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UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K/A
(Amendment
No. 2)
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date
of earliest event reported): May 26, 2026
OLENOX INDUSTRIES INC.
(Exact Name
of Registrant as Specified in its Charter)
| Delaware |
|
001-38037 |
|
95-4463937 |
|
(State or Other Jurisdiction of
Incorporation) |
|
(Commission File Number) |
|
(I.R.S. Employer
Identification Number) |
1207 N. FM 3083 Bldg. C
Conroe, TX 77304
(Address of Principal
Executive Offices, Zip Code)
Registrant’s
telephone number, including area code: (936) 323-6332
(Former name
or former address, if changed since last report.)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant
to Section 12(b) of the Act:
| Title of Each Class |
|
Trading Symbol(s) |
|
Name of Each Exchange on Which Registered |
| Common Stock, par value $0.01 |
|
OLOX |
|
The Nasdaq Stock Market LLC |
Indicate by check mark whether
the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule
12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Explanatory Note
On May 28, 2026, Olenox Industries, Inc. (the
“Company”), a Delaware corporation, filed a Current Report on Form 8-K (the “Initial Report”) to report that on
May 26, 2026, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with CS Digital
Ventures, LLC, a Delaware limited liability company (“CS Digital”), the members of CS Digital listed on the signature page
thereto (collectively, the “Sellers”), and Bernardo Schucman, in his capacity as the seller representative (the “Seller
Representative”). Pursuant to the Purchase Agreement, the Company acquired 100% of the issued and outstanding membership interests
of CS Digital (the “Acquisition”) on the same date.
On
August 11, 2026, the Company filed an amendment to the Initial Report on Form 8-K/A (the “Amendment No. 1”), supplementing
and amending the Initial Report to provide financial statements of CS Digital, and the pro forma financial statements of the Company
required by Item 9.01 of Form 8-K. No other modifications to the Initial Report were made by Amendment No. 1.
This Current Report on Form 8-K/A (this “Amendment
No. 2”) amends and supplements the Initial Report and the Amendment No. 1 to correct a couple drafting errors in the unaudited pro
forma condensed combined financial information filed as Exhibit 99.3 to the Amendment No. 1 (the “Pro Forma Statements”),
namely (i) the Series E Preferred Stock issued to CS Digital under the Purchase Agreement was incorrectly referenced as “Series
D Preferred Stock” in the Pro Forma Statements, and (ii) the earnout thresholds in the Purchase Agreement, as amended, were incorrectly
stated in Note 2 to the Pro Forma Statements. This Amendment No. 2 corrects these drafting errors. No other modifications to the Initial
Report or Amendment No. 1 are being made by this Amendment No. 2. This Amendment No. 2 should be read in connection with the Initial Report
and Amendment No. 1, which provides a more complete description of the Purchase Agreement and transactions contemplated thereby.
| Item 9.01. |
Financial Statements and Exhibits. |
| (a) |
Financial Statements of CS Digital |
The audited financial statements of CS Digital
for the years ended December 31, 2025 and 2024, together with the related notes to the financial statements, are included as Exhibit 99.1
to this Current Report.
The unaudited financial statements of CS Digital
for the three months ended March 31, 2026 and 2025, together with the related unaudited notes to the financial statements, are included
as Exhibit 99.2 to this Current Report and are incorporated herein by reference.
| (b) |
Revised Pro Forma Financial Information. |
The revised unaudited pro forma consolidated financial
statements of the Company for the three months ended March 31, 2026, and for the year ended December 31, 2025, are included as Exhibit
99.3 to this Current Report and are incorporated herein by reference.
