readiness to support an initial commercial launch, subject to receipt of any required approvals.
Previous wording
We continue to execute under the Affiliate Services Agreement with Vast Holdings, Inc. (“Vast”), pursuant to which Vast provides strategic, operational and administrative services that support the further development of the tokenized deposit platform. As of April 30, 2026, we have incurred approximately $3.5 million in reimbursements to Vast for actual development-related costs under the $10.5 million cap contained in the Agreement which expires on December 31, 2026.
Current wording
We continue to execute under the Affiliate Services Agreement with Vast Holdings, Inc. (“Vast”), pursuant to which Vast provides strategic, operational and administrative services that support the further development of the tokenized deposit platform. As of July 31, 2026, we have incurred approximately $5.1 million in reimbursements to Vast for actual development-related costs under the $10.5 million cap contained in the Agreement which expires on December 31, 2026.
Previous wording
On March 18, 2026, we entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”), pursuant to which we may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25 million for up to a twelve-month term, subject to the execution of one or more individual loan term sheets (the "Facility"). The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. Borrowings under the MLA are solely secured by Bitcoin collateral held in and subject to collateral maintenance requirements based on specified margin ratios. The Bitcoin collateralizing the Facility is held for the benefit of the Lender by an affiliate of the Lender, Payward Financial, Inc. (the "Custodian") and subject to an account control agreement by and among the Lender, the Company and the Custodian.
Current wording
On July 28, 2026, we drew an additional fixed-rate borrowing of $3.0 million under the Master Loan Agreement ("MLA") we entered into with Payward Interactive, Inc. on March 18, 2026, increasing the aggregate principal amount outstanding under the MLA to $18.0 million. We previously drew an initial fixed-rate borrowing of $5.0 million on March 20, 2026, followed by additional draws of $5.0 million on April 27, 2026 and June 1, 2026. Under the MLA, we may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. Borrowings under the MLA bear interest at 8.5% per annum and, based on the borrowings outstanding as of July 28, 2026, mature on July 28, 2027 unless earlier terminated in accordance with the terms of the MLA. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. Borrowings under the MLA are solely secured by Bitcoin collateral held in custody with Payward Financial, Inc. and are subject to collateral maintenance requirements based on specified margin ratios.
Previous wording
On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit program offering to market. Phase 1 is being conducted with a limited group of internal users who have elected to participate in an expanded employee pilot program to perform technical readiness testing of product features, such as onboarding and identity recovery, ACH funding, spending, treasury conversion, messaging, and activity logging in a controlled environment ahead of the public launch of the branded platform. Phase 1 is not a consumer offering and is not available to the public; it is intended solely to begin technical readiness testing. During this phase, testing activities are conducted exclusively with company-provided funds for internal evaluation purposes. Development costs associated with the product offering are accelerating as the program advances and are expected to be significant. The results of Phase 1 will inform our evaluation of the timing and scope of subsequent phases of the delivery strategy and when the tokenized deposit product offering may become available to retail customers of Vast Bank, the initial issuing bank. Any future retail launch will remain subject to the outcome of the pilot program, completion of technical integration and internal readiness milestones, and receipt of any required regulatory, board, and bank partner approvals.
Current wording
On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit program offering to market in collaboration with Vast Bank, the initial issuing bank for the tokenized deposit program offering. Phase 1 was conducted with a limited group of internal users who elected to participate in an expanded employee pilot program ahead of the public launch of the branded platform. The principal milestone of Phase 1 was completion of technical readiness testing to support subsequent phases of the delivery strategy, including testing of customer onboarding and identity recovery, ACH funding, spending functionality, treasury conversion, messaging and activity logging.
Previous wording
On January 20, 2026, we formalized our collaboration with Uphold HQ Inc. (“Uphold”) and Vast Bank, N.A. (“Vast Bank”), which will serve as the initial issuing bank for the U.S. Bank Coin (“USBC”) tokenized-deposit program offering. Uphold is a financial technology company that provides modern infrastructure for on-chain payments, banking and investment services. Vast Bank is a federally regulated financial institution that will serve as the initial issuing bank for customer deposit accounts underlying the tokenized-deposit program. Under the tri-party agreement with Vast Bank and Uphold, USBC will serve as the network operator, Vast Bank will serve as the issuing bank for customer deposit accounts, and Uphold will provide platform integration and customer access services. We continue to advance technical, operational, and regulatory readiness in connection with subsequent phases of the delivery strategy and any future broader launch of the USBC tokenized-deposit program offering.
