Madison Technologies flags going-concern risk
Madison Technologies Inc. (MDEX) reported its June 30, 2026 quarter with no operating revenue, a very small asset base of $51,275, and heavy liabilities of $24,623,424, resulting in a stockholders’ deficit of $24,572,149.
Madison Technologies Inc. (MDEX) reported its June 30, 2026 quarter with no operating revenue, a very small asset base of $51,275, and heavy liabilities of $24,623,424, resulting in a stockholders’ deficit of $24,572,149. The company has no cash and a working capital deficit of $24,572,149, funded largely by debt, including senior secured notes, multiple defaulted or past-maturity convertible notes, and a $1,008,244 loan from its principal shareholder.
For the six months ended June 30, 2026, Madison recorded a net loss of $1,273,981, an improvement of about 11% from $1,427,959 a year earlier, driven by lower general and administrative costs, professional fees, and interest expense. Interest expense remained high at $1,103,350, and interest payable on senior secured notes rose to $8,594,888. Management discloses substantial doubt about the company’s ability to continue as a going concern and depends on new capital, support from its largest shareholder, and potential strategic transactions. Internal control over financial reporting is deemed ineffective, with identified material weaknesses. Common shares outstanding increased to 1,761,428,576, reflecting significant dilution.
Positive
- Net loss reduced ~11% year over year for the six months (from $1,427,959 to $1,273,981), mainly due to lower general and administrative expenses and professional fees.
- Operating expenses decreased for the six months (from $238,196 to $170,631), reflecting lower overhead and external professional costs.
Negative
- The company has no cash, total assets of $51,275, and a working capital deficit of $24,572,149, indicating severe liquidity constraints.
- Madison generated no revenues for the three- and six-month periods, while recording a net loss of $1,273,981 for the six months.
- Management states that conditions raise substantial doubt about the company’s ability to continue as a going concern over the next 12 months.
- Total liabilities of $24,623,424 include large senior secured notes and convertible notes, with $8,594,888 of interest payable on senior secured notes.
- There is a significant stockholders’ deficit of $24,572,149 and extensive historical losses with an accumulated deficit of $35,912,731.
- Management identifies material weaknesses in internal control over financial reporting, including lack of an audit committee, poor segregation of duties, and weak period-end reporting controls.
Key Figures
Key Terms
going concern financial
working capital deficit financial
senior secured notes financial
mezzanine equity financial
OTC Expert Market market
material weaknesses financial
Earnings Snapshot
FAQ
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What was MDEX’s net loss for the six months ended June 30, 2026?
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AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number
| (Exact name of registrant as specified in its charter) |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | ☐ | |
| Accelerated filer | ☐ | Smaller reporting company | |
| (Do not check if a smaller reporting company) | Emerging growth company | ||
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As
of August 19, 2026,
TABLE OF CONTENTS
FORM 10-Q
QUARTER ENDED June 30, 2026
| Page | ||||
| PART I FINANCIAL INFORMATION | ||||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 | ||
| Condensed Consolidated Interim Balance Sheets at June 30, 2026 (unaudited) and December 31, 2025 (audited) | 3 | |||
| Condensed Consolidated Interim Statements of Operations for the three and six months ended June 30, 2026 and 2025 (unaudited) | 4 | |||
| Condensed Consolidated Interim Statements of Mezzanine Equity and Stockholders’ Deficiency for the six ended June 30, 2026 and 2025 (unaudited) | 5 | |||
| Condensed Consolidated Interim Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited) | 6 | |||
| Notes to the Condensed Consolidated Interim Financial Statements | 7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 | ||
| Item 4. | Controls and Procedures | 31 | ||
| PART II - OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 33 | ||
| Item 1A. | Risk Factors | 33 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 | ||
| Item 3. | Defaults Upon Senior Securities | 33 | ||
| Item 4. | Mine Safety Disclosures | 33 | ||
| Item 5. | Other Information | 33 | ||
| Item 6. | Exhibits | 34 | ||
2
Item 1: Financial Statements.
MADISON TECHNOLOGIES INC.