The revised pro forma financial information included
in this Amendment No.2 has been presented for informational purposes only and is not necessarily indicative of the consolidated financial
position or results of operations that would have been realized had the acquisition occurred as of the dates indicated, nor is it meant
to be indicative of any anticipated consolidated financial position or future results of operations that the Company will experience after
the acquisition. The pro forma financial information is subject to a full valuation report to be completed by the Company according to
ASC 805.
| 99.1(1) |
|
Audited Annual Financial Statements of CS Digital Ventures, LLC for the Years Ended December 31, 2025 and 2024 |
| 99.2(1) |
|
Unaudited Financial Statements of CS Digital Ventures, LLC for the Three Months Ended March 31, 2026 and 2025 |
| 99.3* |
|
Revised Unaudited Pro Forma Consolidated Financial Information |
| 104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| (1) | Incorporated by reference from the Amendment No. 1 to Current Report on Form 8-K/A filed with the Commission on August 11, 2026. |
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
| |
OLENOX INDUSTRIES
INC. |
| |
|
|
| Dated: October 1, 2026 |
By: |
/s/
Michael McLaren |
| |
|
Name: Michael McLaren |
| |
|
Title: Chief Executive
Officer |
Exhibit 99.3
REVISED OLENOX INDUSTRIES INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
INTRODUCTION
On May 26, 2026, Olenox Industries Inc. (the “Company”
or “Olenox”) completed its acquisition of CS Digital Ventures LLC (“CS Digital”) pursuant to the Purchase Agreement
(the “Acquisition”). The aggregate consideration payable by the Company consists of (i) US$30,000,000 in upfront consideration
payable at closing, comprised of US$14,000,000 in newly issued shares of the Company’s Series E Preferred Stock, being 140,000 shares
issued at a stated value of $100.00 per share and a US$16,000,000 unsecured promissory note issued to the Sellers (the “Seller Note”),
(ii) warrants to purchase an aggregate of 1,500,000 shares of the Company’s common stock in three equal tranches of 500,000 shares each
at exercise prices of $5.00, $7.00 and $9.00 per share (the “Warrants”), and (iii) up to an additional US$20,000,000 in shares
of Series E Preferred Stock (the “Earnout Shares”) issuable upon the achievement of two post-closing milestones tied to cumulative
revenue and cumulative Adjusted EBITDA of CS Digital.
The following unaudited pro forma condensed combined financial information
has been prepared in accordance with Article 11 of Regulation S-X. The Company is a smaller reporting company and prepares this information
pursuant to Rule 8-05 of Regulation S-X, which requires compliance with Rules 11-01 through 11-03 and permits the information to be condensed
pursuant to Rule 8-03(a).
The unaudited pro forma condensed combined balance sheet as of March
31, 2026 gives effect to the Acquisition as if it had occurred on March 31, 2026. The unaudited pro forma condensed combined statements
of operations for the year ended December 31, 2025 and for the three months ended March 31, 2026 give effect to the Acquisition as if
it had occurred on January 1, 2025, the first day of the earliest period presented.
The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only. It is not necessarily indicative of the operating results or financial position that would have
been achieved had the Acquisition been completed on the dates indicated, and it does not purport to project the future operating results
or financial position of the combined company.
This information should be read together with the Company’s audited
consolidated financial statements and related notes for the year ended December 31, 2025, the Company’s unaudited condensed consolidated
financial statements for the three months ended March 31, 2026, and the historical financial statements of CS Digital filed as Exhibits
99.1 and 99.2 to this Current Report on Form 8-K/A.
