USBC Inc. (NYSE: USBC) details Bitcoin treasury shift and tokenized deposit push
Rhea-AI Filing Summary
USBC, Inc. filed a transition report covering the three months from October 1 to December 31, 2025, reflecting a change in fiscal year-end to December 31. The company has pivoted from its legacy Know Labs sensor focus to a digital-finance platform built around a Bitcoin-heavy treasury and tokenized bank deposits.
In August 2025, USBC issued 357.8 million shares for 1,000 Bitcoin and $15 million in cash to Goldeneye 1995 LLC, giving CEO Greg Kidd’s affiliate a controlling interest and funding its Bitcoin reserve strategy. Bitcoin is now the primary treasury asset, managed through an options program run by Hyrcanian Asset Management under a performance-fee structure.
USBC is developing a US-dollar tokenized deposit product with Vast Bank as issuing bank and Uphold as distribution partner, now in an internal Phase 1 pilot. A Master Loan Agreement with Payward Interactive allows borrowing up to $25 million secured by Bitcoin; a $5 million loan at 8.5% is in place to fund tokenized-deposit development and reimbursable affiliate services. The company highlights significant regulatory, execution, vendor, and capital-need risks, as well as concentrated control via Goldeneye.
Positive
- None.
Negative
- None.
Insights
USBC is transforming into a Bitcoin-backed tokenized banking platform with elevated regulatory and balance-sheet risk.
USBC has executed a major strategic pivot, using the Goldeneye transaction to load its balance sheet with Bitcoin and cash while shifting from medical sensors toward a tokenized deposit and payments platform. This is a fundamentally different business model with new revenue drivers and risk exposures.
The Bitcoin treasury program, run via options through Hyrcanian, aims to grow BTC holdings but concentrates risk in a volatile asset class and introduces derivative, counterparty, and collateral-management exposure. The Payward Master Loan Agreement, with up to $25.0 million of Bitcoin-backed borrowing and a current $5.0 million loan at 8.5%, adds leverage tied directly to Bitcoin price moves.
On the operating side, USBC’s tokenized deposit product depends on successful integration with Vast Bank and Uphold, plus favorable regulatory interpretations for bank-issued tokenized deposits. Execution of multi-phase rollout, regulatory acceptance, vendor performance, and the controlled-company governance structure around Goldeneye and Vast affiliates will heavily influence outcomes over the next few reporting periods.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: _______________
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from October 1, 2025 to
Commission File No.
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
|
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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.
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).
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 | ||
|
| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of June 30, 2025 (the last business day of our most recently completed second fiscal quarter), based upon the last reported trade on that date, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $
As of March 24, 2026, there were a total of
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Items 10, 11, 12, 13 and 14 of Part III of this Transition Report on Form 10-K is incorporated by reference from the registrant’s definitive proxy statement for its 2026 Annual Meeting of Stockholders, to be filed with the U.S. Securities and Exchange Commission within 120 days after December 31, 2025.
USBC, Inc.
Form 10-K
Transition Period Ended December 31, 2025
TABLE OF CONTENTS
PART I | ||||
|
|
|
|
|
Item 1. | Business. |
| 5 |
|
Item 1A. | Risk Factors. |
| 15 |
|
Item 1B. | Unresolved Staff Comments. |
| 24 |
|
Item 1C. | Cybersecurity. |
| 25 |
|
Item 2. | Properties. |
| 26 |
|
Item 3. | Legal Proceedings. |
| 26 |
|
Item 4. | Mine Safety Disclosures. |
| 26 |
|
|
|
|
|
|
PART II | ||||
|
|
|
|
|
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
| 27 |
|
Item 6. | Reserved |
| 28 |
|
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
| 28 |
|
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
| 34 |
|
Item 8. | Financial Statements and Supplementary Data. |
| 35 |
|
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
| 35 |
|
Item 9A. | Controls and Procedures. |
| 35 |
|
Item 9B. | Other Information. |
| 36 |
|
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
| 36 |
|
|
|
|
|
|
PART III | ||||
|
|
|
|
|
Item 10. | Directors, Executive Officers and Corporate Governance. |
| 37 |
|
Item 11. | Executive Compensation. |
| 37 |
|
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
| 37 |
|
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
| 37 |
|
Item 14. | Principal Accounting Fees and Services. |
| 37 |
|
|
|
|
|
|
PART IV | ||||
|
|
|
|
|
Item 15. | Exhibits and Financial Statement Schedules. |
| 38 |
|
| 2 |
| Table of Contents |
INTRODUCTORY NOTES
Change in Fiscal Year End
Effective beginning in fiscal year 2026, USBC, Inc. changed its fiscal year end from September 30 to December 31 to better align the Company’s financial reporting calendar with its operating cycle, internal budgeting and financial planning process, and to improve comparability with industry peers that report on a calendar-year basis. As a result, this Transition Report on Form 10-K covers the three-month transition period from October 1, 2025 through December 31, 2025 (the “Transition Period”).
Following the Transition Period, the Company will report its operating results on a calendar-year basis, beginning with the fiscal year ending December 31, 2026.
Unless otherwise indicated, references to “fiscal year 2025” refer to the fiscal year ended September 30, 2025, and references to the “Transition Period” refer to the three-month period ended December 31, 2025.
Operating results for the Transition Period are not directly comparable to results for prior annual periods due to the Company’s fiscal year end change from September 30 to December 31. Accordingly, the operating results for the Transition Period should not be considered indicative of historical or future full-year operating performance. Additionally, operating results for the three-month period ended December 31, 2024, presented for comparison to the Transition Period are unaudited.
Use of Terms
Except as otherwise indicated by the context and for the purposes of this report on Form 10-K only, references in this report to “we,” “us,” “our” and “our company” are to USBC, Inc. (f/k/a Know Labs, Inc.), a Nevada corporation, and its consolidated subsidiary.
Special Note Regarding Forward-Looking Statements
This report on Form 10-K contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to future events or to our future financial performance, tokenized cryptocurrency treasury strategy, anticipated events and trends affecting our business, the broader economy and other future conditions, and our interpretation of applicable state and federal securities laws and other laws and regulations relating to digital assets. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| · | our goals and strategies, including our cryptocurrency treasury strategy; |
| · | our future business development, financial condition and results of operations, including our ability to achieve and maintain profitability in the future; |
| · | expected changes in our revenue, costs or expenditures; |
| · | growth of and competition trends in our industry; |
| · | our expectations regarding demand for, and market acceptance of, our services or products; |
| · | our expectations regarding our relationships with investors, institutional funding partners and other parties with whom we collaborate; |
| · | fluctuations in general economic and business conditions in the markets in which we operate and our ability to respond to those conditions; |
| · | the impact of the regulatory environment on our business and the complexities of compliance, including changes in state or federal securities laws or other laws and regulations; |
| · | our interpretation of applicable state and federal securities laws and other laws and regulations relating to digital assets; |
| · | relevant government policies and regulations relating to our industry; |
| · | fluctuations in the market price of Bitcoin and any associated unrealized gains or losses on our digital assets resulting from a decrease in the market price of Bitcoin below the value at which our Bitcoin is carried on our balance sheet; |
| 3 |
| Table of Contents |
| · | the effect of and uncertainties related to ongoing volatility in interest rates; |
| · | changes in accounting treatment relating to our Bitcoin holdings; |
| · | our ability to manage our growth effectively and to meet our expectations regarding the development and expansion of our business; and |
| · | our ability to access sources of capital—including equity, debt, and other financing—to fund operations and growth. |
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Item 1A “Risk Factors” and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
The forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
Trademarks, Trade Names and Service Marks
We rely upon trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Solely for convenience, some of the trademarks, service marks and trade names referred to in this report are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names. This report may include trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this report are the property of their respective owners.
| 4 |
| Table of Contents |
PART I
ITEM 1. BUSINESS.