CONDENSED
CONSOLIDATED INTERIM BALANCE SHEETS AT JUNE 30, 2026 (Unaudited)
AND DECEMBER 31, 2025 (Audited)
(Currency expressed in United States Dollars (“US$ or $”), except for number of shares)
June 30,
2026 |
December 31,
2025 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Prepaid expense | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities (Note 4) | $ | $ | ||||||
| Loan from a principal shareholder (Note 8) | ||||||||
| Promissory notes (Note 5) | ||||||||
| Convertible notes (Note 6) | ||||||||
| Interest payable on senior secured notes (Note 7) | ||||||||
| Senior secured notes (Note 7) | ||||||||
| Total liabilities | ||||||||
| MEZZANINE EQUITY | ||||||||
| Preferred Stock
– Series A, |
— | — | ||||||
| Preferred
Stock - Series C, $ |
— | — | ||||||
| Total Mezzanine Equity | — | — | ||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred Stock - Series B, $ |
— | — | ||||||
| Preferred Stock - Series D, $ |
||||||||
| Preferred Stock- Series E, $ |
— | — | ||||||
| Preferred Stock - Series E-1, $ |
||||||||
| Preferred Stock - Series F, $ |
— | — | ||||||
| Preferred Stock - Series G, $ |
— | — | ||||||
| Preferred Stock – Series H, $ |
||||||||
| Common Stock - $ |
||||||||
| Additional Paid in Capital (Note 9) | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total stockholders’ deficiency | ( |
) | ( |
) | ||||
| Total liabilities, mezzanine equity and stockholders’ deficiency | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated interim financial statements
3
MADISON TECHNOLOGIES INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS FOR THE THREE AND
SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (Unaudited)
(Currency expressed in United States Dollars (“US$ or $”), except for number of shares)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Revenues | $ | — | $ | — | $ | — | $ | — | ||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss before other expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other expenses | ||||||||||||||||
| Interest expense (Notes 5, 6 and 7) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other expense | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense | — | — | — | — | ||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ( |
) | ( |
) | ||||||
| Loss per share, basic and diluted | $ | ( |
) | $ | ( |
) | ( |
) | ( |
) | ||||||
| Weighted average basic and diluted shares outstanding | ||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated interim financial statements
4
MADISON TECHNOLOGIES INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF MEZZANINE EQUITY AND
STOCKHOLDERS’ DEFICIENCY FOR THE THREE AND SIX ENDED JUNE 30, 2026 AND 2025
(Unaudited)
For the Three and Six Months Ended June 30, 2026 and 2025
(Currency expressed in United States Dollars (“US$ or $”), except for number of shares)
| Mezzanine Equity | Common Stock | Preferred Stock | Additional Paid | Accumulated | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Deficit | Total | |||||||||||||||||||
| # | $ | # | $ | # | $ | $ | $ | $ | |||||||||||||||||||
| Balance, December 31, 2025 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Conversion option exercised for interest accrued (Note 5) | — | — | — | — | ( |
) | — | ||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, June 30, 2026 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Balance, April 1, 2026 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Conversion option exercised for interest accrued (Note 5) | — | — | — | — | ( |
) | — | ||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, June 30, 2026 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Balance, December 31, 2024 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, June 30, 2025 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Balance, April 1, 2025 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
| Net loss for the period | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||
| Balance, June 30, 2025 | — | — | ( |
) | ( |
) | |||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated interim financial statements
5
MADISON TECHNOLOGIES INC.
CONDENSED
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR THE
SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (Unaudited)
(Currency expressed in United States Dollars (“US$ or $”), except for number of shares)
| For the | For the | |||||||
| Six Month Ended | Six Month Ended | |||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss for the period | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Amortized expenses (Notes 5, 6 and 7) | — | — | ||||||
| Changes in non-cash working capital items: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Interest payable on senior secured notes | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities | — | — | ||||||
| Cash flows from financing activities: | ||||||||
| Loan from a principal shareholder | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | — | — | ||||||
| Cash, beginning of the period | — | — | ||||||
| Cash, end of the period | $ | — | $ | — | ||||
| SUPPLEMENTAL DISCLOSURE | ||||||||
| Interest paid | $ | — | $ | — | ||||
| Taxes paid | $ | — | $ | — | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES | ||||||||
| Issuance of Common Stock to pay interest | $ | $ | — | |||||
See the accompanying notes to the unaudited condensed consolidated interim financial statements
6
MADISON TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2026 (Unaudited)
Note 1 Nature of Operations
Madison
Technologies Inc. (the “Company”) was incorporated on
Note 2 Going Concern
The
accompanying unaudited condensed consolidated interim financial statements have been prepared assuming we will continue as a going
concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.
For the period ended June 30, 2026, we generated no revenues from operations, incurred a net loss of $
Note 3 Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2025 and 2024 and their accompanying notes.
The accompanying unaudited condensed consolidated interim financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The Company’s fiscal year-end is December 31.
The unaudited condensed consolidated interim financial statements include the accounts of the Company and its wholly owned subsidiary. Significant intercompany accounts and transactions have been eliminated.
Significant accounting estimates and assumptions
The preparation of the unaudited condensed consolidated interim financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The estimates and related assumptions are based on previous experiences and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Significant accounts that require estimates include promissory notes, convertible notes and senior secured notes due to the use of discount rates.
| ● | Fair value of equity classified conversion feature and warrants |
In determining the fair values of the equity classified conversion feature and warrants pursuant to debt financing transactions, the Company applies a market-based valuation technique using the most recent private placement price as a proxy for fair value. This valuation approach is considered a Level 3 fair value measurement within the fair value hierarchy due to the use of unobservable inputs.
7
| ● | Provisions |
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a previous event, if it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.
| ● | Contingencies |
Contingencies can be either possible assets or possible liabilities arising from past events, which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
| ● | Going concern |
The Company evaluates its ability to continue as a going concern in accordance with ASC 205-40, Presentation of Financial Statements – Going Concern. This assessment requires significant judgment and involves the evaluation of relevant conditions and events that are known or reasonably knowable at the date the financial statements are issued, including the Company’s current financial condition, obligations due within one year, expected future cash flows, access to capital, and management’s plans.
The assessment involves inherent uncertainty, as it requires management to project future conditions and the effectiveness of any plans intended to address potential liquidity shortfalls. If substantial doubt about the Company’s ability to continue as a going concern is identified, management evaluates whether its plans will mitigate that doubt, and appropriate disclosures are made in the financial statements.
Consolidation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of our wholly owned subsidiary, Blockchain.tv, Inc., which is dormant has not had operations since its inception. The functional and reporting currency of the Company and its subsidiaries are U.S. Dollar.
Segment reporting
Operating segments are defined as components of an entity where discrete financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. We identified our Chief Executive Officer as the chief operating decision maker. We operate in one operating segment. Our operating decision maker allocates resources and assesses performance at the consolidated level.
8
Fair Value of Financial Instruments
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair value estimates presented herein are based on market assumptions and information available to management as of the reporting date. The carrying amounts of certain financial instruments approximate their fair values due to their short-term maturities or because their stated interest rates approximate market rates. These instruments include accounts payable and accrued expenses, interest payable on senior secured notes, promissory notes, convertible notes and senior secured notes.