OLENOX INDUSTRIES INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AS OF MARCH 31, 2026
| | |
Olenox Industries Inc. (Historical) | | |
CS Digital Ventures LLC (Historical) | | |
Transaction Accounting Adjustments | | |
Note | |
Pro Forma Combined | |
| Assets | |
| | |
| | |
| | |
| |
| |
| Current assets: | |
| | |
| | |
| | |
| |
| |
| Cash and cash equivalents | |
| 30,883 | | |
| 1,862,219 | | |
| — | | |
| |
| 1,893,102 | |
| Accounts receivable, net | |
| 305,282 | | |
| — | | |
| — | | |
| |
| 305,282 | |
| Digital assets | |
| — | | |
| 631,615 | | |
| — | | |
| |
| 631,615 | |
| Contract assets | |
| 103,736 | | |
| — | | |
| — | | |
| |
| 103,736 | |
| Inventories | |
| 329,978 | | |
| — | | |
| — | | |
| |
| 329,978 | |
| Prepaid expenses and other current assets | |
| 447,039 | | |
| 4,073 | | |
| — | | |
| |
| 451,112 | |
| Total current assets | |
| 1,216,918 | | |
| 2,497,907 | | |
| — | | |
| |
| 3,714,825 | |
| Non-current assets: | |
| | | |
| | | |
| | | |
| |
| | |
| Oil and gas assets, full cost accounting, net | |
| 3,923,164 | | |
| — | | |
| — | | |
| |
| 3,923,164 | |
| Property, plant and equipment, net | |
| 4,672,024 | | |
| 27,264,074 | | |
| — | | |
| |
| 31,936,098 | |
| Project development costs and other non-current assets | |
| 340,744 | | |
| — | | |
| — | | |
| |
| 340,744 | |
| Right-of-use asset, net | |
| 218,934 | | |
| — | | |
| — | | |
| |
| 218,934 | |
| Intangible assets, net | |
| 5,579,563 | | |
| — | | |
| — | | |
| |
| 5,579,563 | |
| Goodwill | |
| 17,449,429 | | |
| — | | |
| 20,771,093 | | |
4(a) | |
| 38,220,522 | |
| Certificate of deposit, restricted | |
| 2,000,000 | | |
| — | | |
| — | | |
| |
| 2,000,000 | |
| Security deposits and other non-current assets | |
| — | | |
| 2,274,534 | | |
| — | | |
| |
| 2,274,534 | |
| Total non-current assets | |
| 34,183,858 | | |
| 29,538,608 | | |
| 20,771,093 | | |
| |
| 84,493,559 | |
| Total Assets | |
| 35,400,776 | | |
| 32,036,515 | | |
| 20,771,093 | | |
| |
| 88,208,384 | |
| Liabilities and Stockholders’ Equity | |
| | | |
| | | |
| | | |
| |
| | |
| Current liabilities: | |
| | | |
| | | |
| | | |
| |
| | |
| Accounts payable and accrued expenses | |
| 12,750,723 | | |
| 692,366 | | |
| — | | |
| |
| 13,443,089 | |
| Contract liabilities and deferred revenue | |
| 945,964 | | |
| — | | |
| — | | |
| |
| 945,964 | |
| Lease liability, current maturities | |
| 179,476 | | |
| — | | |
| — | | |
| |
| 179,476 | |
| Due to affiliates | |
| 1,242,772 | | |
| — | | |
| — | | |
| |
| 1,242,772 | |
| Line of credit | |
| 2,001,667 | | |
| — | | |
| — | | |
| |
| 2,001,667 | |
| Derivative liabilities | |
| 72,157 | | |
| — | | |
| — | | |
| |
| 72,157 | |
| Convertible notes payable | |
| 1,125,000 | | |
| — | | |
| — | | |
| |
| 1,125,000 | |
| Current portion of long-term notes payable | |
| 4,866,664 | | |
| — | | |
| — | | |
| |
| 4,866,664 | |
| Short term notes payable, net | |
| 1,464,612 | | |
| — | | |
| — | | |
| |
| 1,464,612 | |
| Total current liabilities | |
| 24,649,035 | | |
| 692,366 | | |
| — | | |
| |
| 25,341,401 | |
| Long-term notes payable, net of current portion | |
| 636,904 | | |
| — | | |
| — | | |
| |
| 636,904 | |
| Seller Note payable | |
| — | | |
| — | | |
| 16,000,000 | | |
4(b) | |
| 16,000,000 | |
| Contingent consideration liability | |
| — | | |
| — | | |
| 15,399,703 | | |
4(c) | |
| 15,399,703 | |
| Warrant liability | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Deferred tax liability | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Lease liability, net of current maturities | |
| 56,501 | | |
| — | | |
| — | | |
| |
| 56,501 | |
| Asset retirement obligations | |
| 1,871,180 | | |
| — | | |
| — | | |
| |
| 1,871,180 | |
| Total liabilities | |
| 27,213,620 | | |
| 692,366 | | |
| 31,399,703 | | |
| |
| 59,305,689 | |
| Stockholders’ equity: | |
| | | |
| | | |
| | | |
| |
| | |
| Series A Preferred stock | |
| 3,809,640 | | |
| — | | |
| — | | |
| |
| 3,809,640 | |
| Series B Preferred stock | |
| 2,084 | | |
| — | | |
| — | | |
| |
| 2,084 | |