Overview
USBC, Inc. (NYSE American: USBC) is a publicly traded, multi-disciplinary technology company that we believe is an industry-leading innovator in digital financial technologies. USBC develops transformative financial services, including digital assets and banking solutions as well as non-invasive health monitoring research. USBC has implemented a Bitcoin treasury strategy to bolster development and research across its various divisions. A key focus of USBC is the further development of the USBC tokenized deposit offering, a tokenized representation of a U.S.-dollar denominated bank deposit account that operates on blockchain technology and is embedded with digital identity. With a focus on inclusion, innovation, and risk management, USBC is dedicated to creating long-term shareholder value in a rapidly evolving financial landscape.
Corporate History and Development
In August 2025, in connection with the closing of a $125 million strategic controlling-interest acquisition by Goldeneye 1995 LLC (an affiliate of our Chairman and Chief Executive Officer, Greg Kidd), we issued 357.8 million shares of our common stock in exchange for 1,000 Bitcoin and $15 million in cash. Mr. Kidd and his veteran team of finance and technology leaders who are part of the USBC founding team collectively bring with them decades of technology and fintech experience.
Following the closing of the capital investment by Goldeneye in August 2025, we changed our corporate name to USBC, Inc. and our ticker symbol to “USBC” on the NYSE American. Our corporate evolution reflects a strategic pivot to the further development of a financial-technology platform and establishment of a digital asset treasury reserve while continuing to maintain technology capabilities from our legacy sensor business. Prior to August 2025, we operated under the name Know Labs, Inc. and our primary focus was on non-invasive diagnostic and sensor technologies.
On January 20, 2026, we formalized our collaboration with Uphold HQ Inc. (“Uphold”) and Vast Bank, N.A. (“Vast Bank”), which will serve as the initial issuing bank for the U.S. Bank Coin (“USBC”) tokenized-deposit offering. Uphold is a financial technology company that provides modern infrastructure for on-chain payments, banking and investment services. Vast Bank is a federally regulated financial institution that will serve as the initial issuing bank for customer deposit accounts underlying the tokenized-deposit program. Under the tri-party agreement with Vast Bank and Uphold, USBC will serve as the network operator, Vast Bank will serve as the issuing bank for customer deposit accounts, and Uphold will provide platform integration and customer access services. We continue to advance technical, operational, and regulatory readiness in connection with subsequent phases of the delivery strategy and any future broader launch of the USBC tokenized-deposit offering.
In February 2026, we completed our evaluation of the legacy non-invasive sensor business and we have elected to proceed with a divestiture transaction. Negotiations with a potential buyer are nearing completion; however, there is no assurance that any transaction will be consummated. The financial impact of the potential divestiture transaction is not expected to be material to our financial statements.
On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit product to market. Phase 1 is being conducted with a limited group of internal users who have elected to participate in an expanded employee pilot program ahead of the public launch of the branded platform. Phase 1 is not a consumer offering and is not available to the public; it is intended solely to begin technical readiness testing. During this phase, testing activities are conducted exclusively with company-provided funds for internal evaluation purposes. The results of Phase 1 will inform our evaluation of the timing and scope of subsequent phases of the delivery strategy and when the tokenized deposit product offering may become available to retail customers. Any future retail launch will remain subject to the outcome of the pilot program and receipt of any required regulatory, board, and bank partner approvals.
On March 18, 2026, we entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”), pursuant to which the Company may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. Borrowings under the MLA are solely secured by Bitcoin collateral held in and subject to collateral maintenance requirements based on specified margin ratios. On March 20, 2026, we entered into a term sheet for a fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA maturing on March 18, 2027. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.
Our Strategy
Key elements of our business strategy include:
| · | Completing delivery of our USBC tokenized deposit offering, which is a U.S. dollar-denominated tokenized representation of deposit liabilities issued by one or more insured depository institutions (initially Vast Bank) and recorded on distributed-ledger technology (i.e., blockchain technology). We are building complementary compliance, risk management, and payments infrastructure around the tokenized deposit model, aimed at harnessing progressive identity frameworks and scalable financial services, with the goal of creating an integrated platform to enable USBC to serve as program manager for banks and distribution partners desiring to engage in various financial service activities. |
|
|
|
| · | Capitalizing on digital asset security, treasury management and strategic asset allocation (including a Bitcoin treasury strategy) to support our development initiatives and strengthen our balance sheet flexibility. We utilize derivatives to earn yield on our Bitcoin-treasury assets through an external full-service advisor and maintain collateral arrangements customary for such activities. These agreements include provisions for margin and security interests, which are standard in institutional trading relationships. We conduct our derivative trading activities in accordance with applicable laws and regulatory guidance subject to internal risk management policies and counterparty controls. We do not operate a trading desk for third parties, and all derivative positions relate solely to management of our corporate treasury assets. |
| 5 |
| Table of Contents |
Tokenized Deposit Program
Our primary focus is on the further development and future launch of our tokenized deposit program. The tokenized deposit program has been in development from its inception by our Chairman and CEO, Greg Kidd for the better part of a decade. The USBC tokenized deposit offering will incorporate embedded digital identity and leverage blockchain technology. It is being designed to support financial inclusion and innovation, through partnerships with banks and distribution partners such as Uphold, a pioneering infrastructure provider for on-chain finance.
Unlike a stablecoin, USBC is not a newly-created digital asset backed by reserves, nor is USBC a deposit token. USBC is a tokenized representation of a bank deposit offered by banking institutions to their customers. Other tokenized deposit products may exist, but we believe that we will be the first to provide direct access to end users, made possible by its permissioned blockchain and risk management tech stack. USBC’s API-centric approach means that developers building on the platform will have the ability to offer their customers digital U.S. dollars and their own U.S. bank deposit account worldwide.
USBC’s core value proposition is that it provides a safe, compliant and versatile foundation for a variety of payment use cases and financial applications. By combining the real-time settlement and programmability of blockchain technology with the trust and familiarity of regulated bank money, USBC has the potential to unlock a wide range of opportunities that are designed to benefit both consumers and businesses.
We have identified numerous impactful use cases for USBC including financial inclusion and open access, cross-border payments and remittances, hedge against local currency instability, 24/7 instant payments, integrated programmable payments, and treasury management. These use cases illustrate how USBC can permeate many aspects of finance and commerce. While tokenized deposits do not necessarily replace existing systems overnight, they are intended to augment and coexist with traditional payment rails. For end-users who need the advantages, the tokenized option becomes available, while those comfortable with legacy methods can continue as before. Over time, as trust and familiarity grow, we anticipate broader adoption of tokenized deposits as an alternative to traditional bank deposit accounts.
Since USBC is a representation of an actual deposit account, a bank will be able to pay interest to the holder, just as it might on a typical interest-bearing checking or savings account. The interest payment could be structured as a baseline interest rate for all balances, tiered by user type or even as high-yield rewards such as blockchain-based digital reward units or loyalty points which will be portable, interoperable and programmable and can be earned, redeemed, or used across multiple platforms, partners or ecosystems.
USBC is underpinned by a blockchain ledger that serves as the single source of truth for all tokenized deposit transactions, providing customers with the ability to send, spend, convert, and load (and unload) funds from their account balances. These transactions are mirrored on-chain via tokenized representations of deposits and withdrawals made to customer accounts. Each on-chain transfer reflects a corresponding update in a customer’s tokenized deposit account transaction history.
The current implementation runs on a Solana-based blockchain, augmented by a rule engine which provides additional controls on top of the base blockchain and connects directly to the banking system. This setup will allow the banking partner to maintain regulatory oversight and operational control while still leveraging the transparency and immutability of the underlying blockchain. The ledger is permissioned, meaning that on USBC’s private chain, nodes are operated by USBC. On public chains, transactions occur through public nodes but USBC’s rule engine will enforce compliance and access controls. The blockchain network is governed by principles that ensure it remains secure, compliant with regulations and aligned with the interests of all stakeholders. A governance process for software updates is in place that mirrors enterprise IT and blockchain best practices.