Convertible notes and other debt instruments
In connection with the issuance of promissory and convertible notes, in certain instances we issued common share purchase warrants (the “Warrants”) that entitle the holder to purchase shares of our Common Stock at a specified fixed exercise price at any time within a time period specified within each Warrant. We evaluated the embedded conversion feature, if any, and the warrants and concluded that they qualified as equity instruments under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, and ASC 815-40, Contracts in Entity’s Own Equity. The fair value of the Warrants were separated from the promissory and convertible notes and accounted for as a reduction of the carrying amount of the note with an increase to additional paid-in capital.
With respect to the embedded conversion features in the senior secured notes, although they qualify as derivatives under ASC 815, the Company concluded that no reliable basis exists to determine their fair value as of the reporting date. Accordingly, no value has been assigned to the conversion features, and the derivative liability recognized pertains solely to the freestanding warrants.
The fair value of the Warrants that represented a discount was amortized and included in the consolidated statements of operation over the term of each note using the effective interest method.
9
Series A and C Convertible Preferred Stock
The Series A and C convertible preferred stock (“Series A Preferred Stock” and “Series C Preferred Stock”) were accounted for as mezzanine equity.
Loss per share
Net Loss Per Share
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share.
Basic
loss per share of common stock is computed by dividing net loss $
Diluted loss per share of common stock is computed similarly to basic loss per share from continuing operations except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive.
Credit losses
In June 2016, the FASB issued ASU 326, “Financial Instruments – Credit Losses”. The ASU sets forth a “current expected credit loss” (CECL) model which requires us to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023. We have adopted the ASU in year ended December 31, 2023.
10
Related Party Transactions
We follow FASB ASC subtopic 850-10, “Related Party Transactions”, for the identification of related parties and disclosure of related party transactions.
Pursuant to ASC 850-10-20, related parties include: a) our affiliates; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of management; d) our principal owners; e) our management; f) other parties with which we may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Income taxes
The Company accounts for income taxes in accordance with ASC 740. The Company provides for Federal, State and Provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for consolidated financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that is more likely than not to be realized.
Recently Issued Accounting Pronouncements
Accounting guidance recently adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve the disclosures regarding a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The Company is required to adopt the guidance in the fourth quarter of fiscal 2025, though early adoption is permitted. The Company adopted quarterly requirements of this guidance beginning in the first quarter of 2025 and the adoption has no material impact on the unaudited condensed interim consolidated financial statements.
New accounting guidance not yet adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”) to provide disaggregated income tax disclosures on rate reconciliation and income taxes paid. The Company is required to adopt the guidance in the fourth quarter of fiscal 2026, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.
In January 2025, the FASB issued a clarification by ASU 2025-01 Income Statement - Expense Disaggregation Disclosures (Topic 220): A new guidance related to expense disaggregation disclosures. This guidance requires additional disclosure of certain amounts included in the expense captions presented in the Statement of Income as well as disclosures about selling expenses. The new guidance will be effective for us beginning in 2027 on an annual basis and in the first quarter of 2028 on a quarterly basis and may be applied on either a prospective or retrospective basis. Early adoption of the guidance is permitted. The Company is currently evaluating the effect this new guidance will have on our disclosures.
The Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
11
Note 4 Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of June 30, 2026 and December 31, 2025 are summarized below:
Schedule of Accounts Payable and Accrued Liabilities
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Total | $ | $ | ||||||
Note 5 Promissory Notes
During the years ended December 31, 2021, 2022 and 2023, the Company issued several promissory notes with warrants. The Company evaluated the warrants and concluded that those warrants qualified as equity instruments under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, and ASC 815-40, Contracts in Entity’s Own Equity.
Due to the limited trading activity and pricing transparency of the Company’s Common Stock, observable market inputs for valuing the warrants were determined to be unreliable. Specifically:
| ● | The Company’s Common Stock is listed on the OTC Expert Market, which restricts public quotation and limits visibility to investors. |
| ● | The average daily trading volume of the Company’s Common Stock is approximately $1,000, and the share price has historically been highly volatile in its thinly traded status. |
Due to these limitations, valuation techniques that depend on quoted market prices cannot be reliably applied.
Accordingly, the Company applied a market-based valuation technique using the most recent private placement price of $0.018 per share (dated November 2, 2021) as a proxy for fair value. This valuation approach is considered a Level 3 fair value measurement within the fair value hierarchy due to the use of unobservable inputs. The fair value of the freestanding warrants as of the reporting date was estimated based on this Level 3 input, and the corresponding equity classified warrants has been recorded under additional paid-in capital. Management believes this approach provides the most reasonable estimate of fair value in the absence of observable market data.
Significant unobservable input used in the valuation was the private placement price of $0.018/share. No sensitivity analysis is presented due to the absence of a reliable market range of inputs.