| Series C Preferred stock | |
| 4,589 | | |
| — | | |
| — | | |
| |
| 4,589 | |
| Series E Preferred Stock | |
| — | | |
| — | | |
| 140,000 | | |
4(b) | |
| 140,000 | |
| Common stock | |
| 10,002 | | |
| — | | |
| — | | |
| |
| 10,002 | |
| Additional paid-in capital | |
| 124,471,234 | | |
| — | | |
| 20,575,540 | | |
4(b) | |
| 145,046,774 | |
| Treasury stock, at cost | |
| (92,396 | ) | |
| — | | |
| — | | |
| |
| (92,396 | ) |
| Accumulated deficit | |
| (120,017,997 | ) | |
| — | | |
| — | | |
| |
| (120,017,997 | ) |
| Members’ equity — CS Digital Ventures LLC | |
| — | | |
| 31,344,150 | | |
| (31,344,150 | ) | |
4(a) | |
| — | |
| Total stockholders’ equity | |
| 8,187,156 | | |
| 31,344,150 | | |
| (10,628,610 | ) | |
| |
| 28,902,696 | |
| Total Liabilities and Stockholders’ Equity | |
| 35,400,776 | | |
| 32,036,515 | | |
| 20,771,093 | | |
| |
| 88,208,384 | |
See the accompanying notes to the unaudited pro forma condensed
combined financial information.
OLENOX INDUSTRIES INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2025
| | |
Olenox Industries Inc. (Historical) | | |
CS Digital Ventures LLC (Historical) | | |
Transaction Accounting Adjustments | | |
Note | |
Pro Forma Combined | |
| Revenue: | |
| | |
| | |
| | |
| |
| |
| Revenues, net | |
| 2,952,578 | | |
| 20,634,274 | | |
| — | | |
| |
| 23,586,852 | |
| Cost of revenues | |
| 7,243,081 | | |
| 15,422,437 | | |
| — | | |
| |
| 22,665,518 | |
| Gross profit (loss) | |
| (4,290,503 | ) | |
| 5,211,837 | | |
| — | | |
| |
| 921,334 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| |
| | |
| Payroll and related expenses | |
| 2,775,864 | | |
| 562,668 | | |
| — | | |
| |
| 3,338,532 | |
| General and administrative expenses | |
| 6,617,372 | | |
| 5,043,960 | | |
| — | | |
| |
| 11,661,332 | |
| Impairment loss | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Marketing and business development expense | |
| 384,602 | | |
| 170,610 | | |
| — | | |
| |
| 555,212 | |
| Transaction costs | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Total operating expenses | |
| 9,777,838 | | |
| 5,777,238 | | |
| — | | |
| |
| 15,555,076 | |
| Loss from operations | |
| (14,068,341 | ) | |
| (565,401 | ) | |
| — | | |
| |
| (14,633,742 | ) |
| Other income (expense): | |
| | | |
| | | |
| | | |
| |
| | |
| Interest expense | |
| (2,904,992 | ) | |
| (1,380,750 | ) | |
| (219,250 | ) | |
4(b)(d) | |
| (4,504,992 | ) |
| Gain (loss) on debt extinguishment, net | |
| (4,648,282 | ) | |
| — | | |
| — | | |
| |
| (4,648,282 | ) |
| Legal settlement | |
| 2,000,000 | | |
| — | | |
| — | | |
| |
| 2,000,000 | |
| Change in fair value of derivatives | |
| 2,538,248 | | |
| — | | |
| — | | |
| |
| 2,538,248 | |
| Loss on initial recognition of derivatives | |
| (4,275,231 | ) | |
| — | | |
| — | | |
| |
| (4,275,231 | ) |
| Gain on settlement of derivatives | |
| 2,253,638 | | |
| — | | |
| — | | |
| |
| 2,253,638 | |
| Other income | |
| 284,770 | | |
| 297,352 | | |
| — | | |
| |
| 582,122 | |
| Total other income (expense) | |
| (4,751,849 | ) | |
| (1,083,399 | ) | |
| (219,250 | ) | |
| |
| (6,054,497 | ) |
| Loss before income taxes | |
| (18,820,190 | ) | |
| (1,648,799 | ) | |
| (219,250 | ) | |
| |
| (20,688,239 | ) |
| Provision for (benefit from) income taxes | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Net loss from continuing operations | |
| (18,820,190 | ) | |
| (1,648,799 | ) | |
| (219,250 | ) | |
| |
| (20,688,239 | ) |
| Series E Preferred Stock dividends and accretion | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Net loss from continuing operations attributable to common stockholders | |
| (18,820,190 | ) | |
| (1,648,799 | ) | |
| (219,250 | ) | |
| |
| (20,688,239 | ) |
| Weighted average common shares outstanding — basic and diluted | |
| 113,908 | | |
| | | |
| | | |
| |
| 113,908 | |
| Net loss per share from continuing operations — basic and diluted | |
| (165.22 | ) | |
| | | |
| | | |
| |
| (181.62 | ) |
See the accompanying notes to the unaudited pro forma condensed
combined financial information.