Current wording
On January 20, 2026, we formalized our collaboration with Uphold HQ Inc. (“Uphold”) and Vast Bank, N.A. (“Vast Bank”), which will serve as the initial issuing bank for the U.S. Bank Coin (“USBC”) tokenized-deposit program offering. Uphold is a financial technology company that provides modern infrastructure for on-chain payments, banking and investment services. Vast Bank is a federally regulated financial institution that will serve as the initial issuing bank for customer deposit accounts underlying the tokenized-deposit program. USBC will serve as the network operator, Vast Bank will serve as the issuing bank for customer deposit accounts, and Uphold will provide platform integration and customer access services. We continue to advance technical, operational, and regulatory readiness in connection with subsequent phases of the delivery strategy and any future broader launch of the USBC tokenized-deposit program offering.
Previous wording
Our operating results for the three months ended March 31, 2026, reflect the Company's strategic transition towards its digital-asset treasury and financial-technology development initiatives following the Goldeneye capital investment completed on August 6, 2025.
Current wording
Our operating results for the three and six months ended June 30, 2026 reflect the strategic transition to our digital asset treasury and financial technology development initiatives following the Goldeneye capital investment completed on August 6, 2025. Operating results for periods prior to August 6, 2025, reflect the Company's prior focus on non-invasive diagnostic and sensor technologies.
Previous wording
Revenues. We did not generate any operating revenue during the three months ended March 31, 2026, and 2025. During the three months ended March 31, 2026, we continued to focus on financial-technology development activities, and we expect future operating revenues to be generated primarily from financial-technology network services, including the planned USBC tokenized deposit program offering.
Current wording
We did not generate any operating revenue during the six months ended June 30, 2026, or 2025. During the six months ended June 30, 2026, we continued to focus on financial technology development activities, and we expect any future operating revenues to be generated from financial technology network services, including the planned USBC tokenized deposit program offering.
Previous wording
Although we expect our operating losses to continue in the near term, we believe our potential future revenue opportunities and strong capital structure provide us with flexibility to pursue our digital-asset treasury and financial-technology development initiatives.
Current wording
Although we expect to continue to incur operating losses in the near term, we believe our potential future revenue opportunities and strong capital structure provide us with flexibility to pursue our digital asset treasury and financial technology development initiatives.
Previous wording
Research and Development. R&D expenses were $218,000 for the three months ended March 31, 2026, a decrease compared to $418,000 for the comparable prior-year period. In February 2026, we completed our evaluation of the legacy non-invasive sensor technology business and the associated divestiture transaction closed on March 27, 2026.
Current wording
Research and Development. R&D expenses were $57,000 for the three months ended June 30, 2026, a decrease of $182,000 compared to the comparable prior-year period. In February 2026, we completed our evaluation of the legacy non-invasive sensor technology business and the associated divestiture transaction closed on March 27, 2026.
Previous wording
Selling, General and Administrative. SG&A expense was $11,449,000 for the three months ended March 31, 2026, compared to $1,789,000 for the comparable prior-year period, an increase of $9,660,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to increases in non-cash stock-based compensation expense of $3.3 million, operational expenses for tokenized deposit program offering development of $4.7 million (including $3.1 million incurred under agreements with affiliated service providers), and professional fees and other public-company and advisory costs of $1.7 million associated with our strategic transition.
Current wording
Selling, General and Administrative. SG&A expense was $16,373,000 for the three months ended June 30, 2026, compared to $1,016,000 for the comparable prior-year period, an increase of $15,357,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to increases in non-cash stock-based compensation expense of $7.1 million, operational expenses for tokenized deposit program offering development of $4.6 million (including $3.3 million incurred under agreements with affiliated service providers), and professional fees and other public company and advisory costs of $3.6 million associated with our strategic transition.