The issuing bank will commit to clear and transparent rules for the USBC program and will maintain ultimate control and responsibility for the platform which will be subject to regulatory oversight by banking regulators. The USBC program will be integrated into the bank’s overall corporate governance structure and will be subject to oversight by the same audit and risk committees that oversee banking operations, ensuring that the highest level of the organization, the Board of Directors, is aware of and accountable for the program. In addition to governance conducted by the participating bank, the USBC network will undergo regular third-party audits and reviews, similar to those performed on traditional core banking systems, with full results made available to network participants and regulators to ensure transparency and trust.
Unlike permissionless cryptocurrency systems where anyone can create an address and transact, the USBC system contains a trust and identity management layer which requires users to build a verified digital identity before they can access or transact on the network. To open a USBC account, a user will need to go through an onboarding process that collects identity information and verifiable credentials which can be issued or validated by trusted third parties. Before any transaction is submitted to the blockchain, it must be reviewed and signed by the ledger’s rules engine, which enforces a configurable set of policies tied to user identity level, regulatory obligations and risk controls. Once funds are in a USBC tokenized deposit account, funds are immediately available, enabling same-day access to traditional financial infrastructure including wire transfers, ACH payments or spending via debit rails. There is no need to withdraw funds via an exchange or conversion to fiat currency through third party services, eliminating costly ramp fees, reducing counterparty risk and streamlining post-trade fund management.
The technology stack for USBC will be a hybrid of a traditional banking system and blockchain components. Developers and partners like Uphold will see a familiar blockchain environment to build upon that is enriched with identity and compliance layers not found on public chains. The user will experience the system through user-friendly banking apps or web interfaces that abstract away the blockchain complexity. Every transaction will be recorded as a blockchain event on a ledger with each on-chain transfer reflecting a corresponding update in the tokenized deposit account transaction history.
We have finalized our delivery strategy to bring the tokenized deposit product to market, setting the foundation for how we will scale the product offering and support real-world adoption of the USBC tokenized deposit offering. Our delivery strategy consists of multiple phases. We initiated Phase 1 of our multi-phase delivery strategy on March 10, 2026. Planning is underway for future phases of the delivery strategy which will be supported by the core technical foundations built during Phase 1. See “—Corporate History and Development” above for information regarding the scope and limitations of Phase 1 of the delivery strategy.
We expect that the aggregate costs associated with our phased delivery strategy will be substantial, with costs increasing relative to Phase 1 as we enter future phases of our strategy over the next several quarters. The timing, cost and success of future phases of our strategy is subject to uncertainty in how successful we will be in executing the strategy within anticipated parameters. While the timing and total cost of each phase is uncertain at this point in the strategy, we have identified key activities, cost drivers, and operational milestones associated with each phase.
| 6 |
| Table of Contents |
Markets and Distribution
Our platform is being designed to serve a broad group of customers in the emerging blockchain-based banking ecosystem, including retail users, fintech partners, and institutional counterparties, as described under “Tokenized Deposit Program” above.
In particular, we plan to target the following groups:
| · | Retail Deposit Customers: Individual customers who maintain traditional deposit accounts at our partner insured depository institutions. These users can hold and transfer tokenized U.S. dollar deposits 24/7 on blockchain rails, using our digital wallet for everyday payments and savings. See “Tokenized Deposit Program” above for a description of token functionality. |
|
|
|
| · | Distribution Partners: Financial technology companies and other partners who will integrate our tokenization platform to expand their services. We aim to provide APIs and white-label solutions enabling fintechs and other partners to offer tokenized deposits to their own customers, and our platform will work with partners to enable users to custody their underlying fiat funds with our banking partner(s). This distribution strategy leverages partners’ existing customer bases while enabling regulatory compliance for the tokenized funds (e.g. KYC/AML checks via integrated digital identity). By working within the banking system, our platform will be built to comply with existing banking regulations while leveraging FDIC insurance eligibility, an approach that industry pilots have reportedly identified as a key advantage over stablecoins not subject to similar prudential frameworks. Our collaboration with Uphold and Vast Bank exemplifies this partner-integration model, demonstrating how blockchain technology may extend regulated, tokenized deposit functionality to both fintech platforms and their end users. |
|
|
|
| · | Institutional Counterparties: Businesses, exchanges, and institutional investors that use our infrastructure for large-scale transactions and treasury management. These counterparties can leverage our blockchain rails to move funds efficiently across borders, using tokenized deposits for near-instant settlement. As the market for tokenized commercial bank money grows, institutions are seeking interoperable solutions that connect with global networks. Our platform will be designed for interoperability and broad accessibility, enabling tokenized deposits to be issued across multiple public blockchains, such as Ethereum, to support broad market adoption and liquidity. This global connectivity aligns with industry initiatives (like the BIS-led Project Agorá) that explore using tokenized bank deposits to streamline cross-border payments. Our distribution model will combine user-facing digital wallets, partnerships with regulated banks, and public blockchain infrastructure to reach customers worldwide. |
The market for tokenized banking services is projected to experience rapid growth, underscoring the importance of our global and regulation-aware strategy. Major financial institutions have reportedly begun piloting their own tokenized deposit and payment networks. For example, in late 2024, Citigroup announced that it had moved its deposit-token platform from pilot to live commercial use through its Citi Token Services initiative. Similarly, JPMorgan Chase has reported that its proprietary deposit-token system, part of its Onyx/Kinexys blockchain-based payments platform, has processed more than $1.5 trillion in transaction volume since launch. These systems, however, are primarily oriented toward institutional clients and backend settlement infrastructure rather than retail users. In the public crypto markets, the total supply of fiat-backed stablecoins was estimated at approximately $300 billion as of October 2025, according to publicly available industry data. This backdrop presents a significant opportunity for us to capture users transitioning to tokenized banking, and our focus on providing direct consumer access differentiates us within a landscape where institutional tokenization initiatives currently dominate, but it also reinforces that global reach and regulation-centric design are critical to success.
| 7 |
| Table of Contents |
We plan to tailor our tokenized deposit services platform to meet varied regulatory requirements across jurisdictions; for instance, our platform is being developed with robust tools designed to enable compliance with Bank Secrecy Act (BSA), anti-money laundering (AML), and Office of Foreign Asset Control (OFAC) requirements. Our platform is being built with digital identity integration from the ground up, embedding KYC/AML processes into the user experience to satisfy regulators and partner banks. This compliance-centric design aligns with evolving industry consensus that identity and trust frameworks must accompany blockchain-based financial services; indeed, the lack of robust on-chain identity solutions has been noted as a friction point in digital asset adoption, and addressing it is seen as key to broader institutional use. By proactively engineering a globally interoperable and regulation-ready system, we aim to broaden our market reach while seeking to navigate the complex legal landscape for digital assets. We believe that this “regulation aware” approach, coupled with our technology expertise, will help establish our distribution network as a trusted interface between traditional banking and the digital asset economy.
Bitcoin Overview
As of December 31, 2025, substantially all of our treasury reserve assets were invested in Bitcoin. Bitcoin, launched in 2009, is a decentralized digital asset that is issued by and transmitted through an open-source protocol collectively maintained by a distributed network of participants with no central authority. The Bitcoin network operates continuously, 24 hours a day, 7 days a week. The network hosts a public transaction ledger, known as the Bitcoin blockchain, on which Bitcoin holdings and all validated transactions that have ever taken place on the Bitcoin network are recorded. Balances of Bitcoin are stored in individual wallet functions, which associate network public addresses with one or more cryptographic private keys that control the transfer of Bitcoin. See “Custody of Our Bitcoin” below for additional information regarding wallet and key management.
Unlike fiat currencies, which can be printed indefinitely, the maximum possible supply of Bitcoin is capped at 21 million. New Bitcoins are created and allocated by the Bitcoin protocol through mining, a process that rewards users that validate transactions in the Bitcoin blockchain with newly issued Bitcoin and transaction fees. Because of periodic halvings, the rate of new Bitcoin creation slows over time. Halving events reduce mining rewards received, making Bitcoin scarcer over time and slowing the release of new coins into circulation. The most recent Bitcoin halving occurred in April 2024, and the next Bitcoin halving is expected to occur sometime in 2028. The final Bitcoin is projected to be mined in the year 2140.