OLENOX INDUSTRIES INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
| | |
Olenox Industries Inc. (Historical) | | |
CS Digital Ventures LLC (Historical) | | |
Transaction Accounting Adjustments | | |
Note | |
Pro Forma Combined | |
| Revenue: | |
| | |
| | |
| | |
| |
| |
| Revenues, net | |
| 285,313 | | |
| 3,981,070 | | |
| — | | |
| |
| 4,266,383 | |
| Cost of revenues | |
| 486,146 | | |
| 3,544,315 | | |
| — | | |
| |
| 4,030,461 | |
| Gross profit (loss) | |
| (200,833 | ) | |
| 436,755 | | |
| — | | |
| |
| 235,922 | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| |
| | |
| Payroll and related expenses | |
| 692,380 | | |
| 183,783 | | |
| — | | |
| |
| 876,163 | |
| General and administrative expenses | |
| 1,908,492 | | |
| 404,622 | | |
| — | | |
| |
| 2,313,114 | |
| Impairment loss | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Marketing and business development expense | |
| 81,409 | | |
| 62,745 | | |
| — | | |
| |
| 144,154 | |
| Transaction costs | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Total operating expenses | |
| 2,682,281 | | |
| 651,150 | | |
| — | | |
| |
| 3,333,431 | |
| Loss from operations | |
| (2,883,114 | ) | |
| (214,395 | ) | |
| — | | |
| |
| (3,097,509 | ) |
| Other income (expense): | |
| | | |
| | | |
| | | |
| |
| | |
| Interest expense | |
| (365,757 | ) | |
| (398,361 | ) | |
| (1,639 | ) | |
4(b)(d) | |
| (765,757 | ) |
| Gain (loss) on debt extinguishment, net | |
| 583,726 | | |
| — | | |
| — | | |
| |
| 583,726 | |
| Legal settlement | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Change in fair value of derivatives | |
| (1,355 | ) | |
| — | | |
| — | | |
| |
| (1,355 | ) |
| Loss on initial recognition of derivatives | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Gain on settlement of derivatives | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Other income | |
| 776 | | |
| (357,508 | ) | |
| — | | |
| |
| (356,732 | ) |
| Total other income (expense) | |
| 217,390 | | |
| (755,869 | ) | |
| (1,639 | ) | |
| |
| (540,118 | ) |
| Loss before income taxes | |
| (2,665,724 | ) | |
| (970,265 | ) | |
| (1,639 | ) | |
| |
| (3,637,628 | ) |
| Provision for (benefit from) income taxes | |
| — | | |
| — | | |
| — | | |
| |
| — | |
| Net loss from continuing operations | |
| (2,665,724 | ) | |
| (970,265 | ) | |
| (1,639 | ) | |
| |
| (3,637,628 | ) |
| Deemed dividend for preferred shareholders | |
| 395,967 | | |
| — | | |
| — | | |
| |
| 395,967 | |
| Net loss from continuing operations attributable to common stockholders | |
| (3,061,691 | ) | |
| (970,265 | ) | |
| (1,639 | ) | |
| |
| (4,033,595 | ) |
| Weighted average common shares outstanding — basic and diluted | |
| 698,387 | | |
| | | |
| | | |
| |
| 698,387 | |
| Net loss per share from continuing operations — basic and diluted | |
| (4.38 | ) | |
| | | |
| | | |
| |
| (5.78 | ) |
See the accompanying notes to the unaudited pro forma condensed
combined financial information.