Previous wording
Other Expense, Net. Other expense, net for the three months ended March 31, 2026 was $20,627,000, compared to $1,371,000 for the comparable prior-year period, an increase of $19,256,000. The significant increase in other expense, net compared to the prior-year period was primarily driven by changes in fair value of digital assets of $20.0 million, provision for credit losses of $2.2 million, partially offset by higher derivative income, net of $1.6 million, generated from option premiums collected under our Bitcoin treasury trading strategy, and a $1.4 million reduction in interest cost.
Current wording
Other Expense, Net. Other expense, net for the three months ended June 30, 2026 was $9,594,000, compared to $275,000 for the comparable prior-year period, an increase of $9,319,000. The significant increase in other expense, net compared to the prior-year period was primarily driven by changes in fair value of digital assets of $9.7 million, provision for credit losses of $0.4 million, partially offset by derivative income, net of $0.7 million, generated from option premiums collected under our Bitcoin treasury trading strategy; there was no derivative income, net generated during the prior year period since we commenced buying and selling call options on our Bitcoin holdings during the fourth fiscal quarter of 2025.
Previous wording
Income tax benefit. Income tax benefit was $6,740,000 for the three months ended March 31, 2026; there was no income tax benefit for the comparable prior-year period, an increase of $6,740,000. The increase in the income tax benefit compared to the prior-year period was primarily related to the tax effect of the change in fair value of digital assets, driven by volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, net of the benefit of the deferred tax asset.
Current wording
Income tax benefit. Income tax benefit was $5,236,000 for the three months ended June 30, 2026; there was no income tax benefit for the comparable prior-year period, an increase of $5,236,000. The increase in the income tax benefit compared to the prior-year period was primarily related to the tax effect of the change in fair value of digital assets, driven by volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, net of the benefit of the deferred tax asset.
Previous wording
Net Loss. We reported a net loss of $25,554,000 for the three months ended March 31, 2026, compared with a net loss of $3,578,000 for the comparable prior-year period, an increase of $21,976,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $20.0 million, provision for credit losses of $2.2 million, operational expenses for tokenized deposit program offering development of $4.7 million, non-cash stock-based compensation expense of $3.3 million, professional fees and other public-company and advisory costs of $1.7 million, partially offset by a deferred income tax benefit of $6.7 million.
Current wording
Net Loss. We reported a net loss of $20,788,000 for the three months ended June 30, 2026, compared with a net loss of $1,530,000 for the comparable prior-year period, an increase of $19,258,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $9.7 million, provision for credit losses of $0.4 million, operational expenses for tokenized deposit program offering development of $4.6 million, non-cash stock-based compensation expense of $7.1 million, professional fees and other public-company and advisory costs of $3.6 million, partially offset by a deferred income tax benefit of $5.2 million.
Previous wording
•Financing dependence: We expect to require additional liquidity sources in the near term to fund the shortfall in net operating revenue as we continue investing in the further development of the tokenized deposit program offering, which sources may include equity or debt financings, potential sales of Bitcoin, Bitcoin-collateralized financing arrangements, and related-party or other investor financing.
Current wording
•Financing dependence: We expect to require additional liquidity sources in the near term to fund the shortfall in net operating revenue as we continue investing in the further development of the tokenized deposit program offering, which sources may include equity or debt financings, potential sales of Bitcoin, Bitcoin-collateralized financing arrangements, and related-party funding or other investor financing.
Previous wording
•Digital-asset market volatility: Changes in the market price of Bitcoin could cause material non-cash gains or losses in our operating expenses each period.
Current wording
•Digital-asset market volatility: Changes in the market price of Bitcoin could cause material non-cash gains or losses in our results of operations each period.
Previous wording
•Integration of banking partners: Our future results will depend on successful technical and regulatory integration with partner banks and technology providers supporting our tokenized-deposit platform offering. Delays or changes in bank and developer partner strategy could affect timing of launches and revenue realization.
Current wording
•Integration of bank and technology partners: Our future results will depend on successful technical and regulatory integration with partner banks and technology providers supporting our tokenized deposit platform offering. Delays or changes in bank and developer partner strategy could affect timing of launches and revenue realization.