Promissory note issued during year ended December 31, 2021
On
December 28, 2021, the Company issued a promissory note with a principal amount and cash proceeds of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Promissory notes issued during year ended December 31, 2022
| (a) | On January 14, 2022,
the Company issued a promissory note with a principal amount and cash proceeds of $ |
The
promissory note accrued interest at an annual rate of
The
fee payable of $
12
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
As
of June 30, 2026 and December 31, 2025, $
| (b) | On January 14, 2022,
the Company issued a promissory note with a principal amount and cash proceeds of $ |
The
fee payable of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
As
of June 30, 2026 and December 31, 2025, $
| (c) | On April 27, 2022,
the Company issued a promissory note with a principal amount of $ |
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Promissory notes issued during year ended December 31, 2023
In
February 2023, the Company issued a promissory note $
On
February 3, 2023, the Company entered into a securities purchase agreement with a lender pursuant to which the Company borrowed
$
On
May 4, 2026, the note holder exercised their conversion rights over the accrued interest of $
On
December 30, 2025, the note holder exercised their conversion rights over the accrued interest of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
13
Note 6 Convertible Notes
During the years ended December 31, 2021, 2022 and 2023, the Company issued several series of unsecured convertible notes with embedded conversion features and freestanding warrants. The Company evaluated the embedded conversion features and the warrants and concluded that they qualified as equity instruments under Accounting Standards Codification (ASC) 815, Derivatives and Hedging, and ASC 815-40, Contracts in Entity’s Own Equity.
Due to the limited trading activity and pricing transparency of the Company’s Common Stock, observable market inputs for valuing those instruments were determined to be unreliable. Specifically:
| ● | The Company’s Common Stock is listed on the OTC Expert Market, which restricts public quotation and limits visibility to investors. |
| ● | The average daily trading volume of the Company’s Common Stock is approximately $1,000, and the share price has historically been highly volatile in its thinly traded status. |
Accordingly,
the Company applied a market-based valuation technique using the most recent private placement price of $
Significant unobservable input used in the valuation was the private placement price of $0.018/share. No sensitivity analysis is presented due to the absence of a reliable market range of inputs.
Although the embedded conversion features meet the definition of equity classified instruments under ASC 815, the Company concluded that there is no reliable basis to estimate their fair value as of the reporting date. The features are highly sensitive to changes in various unobservable inputs, and due to the lack of active trading, volatility benchmarks, or comparable market data, any valuation would be purely speculative. Management assessed whether a Level 3 fair value estimate (e.g., using an option pricing model) could be developed, but concluded that input assumptions such as volatility and market-based discount rates were not supportable. As such, no value has been assigned to the embedded conversion features, and the recognized equity classified instruments pertains solely to the freestanding warrants. The Company will reassess the valuation of the conversion features in subsequent periods as market data becomes available.
Our convertible notes payable, all of which are liabilities as of June 30, 2026 and December 31, 2025, are as follows:
Schedule of convertible notes payable
| June
30, 2026 |
December
31, 2025 |
|||||||
| Series 1 | $ | $ | ||||||
| Series 2 | ||||||||
| Series 3 | ||||||||
| Series 4 | ||||||||
| Series 5 | ||||||||
| Series 6 | ||||||||
| Principal outstanding total | ||||||||
| Less discount | — | — | ||||||
| Principal outstanding, net | $ | $ | ||||||
Series 1
During
the years ended December 31, 2021 and 2022, the Company issued convertible notes totaling $
Convertible notes issued during year ended December 31, 2021
Series 1-1
On
August 31, 2021, the Company issued a series of convertible notes with total principal amount and cash proceeds of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Convertible notes issued during year ended December 31, 2022
Series 1-2
On
April 5, 2022, the Company issued a convertible note with total principal amount and cash proceeds of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
14
Series 2
Convertible notes issued during year ended December 31, 2022
Series 2-1
On
January 5, 2022, the Company issued a convertible note with a principal amount and cash proceeds of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Convertible notes issued during year ended December 31, 2023
Series 2-4
On
January 10, 2023, the Company issued a convertible note with a principal amount of $
The
issuance of the convertible note resulted in an original issuance discount of $
15
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 2-5
On
January 10, 2023, the Company issued a convertible note with a principal amount and cash proceeds of $110,000. The convertible
note accrued interest at an annual rate of
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 3
Convertible notes issued during year ended December 31, 2022
Series 3-1
On
February 11, 2022, the Company issued a convertible note with a principal amount of $
In
connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the “Warrants”)
that entitle the holder to purchase
The
fair values of the warrants of $
The
issuance of the convertible note resulted in an original issuance discount of $
16
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 3-2
On
February 11, 2022, the Company issued a convertible note with a principal amount of $
In
connection with the issuance of the convertible note, the Company also issued common share purchase warrants (the “Warrants”)
that entitle the holder to purchase
The
fair values of the warrants of $
The
issuance of the convertible note resulted in an original issuance discount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 4
Convertible notes issued during year ended December 31, 2022
Series 4-1
On
May 5, 2022, the Company issued a secured convertible note with a principal amount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
17
Series 4-2
On
June 24, 2022, the Company issued a convertible note with a principal amount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 5
Convertible notes issued during year ended December 31, 2022
Series 5-1
On
May 5, 2022, the Company issued a convertible note with a principal amount of $
18
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 5-2
On
May 5, 2022, the Company issued a convertible note with a principal amount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 5-3
On
October 14, 2022, the Company issued a convertible note with a principal amount of $
19
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Series 5-4
On
December 15, 2022, the Company issued a convertible note with a principal amount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
20
Series 6
Convertible notes issued during year ended December 31, 2022
Series 6-1
On
September 16, 2022, the Company issued a convertible note with a principal amount of $
The
original issuance discount of $
For
the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $
Note 7 Senior Secured Notes
On
February 17, 2021, the Company entered into a securities purchase agreement with funds affiliated with Arena Investors, LP (the
“Investors”) pursuant to which it issued two convertible notes having an aggregate principal amount of $
In
connection with the issuance of the Notes, the Company also issued
The
Notes would mature on February 17, 2024, unless earlier converted, and accrue interest at a rate of
Conversion Feature
The Notes contain conversion features that allow the Investors to convert the Notes and unpaid interests into shares of the Company’s common stock. The conversion price is subject to the following:
On
September 24, 2021, the Notes were amended to change the conversion price to $
21
Warrants
The
Warrants entitle the Investors to purchase shares of the Company’s common stock. At the inception of the agreement, the
exercise price of the Warrants was calculated as 125% of the base price, where the base price was determined by dividing $50,000,000
by the total number of outstanding shares of preferred stock, common stock, and common stock equivalents (assuming the full conversion
or exercise of all outstanding securities that are convertible into or exercisable for equity securities of the Company). The
exercise price is subject to adjustment as provided in the Warrant agreement and may be paid on a cashless basis. On September
24, 2021, the exercise price of the Warrants was amended to $
The Company evaluated the conversion feature and warrants in accordance with Accounting Standards Codification (ASC) 815, Derivatives and Hedging. Initially, the conversion features and warrants were determined to be derivative liabilities. However, as the Company’s common stock is quoted on the OTC Expert Market, which lacks sufficient trading volume and transparency, management determined that reliable market inputs necessary to support a fair value measurement were not available. As a result, the fair value of the embedded conversion features was assessed to be nil. The fair values of the warrants of $3,464,529 were separated from the note and accounted for as a reduction of the carrying amount of the note with a recognition of derivative liabilities).