OLENOX INDUSTRIES INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
NOTE 1 — BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial
information has been prepared in accordance with Article 11 of Regulation S-X, as amended, and is presented pursuant to Rule 8-05 of Regulation
S-X applicable to smaller reporting companies. The Acquisition is accounted for as a business combination using the acquisition method
of accounting in accordance with ASC 805, Business Combinations, with Olenox identified as the accounting acquirer.
Under the acquisition method, the total consideration
transferred is measured at acquisition-date fair value and allocated to the identifiable assets acquired and liabilities assumed based
on their acquisition-date fair values, with any excess recorded as goodwill. Pro forma adjustments reflect only transaction accounting
adjustments.
The historical financial information of CS Digital
for the year ended December 31, 2025 was derived from its audited financial statements as of and for the years ended December 31, 2025.
CS Digital is a limited liability company and recorded no provision for income taxes.
NOTE 2 — CONSIDERATION TRANSFERRED
The fair value of the consideration transferred at the May 26, 2026
acquisition date is as follows:
| Series E Preferred Stock issued (140,000 shares at $100.00 stated value) | |
$ | 14,000,000 | |
| Seller Note | |
| 16,000,000 | |
| Warrants to purchase 1,500,000 shares of common stock | |
| 6,715,540 | |
| Contingent consideration — Earnout Shares | |
| 15,399,703 | |
| Total consideration transferred | |
$ | 52,115,243 | |
The Warrants were valued using the Black-Scholes-Merton
model as of the acquisition date, using the quoted closing price of the Company’s common stock of $4.90, expected volatility of 156.10%
derived from the five years of realized volatility ended on the measurement date, a risk-free rate of 4.19%, no expected dividend yield,
and the five-year contractual term of the instruments. Because the Warrants were issued as consideration transferred in a business combination,
they are measured at fair value under ASC 805-30-30-7 and ASC 820 rather than as share-based compensation, and the contractual term is
used consistent with the market participant perspective required by ASC 820-10-35-9. The Warrants are equity classified under ASC 815-40
and are not subsequently remeasured.
The Earnout Shares comprise up to $20,000,000 of Series E Preferred
Stock issuable on the achievement of two milestones, $10,000,000 of Series E Preferred Stock upon each of the following: (i) cumulative
revenue of CS Digital of $5,000,000, and (ii) cumulative Adjusted EBITDA of CS Digital of $6,000,000. The arrangement contains no expiry,
and the related shares remain issuable whenever a threshold is reached.
NOTE 3 — PRELIMINARY PURCHASE PRICE ALLOCATION
The consideration transferred has been allocated on a preliminary basis
to the identifiable assets acquired and liabilities assumed based on their carrying amounts at the May 26, 2026 acquisition date, which
the Company has used as a proxy for fair value pending completion of its valuation procedures.
| Cash and cash equivalents | |
$ | 514,751 | |
| Prepaid expenses | |
| 35,240 | |
| Cryptocurrency holdings | |
| 1,296,413 | |
| Property and equipment, net | |
| 26,651,059 | |
| Security deposits and other non-current assets | |
| 2,274,534 | |
| Total identifiable assets acquired | |
| 30,771,997 | |
| Accounts payable and accrued expenses | |
| (106,895 | ) |
| Total liabilities assumed | |
| (106,895 | ) |
| Net identifiable assets acquired | |
| 30,665,102 | |
| Goodwill | |
$ | 21,450,140 | |
The purchase price allocation is preliminary and
incomplete. The Company has not completed the valuations required to determine the acquisition-date fair values of the acquired digital
assets, the acquired bitcoin mining equipment, or any identifiable intangible assets, nor has it completed its assessment of the income
tax consequences of the Acquisition or the fair value of the consideration transferred. The Company expects to finalize the allocation
within the measurement period, which will not exceed one year from the acquisition date. The final amounts recorded may differ materially
from those presented, and any such difference would change goodwill and, where an amortizable or depreciable asset is recognized, the
pro forma statements of operations.