Previous wording
As of March 31, 2026, we had cash and cash equivalents of $2.0 million and working capital of $(7.3) million. We have historically incurred recurring losses and had an accumulated deficit of $216.1 million as of March 31, 2026. We recorded a net loss of $25.6 million for the three months ended March 31, 2026, a significant increase compared to a net loss of $3.6 million recorded for the comparable prior-year period. The increase in net loss was primarily attributable to a $20.0 million decline in the fair value of digital assets during the 2026 period. The comparable prior-year period was not impacted by non-cash change in the fair value of digital assets because we did not own any digital assets during that period. We continue to hold the underlying digital assets as of March 31, 2026 and currently intend to continue holding such digital assets for the foreseeable future.
Current wording
We have historically incurred recurring losses and had an accumulated deficit of $236.9 million as of June 30, 2026. We recorded a net loss of $46.3 million for the six months ended June 30, 2026, a significant increase compared to a net loss of $5.1 million recorded for the comparable prior-year period. The increase in net loss was primarily attributable to a $29.7 million unrealized loss recorded to reflect the decline in the fair value of digital assets during the 2026 period. The comparable prior-year period was not impacted by non-cash change in the fair value of digital assets because we did not own any digital assets during that period. We continue to hold the underlying digital assets as of June 30, 2026 and currently intend to continue holding such digital assets for the foreseeable future.
Previous wording
Our liquidity during the three months ended March 31, 2026 primarily reflects the net proceeds of the equity issuance from the private placement completed on August 6, 2025 in which we issued approximately 357.8 million shares of common stock at $0.335 per share, for an aggregate purchase price consisting of 1,000 Bitcoin and $15 million in cash. As such, a substantial portion of our assets consist of Bitcoin. We view our Bitcoin holdings as long-term strategic reserves rather than trading assets although we may convert Bitcoin to cash periodically to fund operations. During the three months ended March 31, 2026, our liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings are sufficient to fund operations for at least 12 months after issuance of these consolidated financial statements. Management expects that the Company will supplement its cash resources with additional liquidity sources as it executes its business plan. These sources may include sales of Bitcoin, potential Bitcoin-collateralized financing arrangements, related-party or other investor financing, and other debt or equity financings.
Current wording
Our liquidity position as of June 30, 2026 reflects the net proceeds of the equity issuance from the private placement completed on August 6, 2025 in which we issued approximately 357.8 million shares of common stock at $0.335 per share, for an aggregate purchase price consisting of 1,000 Bitcoin and $15.0 million in cash. As such, a substantial portion of our assets consist of Bitcoin. We view our Bitcoin holdings as long-term strategic reserves rather than trading assets although we may convert Bitcoin to cash periodically to fund operations and pledge it as collateral under certain financing arrangements that provide capital to support product development and other general corporate purposes.
Previous wording
On March 20, 2026, we entered into a term sheet for a one year fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty. The MLA provides us with an additional source of liquidity to fund our operations and strategic initiatives, primarily the further development and future launch of the tokenized deposit program offering. The loan is collateralized by 150 Bitcoin which we pledged to the counterparty in an amount of approximately $10.2 million based on the price of Bitcoin as of March 31, 2026.
Current wording
We previously entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”) on March 18, 2026, pursuant to which we may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25 million for up to a twelve-month term, subject to the execution of one or more individual loan term sheets (the "Facility"). The MLA provides us with an additional source of liquidity to fund our operations and strategic initiatives, primarily the further development and future launch of the tokenized deposit program offering. As of July 31, 2026, the aggregate principal amount outstanding under the MLA is $18 million. The loan is collateralized by 479 Bitcoin which we pledged to the counterparty in an amount of approximately $30.1 million based on the price of Bitcoin as of July 31, 2026.
Previous wording
Adjusted EBITDA is defined as net loss excluding interest expense primarily incurred in connection with the conversion or extinguishment of our convertible debt obligations, stock-based compensation expense, non-cash changes in the fair value of digital assets, income taxes, and any other items that management has determined are not reflective of our operating performance because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. Adjusted EBITDA should be viewed independently of our reported GAAP net loss as this metric is meant to be considered in addition to, not as a substitute for or in isolation from, our net loss prepared in accordance with GAAP.
Current wording
Adjusted EBITDA is defined as net loss excluding interest expense primarily incurred in connection with the historical conversion or extinguishment of our convertible debt obligations, stock-based compensation expense, non-cash changes in the fair value of digital assets, income taxes, and any other items that management has determined are not reflective of our operating performance because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. Adjusted EBITDA should be viewed independently of our reported GAAP net loss as this metric is meant to be considered in addition to, not as a substitute for or in isolation from, our net loss prepared in accordance with GAAP.