On September 24, 2021, upon the amendment of the exercise price of the warrants to a fixed price, the Company re-evaluated the amended terms in accordance with ASC 815-40 Contracts In Entity’s Own Equity, derecognized the derivative liabilities related to those warrants, and recognized the Warrants in equity (“End of derivative warrants treatment”).
The
issuance of the Notes resulted in an original issuance discount of $
On
February 1, 2023, pursuant to an agreement with the lender of the Company’s senior secured notes, Sovryn was sold to the
lender. The net assets of Sovryn at the time of disposition totalled $
Schedule of senior secured notes
| Total | ||||
| $ | ||||
| Face value of senior secured notes issued | ||||
| Debt discount | ( |
) | ||
| Day 1 value of senior secured notes issued | ||||
| Amortization expenses | ||||
| Balance at December 31, 2021 | ||||
| Amortization expenses | ||||
| Balance at December 31, 2022 | ||||
| Partial settlement of principal | ( |
) | ||
| Amortization expenses | ||||
| Balance at December 31, 2023 | ||||
| Amortization expenses | ||||
| Balance at December 31, 2024 | ||||
| Amortization expenses | — | |||
| Balance at December 31, 2025 | ||||
The
Company recorded interest expenses of $
The
interest payable on senior secured notes as on June 30, 2026 and December 31, 2025 amounts to $
22
Note 8 Related Party
As
at June 30, 2026 and December 31, 2025, respectively, $
Note 9 Stockholders’ Deficiency
Preferred Stock
As
of June 30, 2026 and December 31, 2025, the Company is authorized to issue
Series A Preferred Stock and Series B Preferred Stock
On
July 28, 2020, the Company filed a certificate of designations of Series A Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series A Preferred Stock does not have redemption rights.
The Series A Preferred Stock, with respect to the payment of dividends and payments upon the liquidation of the Company, ranks senior to all capital stock of the Company.
The Series A Preferred Stockholders is entitled to receive cumulative quarterly dividends, payable in additional Series A Preferred Stock, at an annual rate of 3% of the Stated Value, when declared by the Board. The Board did not declare dividend since issuance of the Series A Preferred Shares.
The
Series A Preferred Stock is convertible by the holder into
In the event of a liquidation, dissolution, or winding up of the Company, or a Sale (defined as a sale of the majority of assets or certain mergers/consolidations), holders of Series A Preferred Stock are entitled to receive, prior to any distribution to junior securities, an amount equal to the Stated Value plus all accrued and unpaid dividends. If the Company’s assets are insufficient to pay this full amount, the remaining assets will be distributed proportionally among the Series A Preferred stockholders. The Company will provide at least 45 days’ written notice of any such Liquidation. The number of Series A Preferred Stock issued and outstanding as of June 30, 2026 and December 31, 2025 was Nil.
23
On
July 28, 2020, the Company filed a certificate of designations of Series B Super Voting Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series B Preferred Stock does not have redemption rights.
The Series B Preferred Stock will not be entitled to dividends unless the Corporation pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock.
There is no mandatory conversion of Series B Super Voting Preferred Stock into Common Stock.
On
February 17, 2021, the
In
July 2020, pursuant to an acquisition agreement to acquire the Casa Zeta-Jones Brand License Agreement from Luxurie Legs, LLC,
the Company issued
The
Company accounted for its Series A Preferred Stock as Mezzanine Equity in accordance with ASC 480, Distinguishing Liabilities
from Equity. The embedded conversion feature of the preferred stock was evaluated under ASC 815, Derivatives and Hedging, and
was separated from the host instrument. This embedded conversion feature was recognized as a derivative liability, with changes
in its fair value recorded in the consolidated statements of operations at each reporting period end. Upon the issuance of the
Series A Preferred Stock, the Company recognized derivative liabilities of $
The
Series B Preferred Stock was accounted for as Permanent Equity in accordance with ASC 480 - Distinguishing Liabilities from Equity.
The fair value of the Series B Preferred Stock was allocated to par value of $Nil and additional paid-in capital of $
On
February 16, 2021, the Company extinguished all outstanding shares of its Series A Preferred Stock. In exchange, the former holders
received one-year options to purchase up to
The options issued expired without exercise.
The
number of Series B Preferred Stock issued and outstanding as of June 30, 2026 and December 31, 2025 was
24
Series C Preferred Stock
On
February 11, 2021, the Company filed a certificate of designations of Series C Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series C Preferred Stock does not have redemption rights.