Bitcoin can be transferred peer-to-peer over the public blockchain without intermediaries. Although no one person can unilaterally make changes to the software that runs the network, there is a core group of developers that maintains the code for the Bitcoin protocol, and they can propose changes to the source code and release periodic updates and other changes. Unlike most software that has a central entity that can push updates to users, bitcoin is a peer-to-peer network in which individual network participants, called nodes, decide whether to upgrade the software and accept the new changes. As a practical matter, a modification becomes part of the Bitcoin protocol only if the proposed changes are accepted by participants collectively having more than 50% of the processing power, known as hash rate, on the network. If a certain percentage of the nodes reject the changes, then a “fork” takes place, and participants can choose the version of the software they want to run. See “Custody of Our Bitcoin” below for a discussion of transaction‑related considerations for our treasury transfers.
The Bitcoin network may be subject to attacks, as with any computer network. Some forms of attack include unauthorized access to wallets that hold Bitcoin and direct attacks, like “denial-of-service attacks” or “51% attacks” on the Bitcoin network. A “denial-of-service attack” occurs when legitimate users are unable to access information systems, devices, or other network resources due to the actions of a malicious actor flooding the network with traffic until the network is unable to respond or crashes. The Bitcoin network has been, and can be in the future, subject to denial-of-service attacks, which can result in temporary delays in block creation and in the transfer of Bitcoin. A “51% attack” may occur when a group of miners attains more than 50% of the Bitcoin network’s mining power, thereby enabling them to control the Bitcoin network and protocol and manipulate the blockchain.
Bitcoin has become increasingly illiquid as long-term holders and institutional players lock up coins, reducing the amount available for trading and driving significant price volatility. According to a recent 2025 analysis from Fidelity Digital Assets, more than 28% of Bitcoin could be locked by long-term holders and corporate treasuries, tightening supply and potentially affecting the price of Bitcoin. Other factors that contribute to Bitcoin price volatility may include changes in market sentiment, regulatory developments, macroeconomic conditions, technological events affecting the Bitcoin network, and trading activity on global digital-asset exchanges.
The trading price of Bitcoin has experienced extreme volatility in recent periods and may continue to do so. The prevalence of digital assets, including Bitcoin, is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable. For example, steep increases in the value of certain digital assets, including Bitcoin, occurred over the course of 2017, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2018 in digital asset trading prices, including for Bitcoin. Following the drawdowns, Bitcoin prices increased during 2019, decreased significantly again in early 2020 amidst broader declines as a result of the COVID-19 pandemic before increasing later in the year, and increased again in early 2021 to reach all-time highs. Yet, even during such overall price increase in early 2021, Bitcoin experienced substantial price volatility, including decreases of over 10% in a single day. Further, increases in 2021 were followed by steep drawdowns throughout 2022 in digital asset trading prices, including for Bitcoin. These episodes of rapid price appreciation followed by steep drawdowns have occurred not only as noted above, but multiple times throughout Bitcoin’s history, including in 2011 and 2013-2014. Bitcoin prices have continued to exhibit extreme volatility since the pandemic. Bitcoin markets may still be experiencing a bubble or may experience a bubble again in the future. Extreme volatility may continue to occur in the future, including further declines in the trading prices of Bitcoin.
As of March 20, 2026, the market capitalization of Bitcoin had decreased since mid-December 2025 by approximately 24%, to $1.33 trillion, based on a market price of approximately $70,400 and 20 million coins issued, although the effective circulating supply of Bitcoin may be even lower. Estimates suggest that 3.0 to 3.8 million Bitcoin may be permanently unrecoverable due to forgotten passwords, misplaced wallets, or dormant addresses, reducing the actual circulating supply to approximately 17 to 18 million Bitcoin, creating a structural scarcity effect which may also lead to Bitcoin price volatility.
We currently expect Bitcoin to remain the most significant component of our treasury assets for the foreseeable future. We do not maintain a fixed numerical target percentage allocation of treasury assets to Bitcoin. The substantial majority of our Bitcoin holdings were acquired as part of the Goldeneye 1995 LLC capital investment which closed on August 6, 2025. We do not currently intend to make any future purchases of Bitcoin through open market transactions for the foreseeable future. We do not intend to incur indebtedness for the purpose of acquiring additional Bitcoin to add to our treasury assets. The relative proportion of Bitcoin within our treasury assets may change over time due to operating liquidity needs, capital raising activities or changes in the market value of Bitcoin.
Bitcoin Treasury Strategy
We strategically utilize our Bitcoin holdings as a primary treasury reserve asset to generate yield to help support the current business and future growth and expansion of new business lines. We view our Bitcoin holdings as long-term strategic treasury assets rather than as short-term trading positions. We seek to enhance our Bitcoin-denominated holdings through our Bitcoin yield-generation strategy. Our Bitcoin treasury trading strategy is intended to boost our Bitcoin holdings through premiums collected on options. As part of our Bitcoin yield generation strategy trading activities, we have entered into option derivative contracts on our Bitcoin holdings. As previously disclosed, we have appointed Hyrcanian Asset Management, LLC (the “Manager”) to provide us with discretionary treasury management services with respect to our Bitcoin treasury strategy, specifically buying and selling call options on Bitcoin (the “Program”). The Manager commenced buying and selling call options on our Bitcoin holdings in the fourth fiscal quarter of 2025.
Pursuant to the Program, we enter into short-term arrangements that result in obtaining the right to receive or obligation to deliver a fixed amount of Bitcoin in the future. The Program is structured such that the net maximum notional exposure should not exceed the balance of the Bitcoin treasury holdings. The Program does not involve leveraged derivative exposure in excess of our Bitcoin holdings. While the ability to make further digital investments on our behalf is one of the premises of establishing the Manager, we have not and do not currently intend to utilize the Manager to do so.
| 8 |
| Table of Contents |
On December 12, 2025, we entered into an Amended and Restated Digital Asset Management Agreement (the “New Asset Management Agreement”) with the Manager, replacing the Digital Asset Management Agreement (the “Asset Management Agreement”) we previously entered into with the Manager on August 6, 2025, to govern the management of our Bitcoin treasury. The New Asset Management Agreement revised the fee structure in the Asset Management Agreement by eliminating the asset-based management fee component of the consideration for the Manager’s service and increasing the performance fee component of the consideration paid to the Manager.
Effective January 1, 2026, and subject to the terms of the New Asset Management Agreement, the Manager is solely paid a performance fee equal to 33% of the net realized gains and periodic mark-to-market changes generated by the options strategy, payable quarterly in Bitcoin, superseding the 25% performance fee and 1% asset-based management fee contained in the Asset Management Agreement. The revised performance fee in the New Asset Management Agreement incorporates a high-water mark and is subject to an annual reconciliation and clawback mechanism.
The New Asset Management Agreement enhances the operational framework supporting our Bitcoin treasury program by formally implementing reporting and risk-management obligations. Under the New Asset Management Agreement, the Manager is formally required to provide weekly and quarterly reports detailing key portfolio characteristics and commentary on market conditions. The Manager is also formally required to deliver quarterly reporting on trading performance, returns, risk posture, and forward-looking market analysis. In addition, the New Asset Management Agreement requires the Manager to maintain and periodically update a business continuity plan acceptable to us, and introduces protections addressing key-man risk associated with the principal individual responsible for overseeing our Bitcoin derivatives portfolio.
Except for the amendments described above, all other material terms of the Asset Management Agreement remain unchanged.