Previous wording
The following table reconciles Adjusted EBITDA to net loss, the most closely comparable GAAP financial measure, for the three months ended March 31, 2026 and the comparable prior-year period:
Current wording
The following table reconciles Adjusted EBITDA to net loss, the most closely comparable GAAP financial measure, for the three and six months ended June 30, 2026 and the comparable prior-year period:
Previous wording
Net cash used in operating activities during the three months ended March 31, 2026 was $7,057,591, which was primarily attributable to the net loss for the three months ended March 31, 2026 of $25,554,769, partially offset by non-cash expenses of $17,870,429. Non-cash expenses during the three months ended March 31, 2026 were primarily comprised of stock-based compensation expense of $3,925,225, unrealized losses related to the change in the fair value of digital assets of $20,004,465, partially offset by net gains on derivatives of $1,556,719, and the deferred income tax benefit of $6,739,925.
Current wording
Net cash used in operating activities during the six months ended June 30, 2026 was $15,225,406, which was primarily attributable to the net loss for the six months ended June 30, 2026 of $46,343,343, adjusted for non-cash expenses of $29,339,651. Non-cash expenses during the six months ended June 30, 2026 were primarily comprised of stock-based compensation expense of $11,212,099, the unrealized loss related to the change in the fair value of digital assets of $29,710,439, partially offset by net gains on derivatives of $2,228,110, and the deferred income tax benefit of $11,975,617.
Previous wording
Net cash provided by financing activities during the three months ended March 31, 2026 was $5,000,330, which was primarily attributable to proceeds from a loan draw under the MLA. For additional information on the impact of the private placement transaction completed on August 6, 2025 on the Company’s liquidity position, see "Liquidity and Capital Resources."
Current wording
Net cash provided by financing activities during the six months ended June 30, 2026 was $15,000,330, which was primarily attributable to proceeds from loan draws under the MLA collateralized by a portion of our Bitcoin holdings. For additional information on the impact of the private placement transaction completed on August 6, 2025 on the Company’s liquidity position, see "Liquidity and Capital Resources."
Previous wording
(1) On March 20, 2026, we entered into a term sheet for a one year fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA maturing on March 18, 2027. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty.
Current wording
(1)On March 20, 2026, we entered into a term sheet for a one year fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA maturing on March 18, 2027. On April 27, 2026, we drew the Second Draw under the MLA. The Second Draw increases the aggregate principal amount outstanding under the MLA to $10.0 million and bears interest at a rate of 8.5% per annum maturing on April 27, 2027. On June 1, 2026, we drew the Third Draw under the MLA. The Third Draw increases the aggregate principal amount outstanding under the MLA to $15.0 million and bears interest at a rate of 8.5% per annum maturing on June 1, 2027. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty.
Previous wording
As of March 31, 2026, the Company had an outstanding commitment to provide secured financing of up to $450,000. The loan to the borrower is not an unconditionally cancelable instrument, and as of March 31, 2026, the Company recorded a liability for expected credit loss of $360,000. The estimate of expected credit losses for off-balance sheet commitments considers the likelihood that funding will occur, expected utilization rates, borrower credit quality, collateral values, and current and forecasted economic conditions.
Current wording
As of June 30, 2026, the Company had an outstanding commitment to provide secured financing of up to $450,000, of which $225,000 remained unfunded. The loan to the borrower is not an unconditionally cancelable instrument, and as of June 30, 2026, the Company had recorded a liability for expected credit losses of $180,000 on the unfunded commitment. The estimate of expected credit losses for off-balance sheet commitments considers the likelihood that funding will occur, expected utilization rates, borrower credit quality, collateral values, and current and forecasted economic conditions.
Previous wording
We hold Bitcoin as the principal component of our Consolidated Balance Sheets. Digital assets such as Bitcoin are initially recorded at cost and subsequently measured at fair value, with changes in fair value recognized in the line item, change in fair value of digital assets.