The Series C Preferred Stockholders are entitled to receive cumulative quarterly dividends, payable in additional Series A Preferred Stock, at an annual rate of 2% of the Stated Value, when declared by the Board. The Board did not declare dividend since issuance of the Series A Preferred Shares.
The Company accounted for its Series C Preferred Stock as Mezzanine Equity in accordance with ASC 480, Distinguishing Liabilities from Equity. The embedded conversion feature of the preferred stock was evaluated under ASC 815, Derivatives and Hedging, and was concluded to qualify for derivatives.
The Company did not issue Series C Preferred Stock. As at June 30, 2026 and December 31, 2025, no shares of Series C Preferred Stock are outstanding.
Series D Preferred Stock
On
March 26, 2021, the Company filed a certificate of designations of Series D Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series D Preferred Stock does not have redemption rights.
The Series D are ranked equally with the Series E Preferred Stock and the Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock.
The Series D Preferred Stockholders is entitled to receive dividends when declared by the Board. The Board did not declare a dividend since the issuance of the Series D Preferred Shares.
Each
share of Series D Preferred Stock may be converted into
The Series D Preferred Stock was accounted for as Permanent Equity in accordance with ASC 480 - Distinguishing Liabilities from Equity.
During
the year ended December 31, 2021, the Company issued
During
the year ended December 31, 2021,
25
Series E Preferred Stock and Series E-1 Preferred Stock
On
March 26, 2021, the Company filed a certificate of designations of Series E Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series E are ranked equally with the Series D Preferred Stock and the Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock.
The Series E Preferred Stock does not have redemption rights.
The Series E Preferred Stockholders is entitled to receive dividends when declared by the Board. The Board did not declare dividend since issuance of the Series E Preferred Shares.
The
Company accounted for its Series E Preferred Stock as permanent equity in accordance with ASC 480, Distinguishing Liabilities
from Equity. The embedded conversion feature of the preferred stock was evaluated under ASC 815, Derivatives and Hedging, and
was separated from the host instrument. The original embedded conversion feature was recognized as a derivative liability, with
changes in its fair value recorded in the consolidated statements of operations at each reporting period end. Upon the issuance
of the Series E Preferred Stock, the Company recognized derivative liabilities of $
On
September 16, 2021, the Company filed a certificate of designations of Series E-1 Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series E-1 are ranked equally with the Series D Preferred Stock and the Series F Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock.
The Series E-1 Preferred Stock does not have redemption rights.
The Series E-1 Preferred Stockholders is entitled to receive dividends when declared by the Board. The Board did not declare dividend since issuance of the Series E-1 Preferred Shares.
The holder of the Series E-1 Preferred Stock may convert Series E-1 Preferred Shares into Common Stock at conversion rate of 1:1,000.
The
Series E-1 Preferred Stock was accounted for as Permanent Equity in accordance with ASC 480 - Distinguishing Liabilities from
Equity. The fair value of the Series E-1 Preferred Stock was allocated to par value of $1 and additional paid-in capital of $
On
October 11, 2021, 1,000 shares of Series E Preferred Stock were exchanged for
26
Series F Preferred Stock
During
year ended December 31, 2021, the Company filed a certificate of designations of Series F Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series F Preferred Stock are ranked equally with the Series D Preferred Stock and the Series E Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock.
The Series F Preferred Stock does not have redemption rights.
The Series F Preferred Stockholders is entitled to receive dividends when declared by the Board. The Board did not declare dividends since the issuance of the Series F Preferred Shares.
The
Company accounted for its Series F Preferred Stock as permanent equity in accordance with ASC 480, Distinguishing Liabilities
from Equity. The fair value of the Series F Preferred Stock issued was determined to be $
On
October 11, 2021, the
Series G Preferred Stock
On
March 26, 2021, the Company filed a certificate of designations of Series G Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series G are ranked equally with the Series D Preferred Stock and the Series E Preferred Stock and as senior to all previously issued series of Preferred Stock and the Common Stock.
The Series G Preferred Stock does not have redemption rights.
The Series G Preferred Stockholders is entitled to receive dividends when declared by the Board. The Board did not declare dividend since issuance of the Series G Preferred Shares.
During
year ended December 31, 2021, the Company received $
The
Company accounted for its Series G Preferred Stock as permanent equity in accordance with ASC 480, Distinguishing Liabilities
from Equity. The embedded conversion feature of the preferred stock was evaluated under ASC 815, Derivatives and Hedging, and
was separated from the host instrument. The original embedded conversion feature was recognized as a derivative liability, with
changes in its fair value recorded in the consolidated statements of operations at each reporting period end. Upon the issuance
of the Series G Preferred Stock, the Company recognized derivative liabilities of $
27
Series H Preferred Stock
On
November 5, 2021, the Company filed a certificate of designations of Series H Convertible Preferred Stock (the “Certificate
of Designations”) with the Nevada Secretary of State designating
The Series H Preferred Stock does not have redemption rights.
The Series H Preferred Stockholders are entitled to receive dividends when declared by the Board. The Board did not declare dividends since the issuance of the Series H Preferred Shares.
The Series H Preferred Stock allowed holders to convert into common stock by a conversion ratio of 1:1,000.