Custody of our Bitcoin
We intend to hold substantially all of our Bitcoin in offline cold storage with U.S.-based, institutional-grade custodians. The primary counterparty risk we are exposed to with respect to our Bitcoin is performance obligations under the various custody arrangements which we have entered into custody substantially all of our Bitcoin with Coinbase Custody Trust Company, LLC, (“Coinbase”), a U.S.-based, institutional-grade custodian with a demonstrated record of regulatory compliance and information security. Our custodial services agreement specifies that the private keys that control our Bitcoin will be held by Coinbase in offline or cold storage which is designed to mitigate risks that a system may be susceptible to when connected to the internet. Our custodial contract with Coinbase also contains liability provisions which hold Coinbase liable for its failure to safekeep our Bitcoin.
Our Bitcoin is controllable only by the possessor of both the unique public key and private keys relating to the local or online digital wallet in which the Bitcoin is held. Private keys used to access our Bitcoin balances are not widely distributed and are all held on hardware by the third party custodian at facilities within the U.S. and internationally. The cold-storage vaults used by the custodian use multilayered physical security, including biometric access controls and the vaults are geographically dispersed and access-controlled.
All of our Bitcoin holdings with Coinbase are held in segregated accounts. Coinbase is obligated by our contractual arrangement with them to keep timely and accurate bookkeeping records of our Bitcoin holdings under rigorous internal controls. As an institutional client, we have the ability to generate statements that contain account-level reporting which serves as an audit and verification mechanism to allow the existence of our crypto assets to be verified by us or our independent auditor. We do not have custody of Bitcoin held for clients. We do not self-custody any of our Bitcoin.
The portion of our Bitcoin that is not held with Coinbase is pledged to a designated counterparty in connection with our digital asset options trading activities. As of December 31, 2025, the amount of our Bitcoin that was pledged for digital asset options trading activities represents approximately 2% of our total Bitcoin treasury. The Bitcoin pledged as collateral for trading activities is held in cold storage wallets with one or more of the counterparty’s designated custodial partners. Private keys used to access the Bitcoin pledged as collateral are controlled by the designated trading counterparty.
From time to time, blockchain protocols may initiate hard forks or third parties may distribute airdrops that result in the creation or receipt of new digital assets. Our custodian does not guarantee support for any forked or airdropped assets. As a result, we do not take affirmative steps to solicit or endorse airdropped assets and we only recognize them when received and controlled and only if our custodian provides secure access.
While our custodian is required to maintain insurance as part of the custodial services they provide which is intended to cover potential losses of our Bitcoin holdings, the insurance covers only a small fraction of the value of the entirety of our Bitcoin holdings. Based on existing law and the terms and conditions of our contractual arrangements with our custodian, we believe that our property interests in the Bitcoin held by our custodian would not be subject to the claims of the custodian's creditors in the event the custodian enters bankruptcy, receivership or similar insolvency proceedings.
| 9 |
| Table of Contents |
Competition
We operate in a highly competitive and fast-evolving environment at the intersection of traditional finance and digital assets. Although there are barriers to enter the markets we plan to serve, our results of operations and future prospects for revenue will depend on the user and partner acceptance of the tokenized deposit platform we are currently developing. We expect that we will face competition from established financial institutions as well as new entrants leveraging blockchain technology seeking to capitalize on the same, or similar opportunities, we are pursuing.
Key competitive categories include:
| · | Traditional Banks: Large incumbent banks and financial consortia are reported to be developing their own blockchain-based payment networks and deposit tokens. Several major U.S. banks, including JPMorgan, Bank of America, Citigroup, and Wells Fargo, have announced plans to collaboratively explore a regulated digital dollar token for interbank use, positioning it as an alternative to privately issued stablecoins. These institutions benefit from trusted brands, large customer bases, deep regulatory experience, and extensive internal resources. If traditional banks, particularly the largest banks in the United States, are able to successfully launch their own tokenized deposit platforms, they could directly compete with our solutions by offering similar digital dollar services within their existing client ecosystems. Our strategy of partnering with banks (rather than competing against them outright) is meant to mitigate this risk, but well-resourced banks remain significant competitors in capturing enterprise and retail users for tokenized deposits. |
|
|
|
| · | Fintech and Payments Firms: A range of fintech companies, neo-banks, and tech firms are entering the digital-asset payments space, blurring the line between banking and technology. Notably, in 2023, PayPal became one of the first major fintech companies to launch its own U.S. dollar stablecoin on Ethereum, providing its enormous user base with a token for payments and transfers. Similarly, consumer finance apps like Revolut have explored issuing stablecoins or offering crypto-enabled accounts to their millions of users. These fintech entrants often emphasize user experience and can rapidly scale new financial products through their apps. They represent direct competition for retail and small business customers who might use our tokenized banking services. We seek to differentiate our platform through bank-grade regulatory compliance and specialized focus on blockchain technology infrastructure, and strategic partnerships with Vast Bank and Uphold, which is being designed to provide a regulated distribution channel for retail tokenized deposits through Uphold’s existing customer platform. Nevertheless, we must compete with fintech firms’ agility and established networks in offering convenient digital dollar products. |
|
|
|
| · | Stablecoin Issuers: Independent stablecoin providers dominate the existing market for blockchain-based U.S. dollar tokens. Companies like Tether and Circle have billions of dollars of stablecoins in circulation and well-developed liquidity pools across crypto markets. These stablecoins are widely used in trading, remittances, and DeFi applications, making them a de facto standard for digital dollars. Their incumbency creates a challenging competitive landscape for our tokenized deposit program as users and developers are already familiar with existing stablecoins that offer broader acceptance. In addition, the passage of the GENIUS Act on July 3, 2025, likely will introduce additional stablecoin issuers that may expand the competitive landscape for stablecoins. However, we aim to compete by offering tokenized deposits as a more transparently regulated alternative to stablecoins. |
|
|
|
| · | Decentralized Finance (DeFi) Protocols: A unique source of competition comes from open source blockchain protocols that replicate financial services without centralized intermediaries. DeFi platforms enable activities like dollar-pegged stablecoin issuance, lending, payments, and trading through self-executing smart contracts. For example, decentralized stablecoins and lending protocols allow users to earn yield or borrow funds outside the traditional banking system. These services appeal to a segment of crypto-savvy users and developers who value programmability and permissionless access. While DeFi offerings lack the regulatory assurances of a platform like ours, they innovate rapidly and operate globally, which can draw away both retail and institutional participants (especially those seeking higher returns or censorship-resistant services). We see our role as bridging the gap between traditional finance and decentralized models by offering regulated on-ramps to digital assets. At the same time, we recognize that we will compete with DeFi alternatives whenever potential customers evaluate building on a public protocol instead of leveraging an infrastructure like ours. Our emphasis on compliance and asset quality is a conscious differentiator from many DeFi schemes. Nonetheless, the competitive pressure from DeFi is significant, as evidenced by the billions of dollars flowing into on-chain stablecoins and lending markets in recent years. |
| 10 |
| Table of Contents |
In this increasingly crowded digital asset landscape, our strategy seeks to differentiate our tokenized deposit platform initiative on factors such as compliance integration, adaptability, and risk management. Our platform will be designed to feature built-in digital identity and compliance frameworks that we do not believe many other competitors (especially in the crypto sector) offer. Each wallet or account will be designed to be linked to verified identity credentials, which will enable seamless KYC/AML processes and transaction traceability. This focus on identity is intended to address what is widely known to be an industry pain point: the absence of robust on-chain identity solutions and privacy measures has hindered adoption and created operational friction in tokenized finance. By seeking to solve for identity and compliance up front, we aim to attract institutions and end users who require a regulated environment without sacrificing the efficiency of blockchain.
We believe that our deep expertise in digital assets and partnership with a forward-thinking financial institution like Vast Bank, that exhibits regulatory agility will allow us to respond quickly to changing laws and guidance. For example, if new stablecoin reserve standards or licensing requirements emerge, Vast Bank may be able to update its programs and policies more rapidly than many large banks or slower moving peers. This agility is increasingly important as jurisdictions worldwide refine their rules for digital assets. Our management team is continuously monitoring these developments to ensure our proposed product will be in compliance and potentially even turn compliance into a selling point, offering features like real-time auditability and automated reporting.