Current wording
We hold Bitcoin as the principal component of our Consolidated Balance Sheets. Digital assets such as Bitcoin are initially recorded at cost and subsequently measured at fair value, with changes in fair value recognized in the line item in the Consolidated Statements of Operations, change in fair value of digital assets.
Previous wording
The Company applies the current expected credit loss ("CECL") model under ASC 326, Financial Instruments — Credit Losses, to estimate expected credit losses on financial assets measured at amortized cost and certain off-balance sheet credit exposures. This standard requires the Company to recognize lifetime expected credit losses upon origination of a financial asset or at the time an off-balance sheet commitment is made, rather than when losses are probable, and to incorporate forward-looking information into the estimate. The CECL model represents a critical accounting policy because it is new for the Company this quarter and requires significant management judgment in the selection of inputs, assumptions, and methodologies.
Current wording
We apply the current expected credit loss ("CECL") model under ASC 326, Financial Instruments — Credit Losses, to estimate expected credit losses on financial assets measured at amortized cost and certain off-balance sheet credit exposures. This standard requires us to recognize lifetime expected credit losses upon origination of a financial asset or at the time an off-balance sheet commitment is made, rather than when losses are probable, and to incorporate forward-looking information into the estimate. The CECL model represents a critical accounting policy because it requires significant management judgment in the selection of inputs, assumptions, and methodologies.
Previous wording
Digital asset receivable . We consider and account for counterparty credit risk using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses if deemed material. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. As of March 31, 2026, we recorded an allowance for credit loss of $1.8 million, based on management’s estimate of expected credit losses.
Current wording
Digital asset receivable . We consider and account for counterparty credit risk using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses if deemed material. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. As of June 30, 2026, we recorded an allowance for credit loss of $2.2 million as an offset to the digital asset receivable balance in our Consolidated Balance Sheets, based on management’s estimate of expected credit losses.
Previous wording
Off-Balance Sheet Commitments. The Company is party to certain off-balance sheet financing commitments that are subject to credit loss estimation under ASC 326. The ACL is estimated using a loss given default / expected exposure methodology that incorporates management's assessment of expected draw timing, obligor credit quality, collateral recovery values, and current and forecasted economic conditions. As of March 31, 2026, we recorded an allowance for expected credit losses of $360,000 on its off-balance sheet commitments, reflected as a non-cash provision for credit losses in the condensed consolidated statements of operations for the three months ended March 31, 2026.
Current wording
Off-Balance Sheet Commitments. We are a party to certain off-balance sheet financing commitments that are subject to credit loss estimation under ASC 326. The ACL is estimated using a loss given default / expected exposure methodology that incorporates management's assessment of expected draw timing, obligor credit quality, collateral recovery values, and current and forecasted economic conditions. As of June 30, 2026, we recorded an allowance for expected credit losses of $180,000 on the unfunded commitment. The estimate of expected credit losses for off-balance sheet commitments considers the likelihood that funding will occur, expected utilization rates, borrower credit quality, collateral values, and current and forecasted economic conditions.
Previous wording
Because volatility and expected-term assumptions involve significant judgment, changes in these inputs could materially affect compensation expense recognized under the Amended and Restated 2021 Equity Incentive Plan (see “Executive Compensation” in Part III of our Transition report on Form 10-K for the three months ended December 31, 2025.
Current wording
Because volatility and expected-term assumptions involve significant judgment, changes in these inputs could materially affect compensation expense recognized under the Amended and Restated 2021 Equity Incentive Plan (see “Executive Compensation” in Part III, Item 11 of Amendment No. 1 to our Transition Report on Form 10-K for the transition period from October 1, 2025 to December 31, 2025 filed with the SEC on April 27, 2026).
Previous wording
Evaluating embedded conversion and redemption features requires judgment, including volatility estimates and discount‑rate assumptions that may result in non‑cash gains or losses. See Notes 3 and 5 to our financial statements included in Item 1 of this report for additional information on our accounting for convertible instruments and embedded derivatives prior to the Transition Period. When we issued convertible debt or equity instruments that may have contained embedded conversion or redemption features, we evaluated whether those features required bifurcation and separate accounting as derivatives under ASC 815. Determining the fair value of embedded derivatives involves the use of valuation models incorporating market-based assumptions, such as the volatility of our stock price, expected term, and discount rates. Future volatility or interest-rate changes could result in material non-cash gains or losses each period.