On
November 11, 2021, pursuant to an exchange agreement that we entered into with the Investors,
At
June 30, 2026 and December 31, 2025,
Common Stock
On
May 4, 2026, the Company issued
On
January 31, 2026, the Company adopted the 2026 Omnibus Equity Incentive Plan (the “Plan”) and reserved
On
August 14, 2021, our shareholders approved an increase in the authorized number of shares of Common Stock to
Warrants
We issued warrants issued as loan incentives and valued the warrants on their respective grant dates using the Black-Scholes option pricing model. Warrant values per share ranged from $0.023 to $0.002. For the six months ended June 30, 2025, a summary of our warrant activity is as follows:
Schedule of warrant activity
| Number
of Warrants |
Weighted- Average Exercise Price |
Weighted- Average Remaining Contractual Term (Years) |
Weighted- Grant- Value |
|||||||||||||
| Outstanding and exercisable at January 1, 2026 | $ | $ | ||||||||||||||
| Expired | ( |
) | — | — | — | |||||||||||
| Outstanding and exercisable at June 30, 2026 | $ | $ | ||||||||||||||
In determining the fair value of these equity-classified features, the Company considered the fact that its common stock is quoted on the OTC Expert Market, where trading volume is minimal and pricing is not reliably observable. Due to the absence of active market inputs, the Company determined that a quoted market price could not be used to value the conversion features.
Instead,
the Company referred to the most recent observable transaction price from a private placement conducted in 2021, in which it issued
28
Note 10 Contingency and Commitments
On
February 17, 2024, Agile Capital Funding LLC (“Agile”) filed a Confession of Judgment executed by Philip Falcone with
the Supreme Court of the State of New York, County of New York. The filing stated that Sovryn Holdings Inc. (“Sovryn”)
and Madison Technologies Inc. (“Madison”) owe Agile an amount of approximately $
Management has reviewed this matter and concluded that Madison has no obligation arising from this Confession of Judgment. The funds in question were received by Sovryn, which was a subsidiary of Madison at the time and was sold to Arena Group Holdings Inc. in February 2023, including all of Sovryn’s assets and liabilities. Accordingly, management believes that the Confession of Judgment relates to obligations of Sovryn prior to its sale.
Madison has not received any demand or claim for payment in connection with this matter. Based on the information available, management believes it is unlikely that this matter will result in any obligation for Madison. No amount has been recognized in the financial statements, as any potential liability, if any, cannot be reasonably determined at this time.
Our principal executive office, at which minimal operations are conducted and which we do not own or lease, is located at 405 Lexington Avenue, 59th floor, New York, New York.
We do not have an employment agreement with our Chief Executive Officer.
Note 11 Subsequent Events
The Company has evaluated subsequent events through August 13, 2026, the date the financial statements were available to be issued.
In August 2026, we relocated our principal executive office, at which minimal operations are conducted and which we do not own or lease, to 405 Lexington Avenue, 59th floor, New York, New York.
Management believes that the continued financial support from Arena demonstrates the shareholder’s commitment and provides the Company with sufficient liquidity to continue operations for the foreseeable future.
Other than the above, management has determined that there are no other subsequent events.
29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation. Shareholders’ Equity General.
THE FOLLOWING PRESENTATION OF OUR PLAN OF OPERATION OF SHOULD BE READ IN CONJUNCTION WITH THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.
RESULTS OF OPERATIONS
Our consolidated financial statements have been prepared on a going concern basis and, accordingly, do not include any adjustments relating to the recoverability and realization of assets or the classification of liabilities that might be necessary should we be unable to continue in operation.
Our ability to continue as a going concern is dependent upon our ability to raise additional capital through the issuance of equity or debt securities, continued financial support from our largest shareholder, the execution of potential strategic initiatives, including amalgamation or similar transactions currently being pursued by management, and the continued implementation of our business plan. However, we may not be successful in securing such financing on a timely basis or on favorable terms, if at all.
RECENT DEVELOPMENTS
On January 31, 2026, Vincent DeVito was appointed to our board of directors.
In August 2026, we relocated our principal executive office, at which minimal operations are conducted and which we do not own or lease, to 405 Lexington Avenue, 59th floor, New York, New York.
Three and Six Months Ended June 30, 2026 and 2025
General and administrative expenses
General and administrative expenses increased to $48,321 for the three months ended June 30, 2026, from $40,046 for the three months ended June 30, 2025. General and administrative expenses decreased to $87,968 for the six months ended June 30, 2026, from $101,022 for the six months ended June 30, 2025. The decrease was primarily because of the expenses incurred in the prior year’s six-month period for processing multiple SEC filings.
Professional Fees
Professional fees decreased to $35,957 for the three months ended June 30, 2026, from $80,270 for the three months ended June 30, 2025. Professional fees decreased to $82,664 for the six months ended June 30, 2026, from $137,174 for the six months ended June 30, 2025. The decrease was primarily because of the expenses incurred in the prior year’s six-month period for processing multiple SEC filings.
Interest expense
Interest expense decreased to $529,248 for the three months ended June 30, 2026, from $598,166 for the three months ended June 30, 2025.
Interest expense decreased to $1,103,350 for the six months ended June 30, 2026, from $1,189,763 for the six months ended June 30, 2025.
Net Loss
Net loss decreased to $613,526 for the three months ended June 30, 2026, from $718,482 for the three months ended June 30, 2025. Net loss decreased to $1,273,981 for the six months ended June 30, 2026, from $1,427,959 for the six months ended June 30, 2025. The decrease was primarily the result of decreases in general and administrative expense, professional fees and interest expense. The net loss per basic and diluted share was $0.0004 and $0.0007 for the three-month periods ended June 30, 2026 and 2025, respectively and $0.0007 and $0.0009 for the six-month periods ended June 30, 2026 and 2025, respectively. Basic and diluted weighted averages shares outstanding were 1,731,208,796 and 1,704,798,742 for the three and six month periods ended June 30, 2026 compared to 1,603,095,243 for the respective 2025 periods.
