USBC, Inc.

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 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.

Current wording

USBC, Inc. ("USBC" or the "Company") is a publicly traded financial 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. Upon commercial launch, USBC will operate a U.S. dollar-denominated tokenized deposit network (the "USBC Network"). Each USBC tokenized deposit on the USBC Network is an on-chain representation of a U.S. dollar deposit held at an issuing bank, initially Vast Bank, N.A., a national bank chartered by the Office of the Comptroller of the Currency, headquartered in Tulsa, Oklahoma. 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

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.

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 September 30, 2026, we had advanced $450,000 of the total amount committed under the credit facility, which was scheduled to mature 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. Pursuant to the terms of the note, the maturity date was extended 180 days, and will mature on March 22, 2027. 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. 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.

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 in June 2026, the Company initiated Phase 2 of its delivery strategy. Phase 2 expands testing to additional invited participants, builds upon the core technical infrastructure established during Phase 1 and focuses on further advancing the platform toward full market launch through continued product development, operational integration with Vast Bank, 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 the outcome of the pilot program and receipt of any required bank board, regulatory and bank partner 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 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.

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 September 30, 2026, we have incurred approximately $6.2 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 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.

Current wording

On September 11, 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 $21.0 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, and additional draws of $3.0 million on July 28, 2026, and September 11, 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 $40.0 million (increased from $25.0 million on October 12, 2026) 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 mature on the anniversary of each draw (September 11, 2027 for the Fifth Draw) 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

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 wording

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 may 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).

Previous wording

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 wording

As of October 31, 2026, a decline of approximately 26% 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 October 31, 2026.

Previous wording

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 wording

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. As of September 30, 2026, we had reimbursed approximately $6.2 million in development-related costs in accordance with the terms of the Agreement, leaving approximately $4.3 million in available reimbursement capacity through the Agreement's expiration on December 31, 2026. 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.

Previous wording

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 wording

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. As of the date of this report, the Reverse Split has not been effected.

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 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.

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. Phase 1 was not a consumer offering and was not available to the public, and testing activities during Phase 1 were conducted exclusively with company-provided funds for internal evaluation purposes. The results of Phase 1 served to 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.

Previous wording

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 wording

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. The timing, cost and success of future phases of our strategy is subject to uncertainty in how successful we will be in executing Phase 2 of the strategy within anticipated parameters. 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.

Previous 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.

Current wording

Our operating results for the three and nine months ended September 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

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.

Current wording

We did not generate any operating revenue during the nine months ended September 30, 2026, or 2025. During the nine months ended September 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 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.

Current wording

Although we expect to continue to incur operating losses in the near term, we believe our potential future revenue opportunities and available liquidity sources, including our digital asset treasury holdings, existing borrowing arrangements and access to equity financing, subject to market conditions and applicable restrictions, provide us with flexibility to pursue our digital asset treasury and financial technology development initiatives.

Previous wording

The following table sets forth key components of our results of operations for the six months ended June 30, 2026, and 2025.

Current wording

The following table sets forth key components of our results of operations for the three months ended September 30, 2026, and 2025. Amounts are rounded to the nearest thousand.

Previous 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.

Current wording

Research and Development. The Company did not have R&D expenses for the three months ended September 30, 2026, a decrease of $294,000 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 $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.

Current wording

Selling, General and Administrative. SG&A expense was $14,791,000 for the three months ended September 30, 2026, compared to $11,524,000 for the comparable prior-year period, an increase of $3,267,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to operational expenses for tokenized deposit program offering development of $2.3 million (including $1.9 million incurred under agreements with affiliated service providers), and professional fees and other public company and advisory costs of $1.8 million associated with our strategic transition, partially offset by decreases in non-cash stock-based compensation expense of $0.9 million.

Previous 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.

Current wording

Other Income/(Expense), Net. Other income, net for the three months ended September 30, 2026 was $21,103,000, compared to $(705,000) for the comparable prior-year period, an increase of $21,808,000. The significant increase in other income, net compared to the prior-year period was primarily driven by changes in fair value of digital assets of $25.7 million, partially offset by provision for credit losses of $0.9 million, and other derivative income (loss), net of $(3.3) million, generated from option premiums collected under our Bitcoin treasury trading strategy.

Previous 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.