Where a related party such as Vast Bank is involved, potential strategic benefits of a business partnership may include reduced transition costs, improved coordination and greater alignment of long-term strategic objectives. Vast Bank is majority-owned by Vast Holdings, Inc., in which our Chairman and Chief Executive Officer, Greg Kidd, holds a controlling interest and our Vice Chair, Linda Jenkinson, serves as Chair and CEO. We believe that our relationship with Vast Bank provides us with the ability to leverage strategic benefits from the business partnership with Uphold such as improved coordination, deeper operational knowledge, and faster execution of the business strategy while ensuring compliance with our related-party governance policies.
We believe that, over the long term, our integrated model combining bank-like trust, fintech agility, and a Bitcoin-enhanced balance sheet will position us distinctively against both incumbents and startups. However, we must execute diligently on this vision amid intense competition. If we are unable to successfully compete in our industry, our business, results of operations, financial condition and prospects could suffer materially. Ongoing innovation, strict compliance, and customer confidence will be critical for us to capture, maintain and have the potential to grow our share in the tokenized deposit market.
Supervision and Regulation
Regulation of Digital Asset and Financial Technology Infrastructure Activities
We operate within a highly regulated environment that spans federal securities laws, banking and financial services regulations, digital asset and token-related frameworks, and multiple layers of consumer protection and data privacy obligations. These regulatory regimes, especially those governing digital assets, payments, and financial technology infrastructure, are evolving rapidly and are likely to subject us to ongoing interpretation which may lead to potential enforcement activity. We monitor regulatory changes closely and are making significant investments in our legal, compliance, product and engineering teams to plan and prepare to comply with current and future regulations.
The following summarizes key areas of supervision which may be applicable to us and our operations. It is not intended to be a comprehensive analysis of all applicable laws, and is qualified by reference to the full text of statutes and regulations referenced below, which may be modified or amended from time to time. This section contains forward-looking statements regarding anticipated regulatory changes and their possible effects; actual outcomes may differ.
Federal Securities Laws and SEC Oversight
As a public company listed on the NYSE American, we are subject to U.S. federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934, and oversight by the SEC. We must file annual, quarterly, and current reports and we are required to maintain effective disclosure controls, financial reporting systems, and internal governance consistent with SEC and NYSE American requirements.
Digital Asset Regulatory Environment
General Regulatory Scope. Our strategy to develop a tokenized deposit program and hold Bitcoin as a treasury reserve asset places us at the intersection of multiple regulatory regimes. U.S. federal and state regulators, including the SEC, CFTC, FinCEN, OFAC, CFPB, banking regulators, and state licensing authorities, continue to increase their scrutiny of digital assets, emphasizing issues such as illicit finance, consumer protection, systemic risk, and prudential standards.
| 11 |
| Table of Contents |
AML and Sanctions Compliance. Although we are not registered as a money services business or otherwise engaged in regulated money transmission activities that would subject us to direct supervision by FinCEN (or an applicable state regulator), we are building policies for KYC, transaction monitoring, suspicious activity monitoring and reporting, and internal compliance oversight and training as oftentimes may be required by our bank partners and as otherwise expected by such partners. For example, FinCEN has recently enforced BSA compliance vigorously in the digital asset sector, with fines and penalties for firms operating without proper controls or licenses.
In parallel, we are subject to OFAC-administered economic sanctions that apply to activities involving tokenized assets, stablecoins, cryptocurrencies and smart contracts in the same way that traditional financial assets are treated for purposes of sanction compliance. Blockchain tracing tools help us screen addresses and counterparties against the SDN list. If any digital asset we process is later associated with a sanctioned individual or wallet, we may be required to freeze or block those assets, report the incident, and manage potential valuation and reputational fallout. This is particularly relevant for Bitcoin due to its pseudonymous and fungible characteristics.
Non-Bank Financial Model and Fintech Partnerships. We are not a chartered bank and we do not issue deposit accounts. We plan to deliver a platform to enable tokenized deposits and related services via partnerships with regulated banks and digital wallet operators. Our bank partners hold customer deposits and, in some cases, custody digital assets or issue payment instruments. These relationships will be governed by robust third-party risk management requirements, and we will adhere to our bank partners’ compliance standards where applicable, including those related to BSA/AML, consumer disclosures, and cybersecurity. We have entered into a commercial partnership with Vast Bank and Uphold to facilitate the future issuance and distribution of tokenized retail deposits. Under this partnership, Vast Bank will serve as the initial insured depository institution responsible for issuing the deposits, while Uphold will provide the retail user interface and wallet infrastructure under applicable regulatory supervision. These arrangements will be governed by contractual controls addressing compliance with BSA/AML, cybersecurity, and consumer-protection obligations as applicable.
Bank regulators, including the OCC, FDIC, and Federal Reserve, have recently increased scrutiny of fintech-bank partnerships, including requiring pre-approval for new product features and closer monitoring of operational risks. While no requirement to obtain regulatory pre-approval to tokenize bank deposit accounts has specifically been identified, we are coordinating closely with Vast Bank and Uphold to meet these expectations and avoid regulatory exposure that could delay or jeopardize the further development and future retail launch of the USBC tokenized deposit program.
Payments, Consumer Protection, and Data Privacy
Money Transmission and Electronic Payments. Because our tokenized deposit product is not yet live, we are not currently conducting any activity that may constitute “money transmission” under applicable laws. We are designing our tokenized deposit platform to ensure that we will never take custody, control, or possession of customer funds or digital assets. Customer funds remain on deposit with Vast Bank. Retail distribution of tokenized deposits will be facilitated through Uphold’s regulated platform, which provides wallet services to end users. As a result, we do not expect to be directly subject to regulation as a money transmitter or money services business (“MSB”) and we will instead rely on Vast Bank or our other partners’ existing licensure and regulatory frameworks to provide any regulated financial services. Accordingly, we are not registered with FinCEN as an MSB and we do not believe that we will be required to obtain state money-transmitter licenses. Nevertheless, we understand that our platform and our related services are subject to scrutiny not only by our bank partners but also their regulators. As a result, we are planning to implement and will maintain robust policies and procedures related to BSA/AML/OFAC, cybersecurity, and other applicable regulations.
Consumer Protection and UDAAP Compliance. The CFPB has authority over unfair, deceptive, or abusive acts and practices (“UDAAP”) involving consumer financial products. We are designing our compliance program to include regular reviews of our product marketing practices, fee structures, and user interfaces to ensure that they align with federal and state consumer protection laws. If we expand into additional services, such as lending or credit-related products, further rules (e.g., TILA, ECOA) may apply.
Privacy and Data Security. We are in pre-launch development and we do not currently collect or process sensitive personal information in a production environment. We are developing a comprehensive privacy and data-security program, including encryption, access controls, data minimization, incident response procedures and regulatory compliance measures as we are subject to federal laws like the Gramm-Leach-Bliley Act, which governs privacy notices, data usage, and security safeguards. We are also developing processes to monitor and comply with state-level privacy laws such as the California Consumer Privacy Act, and we are taking steps to ensure we remain aware of new rules related to emerging technology such as biometric data, AI in financial services, and cross-border data transfers. Subsequent to the future retail launch of the tokenized deposit offering, our security framework will be reviewed regularly and is being designed to include technical, administrative, and physical safeguards in line with industry standards.
| 12 |
| Table of Contents |
Regulatory Developments and Outlook
SEC and Securities Law Enforcement. The SEC continues to actively assert jurisdiction over a wide range of digital assets. While the SEC has indicated that Bitcoin is generally viewed as a commodity, other tokens may be deemed securities under the federal securities laws, depending on their structure and use. Our tokenized deposit product is not a newly-issued digital asset backed by reserves, nor is it a deposit token. We have designed it with a view to avoid classification as a security under current SEC guidance. However, regulatory interpretation remains uncertain, and further rulemaking or enforcement action could require us to register certain products or restructure features to ensure compliance.