Liquidity and Capital Resources
Cash and Working Capital
As at June 30, 2026, we had $Nil in cash and a $24,572,149 working capital deficit, compared to cash of $Nil and working capital deficit of $23,310,668 as at December 31, 2025. The increase in the working capital deficit primarily resulted from the accrual of interest on our debt.
We will require additional capital to meet our long- and short-term operating requirements. For the six months ended June 30, 2026, our principal source of liquidity was our cash that we obtained from funds provided by the Investors. Our principal use of cash was to fund operations. We expect that the principal uses of cash in the future will be for continuing operations associated with rolling out our business plan and repayment of notes payable that are not converted into our Common Stock or renegotiated.
Net Cash Used in Operating Activities
We used $282,662 in cash from continuing operating activities for the six months ended June 30, 2026, compared to cash used of $128,690 from continuing operating activities during the six months ended June 30, 2025. The increase in cash used in operating activities in 2026 resulted from payments to vendors that reduced our accounts payable balance.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $282,662 during the six months ended June 30, 2026, compared to $128,690 of cash provided by financing activities during the six months ended June 30, 2025. The increase in cash provided by financing activities in 2026 resulted from borrowings from Arena to make payments to vendors that reduced our accounts payable balance.
30
No cash was used in investing activities during the six months ended June 30, 2026 and 2025.
Going Concern
Our unaudited condensed consolidated financial statements have been prepared on a going concern basis and, accordingly, do not include any adjustments relating to the recoverability and realization of assets or the classification of liabilities that might be necessary should we be unable to continue in operation.
Our ability to continue as a going concern is dependent upon our ability to raise additional capital through the issuance of equity or debt securities, continued financial support from our largest shareholder, the execution of potential strategic initiatives, including amalgamation or similar transactions currently being pursued by management, and the continued implementation of our business plan. However, we may not be successful in securing such financing on a timely basis or on favorable terms, if at all.
We expect to raise additional capital through, among other means, the issuance of equity or debt securities and the continued execution of our business plan.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In connection with the preparation of this annual report on Form 10-K, an evaluation was carried out by the sole member of our Board of Directors and our Chief Executive Officer of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2025. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, our management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the SEC rules and forms and that such information was accumulated or communicated to management to allow timely decisions regarding required disclosure. In particular, we identified material weaknesses in internal control over financial reporting, as discussed below.
Management’s Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our internal control framework over financial reporting is a process designed under the supervision of our Chief Executive Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“US GAAP”). Internal control over financial reporting includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and | |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, management identified material weaknesses in internal control over financial reporting.
A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
The matters involving internal controls and procedures that management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee and no outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified and communicated to management in connection with the preparation and audit of our financial statements as of December 31, 2025.
As a result of the material weakness in internal control over financial reporting described above, management has concluded that, as of June 30, 2026, our internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.
Management believes that the material weaknesses set forth in items (2), (3) and (4) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and no outside directors on our Board of Directors caused and continues to cause an ineffective oversight in the establishment and monitoring of the required internal controls over financial reporting.
We are committed to improving our financial organization. As part of this commitment and when funds are available, we will create a position to segregate duties consistent with control objectives and will increase its personnel resources and technical accounting expertise within the accounting function by: (i) appointing additional outside directors to its board of directors who will also be appointed to our audit committee, resulting in a fully functioning audit committee that will undertake the oversight in the establishment and monitoring of required internal controls over financial reporting; and (ii) preparing and implementing sufficient written policies and checklists that will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of additional outside directors, who will also be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board. In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses: (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support our internal controls if personnel turn-over issues within the department occur. This, coupled with the appointment of additional outside directors, is designed to greatly decrease any control and procedure issues we may encounter in the future.
Management will continue to monitor and evaluate the effectiveness of our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Our independent auditors have not issued an attestation report on management’s assessment of our internal control over financial reporting. As a result, this Quarterly Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We are not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the temporary rules of the SEC that permit us to provide only management’s report in this quarterly report.
Changes in Internal Controls
There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the year ended December 31, 2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not required under Regulation S-K for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On December 30, 2025, we issued 75,000,000 shares of unregistered Common Stock in satisfaction of a conversion notice submitted by a lender for partial repayment of our debt.
On May 5, 2026, the Company issued 83,333,333 shares of unregistered Common Stock in satisfaction of a conversion notice submitted by a lender for partial repayment of our debt.
Item 3. Defaults Upon Senior Securities.
On February 17, 2021, the Company entered into a securities purchase agreement with funds affiliated with Arena Investors, LP (the “Investors”) pursuant to which it issued two convertible notes having an aggregate principal amount of $16,500,000 for an aggregate purchase price of $15,000,000 (collectively, the “Notes”). The Notes are secured by a blanket lien on all of the Company’s assets and the shares of the Company’s Common Stock and Preferred Stock (the “Pledged Assets”). On February 1, 2023, pursuant to an agreement with the lender of the Company’s senior secured notes, Sovryn was sold to the lender. The net assets of Sovryn at the time of disposition totalled $9,159,907, which was used to partially settle the principal balance of the senior secured notes, which totalled $16,500,000. The transaction was accounted for as a non-cash settlement. The remaining principal balance of $7,340,093 and accrued interest are in default.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
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Item 6. Exhibits.
The following exhibits are attached hereto:
| Exhibit No. | Description of Exhibit | |
| 31.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended, filed herewith. | |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith | |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Madison Technologies, Inc. | |||
| By: | /s/ Thomas Amon | ||
| Thomas Amon | |||
| Chief Executive Officer and Chief Financial Officer | |||
| (Principal Executive Officer and Principal Financial Officer) | |||
| August 19, 2026 | |||
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