Current wording

Income tax expense (benefit). Income tax expense was $1,367,000 for the three months ended September 30, 2026, compared to an income tax benefit of 173,000 for the comparable prior-year period, an increase of $1,540,000. The change 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 increase 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 $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 wording

Net Income (Loss). We reported a net income of $4,945,000 for the three months ended September 30, 2026, compared with a net loss of $12,350,000 for the comparable prior-year period, an increase of $17,295,000. The change compared to the prior-year period primarily reflects the change in fair value of digital assets of $26.5 million, partially offset by other derivative income (loss), net of $3.3 million, operational expenses for tokenized deposit program offering development of $2.3 million, professional fees and other public-company and advisory costs of $1.8 million, provision for credit losses of $0.9 million, and a deferred income tax expense of $1.4 million.

Previous wording

The following table sets forth key components of our results of operations for the three months ended June 30, 2026, and 2025.

Current wording

The following table sets forth key components of our results of operations for the nine months ended September 30, 2026, and 2025.

Previous wording

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 wording

Research and Development. R&D expenses were $276,000 for the nine months ended September 30, 2026, a decrease compared to $951,000 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.

Previous wording

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 wording

Selling, General and Administrative. SG&A expense was $42,613,000 for the nine months ended September 30, 2026, compared to $14,329,000 for the comparable prior-year period, an increase of $28,284,000. 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 $10.9 million, operational expenses for tokenized deposit program offering development of $11.6 million (including $8.2 million incurred under agreements with affiliated service providers), professional fees and other public company and advisory costs of $7.1 million associated with our strategic transition, partially offset with decreases in non-cash stock-based expenses for services of $1.1 million.

Previous wording

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 wording

Other Expense, Net. Other expense, net for the nine months ended September 30, 2026 was $9,120,000, compared to $2,352,000 for the comparable prior-year period, an increase of $6,768,000. 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 $3.2 million and a $3.5 million provision for credit losses, and derivative loss, net of $1.4 million generated from option premiums collected under our Bitcoin treasury trading strategy, partially offset by a $1.0 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.

Previous wording

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 wording

Income tax benefit. Income tax benefit was $10,609,000 for the nine months ended September 30, 2026, compared to 173,000 for the comparable prior-year period, an increase of $10,436,000. The increase in the income tax benefit compared to the prior-year period was primarily related to the tax effect of net operating losses related to the continued development of the tokenized deposit program, and 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 $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.

Current wording

Net Loss. We reported a net loss of $41,400,000 for the nine months ended September 30, 2026, compared with a net loss of $17,459,000 for the comparable prior-year period, an increase of $23,941,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $3.2 million, provision for credit losses of $3.5 million, operational expenses for tokenized deposit program offering development of $11.6 million, non-cash stock-based compensation expense of $10.9 million, professional fees and other public company and advisory costs of $7.1 million, partially offset by a deferred income tax benefit of $10.6 million.

Previous wording

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 wording

As of September 30, 2026, we had cash and cash equivalents (excluding restricted cash) of $3.5 million and working capital of $(24.2) million. The negative working capital position was primarily driven by the $21.0 million loan payable and costs incurred during the nine months ended September 30, 2026, to develop the tokenized deposit program. Operational expenses for the tokenized deposit program offering development were $11.6 million (including $8.2 million incurred under agreements with affiliated service providers) and professional fees of $7.1 million associated with our development initiatives.

Previous 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.

Current wording

We have historically incurred recurring losses and had an accumulated deficit of $231.9 million as of September 30, 2026. We recorded a net loss of $41.4 million for the nine months ended September 30, 2026, a significant increase compared to a net loss of $17.5 million recorded for the comparable prior-year period. The increase in net loss was primarily attributable to increases in non-cash stock-based compensation expense of $10.9 million, operational expenses for tokenized deposit program offering development of $11.6 million (including $8.2 million incurred under agreements with affiliated service providers), professional fees and other public company and advisory costs of $7.1 million associated with our strategic transition, unrealized loss of $4.0 million to reflect the decline in the fair value of digital assets during the 2026 period, and partially offset with an increase in the tax benefit recognized due to net operating losses as a result of continued development of the tokenized deposit program, and decreases in non-cash stock-based expenses for services of $1.1 million. We continue to hold the underlying digital assets as of September 30, 2026 and currently intend to continue holding such digital assets for the foreseeable future.

Previous 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.