AML and Sanctions Scrutiny. U.S. regulators, including FinCEN, OFAC, and the Department of Justice, have intensified scrutiny on AML and sanctions controls in the crypto sector. High-profile enforcement actions in 2023 and 2024 illustrate the risk of compliance lapses, including multimillion-dollar fines and criminal penalties. We are designing and testing transaction monitoring, sanctions screening, and blockchain analytics tools to meet regulatory expectations. Because regulatory expectations in the AML and sanctions landscape continue to evolve, we continuously update our policies to incorporate emerging guidance.
Bank-Fintech Oversight. Banking regulators have issued updated guidance on third-party risk management, particularly in the context of fintech partnerships. As a program manager and infrastructure provider working with chartered institutions, we must maintain controls commensurate with those of our regulated partners. Increased regulatory oversight could raise compliance costs and slow product rollouts, but we believe robust governance also serves as a competitive advantage.
Legislative and International Developments. The U.S. Congress continues to debate legislation that could further reshape the regulatory framework for stablecoins, tokenized deposits, and crypto assets. In particular, Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (the “GENIUS” Act) in July 2025, which establishes a federal framework for the issuance and oversight of certain payment stablecoins. The interpretation, implementation, and any related rulemaking under the GENIUS Act remain evolving and could affect market structure, bank-fintech partnership expectations, and regulatory treatment of tokenized financial products, including tokenized deposits. In addition, major jurisdictions, including the European Union, Japan, Hong Kong, and Singapore, have adopted laws or regulatory frameworks addressing stablecoins and other digital asset activities. We monitor these developments and may need to adjust our current or future business operations to comply with applicable foreign laws and regulations.
Regulation of the Science Division
Our Science Division, which includes the legacy Know Labs business, remains focused on advancing our proprietary sensor technology. We have significantly reduced the scale of our research and development activities and are no longer conducting human clinical trials. Current efforts are limited to laboratory-based feasibility testing, intellectual property protection, and maintaining regulatory readiness for potential future commercialization. We are also focused on building strong external validation of our technology, primarily through technical studies.
Our operations, and those of any future development and research partners, may, if we decide to resume pursuit of medical applications of our sensor technology, be subject to regulation by the U.S. Food and Drug Administration (“FDA”) and other federal and state agencies under the Federal Food, Drug, and Cosmetic Act and related regulations. These laws govern, among other things, the design, clinical testing, manufacture, labeling, promotion, and sale of medical devices. Any medical-diagnostic products developed by the Science Division would be regulated by the FDA as medical devices, and must satisfy applicable pre-market review, quality-system, and post-market reporting requirements.
The FDA classifies medical devices into three categories—Class I, II, or III—based on the level of regulatory control necessary to assure safety and effectiveness. Class I devices are subject to general controls; Class II devices, such as most diagnostic instruments, generally require pre-market clearance through the 510(k) process or, where no predicate device exists, a De Novo classification request; and Class III devices require pre-market approval. The specific classification and pre-market pathway applicable to our Bio-RFID™-based products will depend on their final intended use, technological characteristics, and the availability of a legally marketed predicate device.
| 13 |
| Table of Contents |
If we resume active product development or clinical testing in the future, we expect that any future regulatory submission for the sensor product would likely proceed through the FDA’s De Novo or 510(k) process, supported by clinical data demonstrating substantial equivalence or reasonable assurance of safety and effectiveness. Should the FDA determine that the product represents a novel technology, the device could be subject to additional review or more extensive testing before marketing authorization is granted. We may also seek designation under the FDA’s Breakthrough Devices Program if our technology continues to demonstrate potential for materially improved diagnostic accuracy or patient outcomes.
Clinical testing of our investigational devices, if required, must comply with the FDA’s investigational device exemption regulations and be conducted under the oversight of Institutional Review Boards. These requirements govern study design, informed consent, monitoring, and reporting obligations. Even after a device receives marketing authorization, the manufacturer is subject to post-market surveillance, quality-system regulation compliance, medical-device reporting, and FDA inspection authority. Non-compliance with any of these obligations could result in enforcement actions, including fines, injunctions, product recalls, or civil and criminal penalties.
Because the Science Division’s current activities are primarily research-oriented, we have no current exposure to the full range of FDA and Federal Trade Commission marketing and labeling regulations at this time. Nevertheless, we continue to monitor evolving regulatory requirements to ensure that our intellectual property and development programs, advertising materials, and data-handling practices remain compliant. Any significant change in the regulatory framework applicable to medical-diagnostic technologies, or any adverse determination by the FDA, could materially affect our ability to advance or commercialize the Science Division’s products in the future.
Research and Development
Our research and development initiatives are primarily directed toward advancing the architecture, functionality, and scalability of our tokenized deposit platform and related digital financial infrastructure, including the pre-launch development of identity-integrated wallets, compliance-enabled smart contracts, blockchain interoperability features, reserve-management tooling, and user experience enhancements. Following the October 2025 announcement of our strategic partnership with Vast Bank and Uphold, our R&D activities will also include technical integration, compliance validation, and user-interface testing to support the further development of the USBC tokenized deposit offering. We are also focused on building modular program management systems that could support licensing or white- label deployment of our financial-technology stack.
While our core research and development efforts are now heavily focused on the financial technology and digital asset space, we continue to support limited development related to our legacy non-invasive sensor technology, primarily to preserve prior investment and explore potential integrations with our identity or health-related applications which may support future monetization or technology licensing.
Our research and development expenditures vary based on project cycles, regulatory requirements, technical hiring, and third-party partnerships. Integration testing and regulatory-readiness efforts associated with the Vast Bank and Uphold collaboration are expected to represent a meaningful portion of near-term R&D spending. We expect investment in platform security, cryptographic protocols, regulatory adaptability, and cross-chain deployment tools to remain a significant focus.
Human Capital Resources
As of December 31, 2025, we employed 31 individuals, including 16 full-time employees who support critical areas including platform development, financial operations, digital asset custody, product management, regulatory compliance, and strategic partnerships. Our employees work remotely from locations across the United States and abroad. Substantially all executive and team meetings are held virtually, with occasional in-person sessions for strategic planning or technical integration.
We prioritize recruiting and retaining professionals with experience in blockchain architecture, smart contract engineering, cybersecurity, AML/KYC compliance, and tokenomics. Our team structure is designed to remain agile, allowing us to scale selectively in line with evolving regulatory and business priorities. In execution of our hiring strategy, we maintain an equity incentive plan which we believe serves as a key incentive for our employees, aligning their long-term interests with our objectives as an organization.
| 14 |
| Table of Contents |
Key human-capital objectives include maintaining a culture of accountability, innovation, and regulatory compliance. To support these objectives, we emphasize:
| · | Recruitment and retention of professionals with experience in digital-asset infrastructure, risk management, and software engineering; |
|
|
|
| · | Compliance and security training, including periodic instruction on anti-money-laundering, data-privacy, and cybersecurity obligations; and |
|
|
|
| · | Equity-based compensation as a core retention and alignment tool, which links employee interests with long-term shareholder value. |
We continuously evaluate our human-capital programs and may adjust our practices as our business evolves.
Available Information
You can find reports on our company including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports on our Investor Relations website https://investors.usbc.xyz under the “Filings” heading. These reports are available free of charge and as soon as reasonably practicable after they have been filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). We are providing the address of our website solely for the information of investors and the information on our website is not a part of or incorporated into this or any report that we file with the SEC.
ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this report, before making an investment decision with respect to our common stock. If any of the following events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment.
Risk Related to Business, Finance and Operations
We have a history of losses, we may not be able to attain profitability in the future, and there is no assurance that our revenue and business model will be successful.