Current wording
Evaluating embedded conversion and redemption features requires judgment, including volatility estimates and discount‑rate assumptions that may result in non‑cash gains or losses. All legacy convertible notes and promissory notes were repaid, converted, or otherwise extinguished in connection with the Goldeneye private placement transaction that closed on August 6, 2025. Accordingly, there was no convertible instruments activity during the six months ended June 30, 2026. See Notes 3 and 5 to our financial statements included in Item 1 of this report for additional information on our accounting for convertible instruments and embedded derivatives prior to August 6, 2025. When we historically issued convertible debt or equity instruments that may have contained embedded conversion or redemption features, we evaluated whether those features required bifurcation and separate accounting as derivatives under ASC 815. Determining the fair value of embedded derivatives involves the use of valuation models incorporating market-based assumptions, such as the volatility of our stock price, expected term, and discount rates. Future volatility or interest rate changes could have resulted in material non-cash gains or losses each period.
Previous wording
In accordance with ASC 205-40, management evaluates our ability to continue as a going concern for a period of one year after the date the financial statements are issued. Our assessment considers current cash on hand, expected cash flows from operations, and our ability to raise additional capital. In May 2026, the Company analyzed its cash requirements and operations at least through May 2027 and determined that, based upon our current available cash, digital asset holdings, and expected operations, the Company has no substantial doubt about its ability to continue as a going concern. While the capital investment significantly improved our liquidity, our business model remains dependent on external financing and the value of digital assets, both of which are subject to market volatility and investor sentiment.
Current wording
In accordance with ASC 205-40, management evaluates the Company's ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management's assessment considered the Company's projected cash requirement during the evaluation period and available sources of liquidity, including cash and cash equivalents, digital assets available for monetization or use as collateral, available borrowing capacity under its Bitcoin-collateralized Master Loan Agreement, anticipated cash generated from the Company's Bitcoin treasury strategy, and available capacity under its At-The-Market ("ATM") equity program. In August 2026, the Company analyzed its cash requirements and operations through August 2027 and determined that, based upon its available cash and cash equivalents, digital assets, available financing arrangements, projected cash generated from its Bitcoin treasury strategy, and available capacity under its ATM program, management concluded that no substantial doubt about its ability to continue as a going concern. Management will continue to monitor its liquidity position, operating performance, and capital resources as it executes its operating plan. The Company's business model remains dependent on external financing and the value of digital assets, both of which are subject to market volatility and investor sentiment.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Current report — wording carried from elsewhere
The following table sets forth key components of our results of operations for the six months ended June 30, 2026, and 2025.
Current report — wording carried from elsewhere
Research and Development. R&D expenses were $276,000 for the six months ended June 30, 2026, a decrease compared to $657,000 for the comparable prior-year period. In February 2026, we completed our evaluation of the legacy non-invasive sensor technology business and the associated divestiture transaction closed on March 27, 2026.
Current report — wording carried from elsewhere
Selling, General and Administrative. SG&A expense was $27,822,000 for the six months ended June 30, 2026, compared to $2,805,000 for the comparable prior-year period, an increase of $25,017,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to increases in non-cash stock-based compensation expense of $10.4 million, operational expenses for tokenized deposit program offering development of $9.3 million (including $6.3 million incurred under agreements with affiliated service providers), and professional fees and other public company and advisory costs of $5.2 million associated with our strategic transition.
Current report — wording carried from elsewhere
Income tax benefit. Income tax benefit was $11,976,000 for the six months ended June 30, 2026; there was no income tax benefit for the comparable prior-year period, an increase of $11,976,000. The increase in the income tax benefit compared to the prior-year period was primarily related to the tax effect of the change in fair value of digital assets, driven by volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, net of the benefit of the deferred tax asset.
Current report — wording carried from elsewhere
During the six months ended June 30, 2026, our liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings are sufficient to fund our operations for at least 12 months after issuance of these consolidated financial statements. Management expects that we will supplement our cash resources with additional liquidity sources as we continue executing our business plan. These sources may include sales of Bitcoin, potential Bitcoin-collateralized financing arrangements, related-party funding or other investor financing, and other debt or equity financings.