Current wording

Our liquidity position as of September 30, 2026 was supported by borrowings under the MLA, capital contributions from Hard Yaka, and our Bitcoin treasury holdings. As of September 30, 2026, we had $21.0 million outstanding under the MLA and held $82.7 million in digital assets, a portion of which were pledged as collateral. Additional potential liquidity sources include financing under the Note and our ATM equity offering program, subject to applicable terms and conditions. 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

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.

Current wording

During the nine months ended September 30, 2026, our liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings, together with available financing under the MLA, the Note with Goldeneye 1995 LLC (as described below), and capital contributions from Hard Yaka (as described below), 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.

Previous 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.

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"). On October 12, 2026, the aggregate borrowing commitment increased from $25.0 million to $40.0 million, leaving $19.0 million of additional borrowing capacity as of that date, subject to applicable borrowing conditions, collateral requirements and execution of individual loan term sheets. The amended collateral arrangements also provide for cross-collateralization of borrowings and certain digital asset derivative obligations. 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 October 31, 2026, the aggregate principal amount outstanding under the MLA is $21.0 million. The loan is collateralized by 479 Bitcoin which we pledged to the counterparty in an amount of approximately $36.9 million based on the price of Bitcoin as of October 31, 2026.

Previous 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.

Current wording

Adjusted EBITDA is defined as net income (loss) excluding interest expense, stock-based compensation expense, non-cash changes in the fair value of digital assets, income taxes, provision for credit losses, and any other items that management has determined are not reflective of our operating performance because the amount of such non-cash adjustments 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 and six months ended June 30, 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 nine months ended September 30, 2026 and the comparable prior-year period:

Previous 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.

Current wording

Net cash used in operating activities during the nine months ended September 30, 2026 was $23,508,621, which was primarily attributable to the net loss for the nine months ended September 30, 2026 of $41,398,520, adjusted for non-cash adjustments of $15,846,759. Non-cash adjustments during the nine months ended September 30, 2026 were primarily comprised of stock-based compensation expense of $17,797,817, the unrealized loss related to the change in the fair value of digital assets of $3,986,911, and net losses on derivatives of $1,101,541, partially offset by the deferred income tax benefit of $10,608,685.

Previous wording

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 wording

Net cash used in investing activities during the nine months ended September 30, 2026 was $450,000, 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.

Previous 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."

Current wording

Net cash provided by financing activities during the nine months ended September 30, 2026 was $23,994,500, which was primarily attributable to proceeds from loan draws under the MLA collateralized by a portion of our Bitcoin holdings, and funding from Hard Yaka. 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

We expect to continue incurring operating losses as we fund the further development of our tokenized deposit program offering. Our ability to sustain operations and execute our strategy depends on our capacity to raise additional capital through equity or debt financings, monetize Bitcoin holdings, including through potential sales, or obtain other sources of liquidity, including potential Bitcoin-collateralized financing arrangements, or related-party or other investor financing.

Current wording

We expect to continue incurring operating losses as we fund the further development of our tokenized deposit program offering. Our ability to sustain operations and execute our strategy depends on our ability to leverage our existing financing sources and capacity to raise additional capital through equity or debt financings, monetize Bitcoin holdings, including through potential sales, or obtain other sources of liquidity, including potential Bitcoin-collateralized financing arrangements, or related-party or other investor financing.

Previous wording

Based on our current projections, management believes we have adequate resources to meet our obligations for the next twelve months. As we continue to execute our business strategy, management may supplement cash on hand with additional liquidity sources, which could include digital asset sales, financing arrangements, or other debt or equity financings. Continuation of operations beyond that period will depend on market conditions for additional capital and the financial performance of our tokenized deposit program offering.

Current wording

Based on our current projections, management believes we have adequate resources to meet our obligations for at least the next twelve months. As we continue to execute our business strategy, management may supplement cash on hand with additional liquidity sources, which could include digital asset sales, financing arrangements, or other debt or equity financings. Continuation of operations beyond that period will depend on market conditions for additional capital and the financial performance of our tokenized deposit program offering.

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. 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.

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. On July 28, 2026, we drew the Fourth Draw under the MLA. On September 11, 2026, we drew the Fifth Draw under the MLA. The Fifth Draw increases the aggregate principal amount outstanding under the MLA to $21.0 million and bears interest at a rate of 8.5% per annum maturing on September 11, 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

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.

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 September 30, 2026, we recorded an allowance for credit loss of $3.1 million as an offset to the digital asset receivable balance in our Consolidated Balance Sheets, based on management’s estimate of expected credit losses.