NOTE 4 — PRO FORMA ADJUSTMENTS
| (a) | To record the preliminary allocation of
the consideration transferred, comprising the recognition of goodwill of $20,771,093 measured as of the pro forma balance sheet date and
the elimination of the members’ equity of CS Digital of $31,344,150.
|
| (b) | To record the issuance of 140,000 shares of Series E Preferred Stock at a stated value of $100.00 per share, recorded as $140,000 of par value and $13,860,000 within additional paid-in capital, and
the Seller Notes of $16,000,000, in each case as consideration, and the related pro forma interest expense on the Seller Note of $1,600,000
for the year ended December 31, 2025 and $400,000 for the three months ended March 31, 2026. The Seller Note bears interest at 10.0%
per annum, is payable interest-only commencing 90 days after closing, and matures with all principal and remaining interest due on May
26, 2029. The Seller Note is recorded at its face amount, the stated rate having been determined to approximate a market rate. |
| (c) | To record the Warrants of $6,715,540 within additional paid-in
capital and the Earnout Shares of $15,399,703 as a contingent consideration liability. The Earnout Shares represent an obligation that
the Company may settle by issuing a variable number of its own equity shares for an amount based on a fixed monetary value, and are classified
as a liability. Subsequent changes in the fair value of the contingent consideration will be recognized in earnings; no such changes
are reflected in the pro forma statements of operations. |
| (e) | Transaction costs incurred in connection with the Acquisition
are expensed as incurred in accordance with ASC 805-10-25-23. No amount is reflected in the pro forma statements of operations beyond
the amounts already recognized in the historical statements. |
| (f) | To record the income tax effect of the pro forma adjustments.
CS Digital is a limited liability company that recorded no historical tax provision because its net earnings or losses are reported by
its members. An effective rate of 0% has therefore been applied. |
| (g) | No incremental depreciation has been recorded, as no fair value
adjustments to the acquired property and equipment has been determined. CS Digital’s bitcoin mining equipment is carried at $26,651,059
net of accumulated depreciation of $10,495,248 at the acquisition date. |
| (h) | No amortization has been recorded, as no identifiable intangible
assets have been recognized separately from goodwill as the valuation of remains incomplete. |
NOTE 5 — NON-RECURRING ITEMS
Rule 11-02(a)(11)(i) requires disclosure of material non-recurring
items included in the pro forma statements of operations that will not recur beyond twelve months following the Acquisition. The pro forma
statement of operations for the year ended December 31, 2025 includes the following amounts of the Company that are not expected to recur:
a loss on debt extinguishment of $4,648,282, a legal settlement gain of $2,000,000, a loss on initial recognition of derivatives of $4,275,231,
a gain on settlement of derivatives of $2,253,638 and a change in the fair value of derivatives of $2,538,248. The pro forma statement
of operations for the three months ended March 31, 2026 includes a net gain on debt extinguishment of $583,726 that is not expected to
recur.
NOTE 6 — PRO FORMA NET LOSS PER SHARE
Pro forma basic and diluted net loss per share
from continuing operations has been calculated using the Company’s historical weighted average common shares outstanding, as the consideration
transferred consists of Series E Preferred Stock, a promissory note and warrants rather than common stock. The Warrants and the Series
E Preferred Stock have been excluded from the computation of diluted net loss per share because their effect would be anti-dilutive in
a period of net loss; basic and diluted amounts are therefore identical.
| Year ended December 31, 2025 | |
| |
| Pro forma net loss from continuing operations attributable to common stockholders | |
$ | (20,688,239 | ) |
| Weighted average common shares outstanding — basic and diluted | |
| 113,908 | |
| Pro forma net loss per share — basic and diluted | |
$ | (181.62 | ) |
| | |
| | |
| Three months ended March 31, 2026 | |
| | |
| Pro forma net loss from continuing operations attributable to common stockholders | |
$ | (4,033,595 | ) |
| Weighted average common shares outstanding — basic and diluted | |
| 698,387 | |
| Pro forma net loss per share — basic and diluted | |
$ | (5.78 | ) |