We have a history of net losses. We expect our costs will increase over time, and that we may continue to generate losses in the future as we invest significant additional funds toward growing our business and operating as a public company. Such losses may fluctuate significantly from quarter to quarter. We expect to expend substantial financial and other resources on pre-launch product development, including investments in our proposed product, engineering, data, and design teams and platform; our technology infrastructure, including systems architecture, management tools, scalability, availability, performance, security, and disaster recovery measures; our sales, marketing, and partner management organizations; acquisitions or strategic investments; and general administration, including legal and accounting expenses. These efforts may be more costly than we expect and may not result in the generation of any revenue. A failure to generate enough revenue to sufficiently keep pace with our investments and other expenses could prevent us from achieving profitability or positive cash flows. If we are unable to successfully address these risks and challenges as we encounter them, our business, financial condition, and results of operations could be adversely affected.
If we cannot keep pace with rapid changes in the digital asset industry, including technological developments and evolving regulatory frameworks, the potential use of our proposed products and services, and consequently our ability to generate revenue, could decline, which could adversely affect our business, financial condition, and results of operations.
The digital asset industry has been characterized by many rapid, significant, and disruptive products and services in recent years. These include decentralized applications, DeFi, yield farming, non-fungible tokens, play-to-earn games, lending, staking, token wrapping, governance tokens, innovative programs to attract customers such as transaction fee mining programs, initiatives to attract traders such as trading competitions, airdrops and giveaways, staking reward programs, “layer 2” blockchain networks, and novel digital asset fundraising and distribution schemes, such as “initial exchange offerings.” We expect new digital asset products, services, and technologies to continue to emerge and evolve, which may be superior to, or render obsolete, the products and services that we are currently developing. For example, disruptive technologies such as generative artificial intelligence (“AI”) may fundamentally alter the use of our proposed products or services in unpredictable ways. We cannot predict the effects of new services and technologies on our business. Our ability to generate net revenue will depend heavily on our ability to innovate and create successful new products and services, both independently and in conjunction with third-party developers. In particular, developing and incorporating these new products and services into our business may require substantial expenditures, take considerable time, and ultimately may not be successful. Any new products or services could fail to attract customers, generate revenue, or perform or integrate well with third-party applications and platforms. In addition, our ability to adapt and compete with new products and services may be inhibited by regulatory requirements and general uncertainty in the law and regulatory expectations, constraints by our banking partners and payment processors, third-party intellectual property rights, or other factors. Moreover, we must continue to enhance our technical infrastructure and other technology offerings to remain competitive and ensure our platform has the required functionality, performance, capacity, security, and speed to attract and retain customers. As a result, we expect to incur significant costs and expenses to continue developing the technical infrastructure required to meet the evolving needs of the industry. Our success will depend on our ability to develop and incorporate new offerings and adapt to technological changes and evolving industry practices. If we are unable to do so in a timely or cost-effective manner, our business and our ability to successfully compete to attract customers may be adversely affected.
| 15 |
| Table of Contents |
Since late 2025, policymakers in the United States and other jurisdictions have continued to consider legislation and regulatory proposals addressing digital assets, including frameworks relating to tokenized deposits, payment stablecoins, and other blockchain-based representations of financial assets. These proposals could impose new requirements relating to licensing, capital or reserve requirements, operational controls, consumer protections, and regulatory oversight of blockchain-based financial infrastructure. Because our business strategy includes the development of a tokenized deposit platform and related digital financial infrastructure, changes in law, regulation, or regulatory interpretation could affect our ability to launch or operate such services, require modifications to our platform architecture or compliance framework, or impose additional obligations on us or our partners. Regulatory developments could also impose additional supervisory expectations on bank-fintech partnerships or limit the types of institutions permitted to issue tokenized deposits. Any such developments could adversely affect our business, financial condition, and results of operations.
We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.
Historically, we have funded our operations and capital expenditures primarily through debt and equity issuance. While we currently anticipate that our existing liquidity sources, including our Bitcoin holdings and available borrowing capacity under our Bitcoin-collateralized loan facility, will be sufficient to meet our cash needs for at least the next 12 months, our anticipated cash needs may exceed our available resources as we execute our business strategy. As a result, we may require additional financing or other sources of liquidity to fund operations and support the continued development of our business. We may evaluate financing opportunities from time to time, including through sales of Bitcoin, Bitcoin-collateralized financing arrangements, related-party or other investor financing, and other debt or equity financings, and our ability to obtain financing will depend, among other things, on our pre-launch development efforts, outcome of the pilot program, business plans, operating performance, and the condition of the capital markets at the time we seek financing. We cannot assure you that additional financing or other liquidity sources will be available to us on favorable terms when required, or at all. In particular, if we seek to obtain financing through Bitcoin-collateralized financing arrangements, we may be required to pledge a substantial portion of our digital asset holdings and satisfy margin maintenance and other collateral requirements. If the value of the pledged collateral declines, we could be required to post additional collateral, repay indebtedness earlier than anticipated or permit the liquidation of pledged Bitcoin, which could adversely affect our liquidity, financial condition and results of operations. If we raise additional funds through the issuance of equity or equity-linked securities, those securities may have rights, preferences, or privileges senior to the rights of our common stock, and our stockholders may experience dilution. If we raise additional funds by incurring indebtedness, then we may be subject to increased fixed payment obligations and could be subject to restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely affect our ability to conduct our business. Any future indebtedness we may incur may result in terms that could be unfavorable to our investors.
In March 2026, we entered into a Master Loan Agreement with Payward Interactive, Inc., pursuant to which we may borrow from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. The Bitcoin collateralizing the borrowing facility is held for the benefit of the Lender by an affiliate of the Lender, Payward Financial, Inc. (the "Custodian") and subject to an account control agreement by and among the Lender, the Company and the Custodian. As of March 20, 2026, we entered into a term sheet for a fixed-term loan of $5.0 million bearing interest at 8.5% per annum under the MLA maturing on March 18, 2027. Borrowings under the MLA are solely secured by Bitcoin collateral held in and subject to collateral maintenance requirements based on specified margin ratios. Due to the inherent volatility of Bitcoin and other digital assets, declines in the value of our pledged collateral could result in margin calls requiring us to repay borrowings earlier than anticipated or post additional collateral within short timeframes, each of which may strain our liquidity, or result in the liquidation of pledged assets at unfavorable prices. Any such events could adversely impact our financial condition, results of operations and ability to execute our business strategy.
Failure of vendors to perform their contractual agreements and our failure to effectively oversee vendor operations could adversely affect our business, financial condition, and results of operations.
We contract with vendors and service providers who perform services for us or to whom select functions are delegated and integrated into our processes. In some cases, third-party vendors are one of a limited number of sources. These service providers play an important role in supporting the technology, automation, and operational capabilities of our platform. If certain critical vendors were unable to perform, we could experience interruptions or delays in the delivery of our products and services while we identify and integrate suitable alternatives. We also rely on third-party providers for key technology functions, including system availability, cybersecurity, data processing, and infrastructure support. These providers supply resources that help maintain the reliability, scalability, and security of our systems and data. We utilize a variety of other vendors to detect and defend against malicious activity and threats. Any disruption, performance degradation, or failure by our vendors to meet their obligations could adversely affect the continuity of our operations.
| 16 |
| Table of Contents |
Our arrangements with vendors and service providers have in the past and may in the future disrupt or degrade our operations if they fail to satisfy their obligations to us or if they were to stop providing services to us either on a temporary or permanent basis. We may be unable to replace these vendors and service providers in a timely and efficient manner, on similar terms, or at all. In addition, our vendors and service providers may fail to operate in compliance with applicable laws, regulations, and rules. Despite our efforts to monitor our vendors and service providers with which we transact business, there is no guarantee that they will comply with their contractual obligations as agreed to or applicable laws and regulations. Failure to maintain an effective vendor oversight program and monitor our vendors’ compliance with applicable laws could result in fines, penalties or other liability for errors and omissions by these vendors and service providers, which could adversely affect our business, financial condition, and results of operations.
The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the listing requirements of the NYSE American and other applicable securities rules and regulations. Compliance with these rules and regulations may increase our legal and financial compliance costs, make some activities more difficult, time consuming, or costly, and increase the demands on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. In addition, we expect that our management and personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the amount of additional costs we may incur as a result of being a public company or the timing of such costs.
Our executive officers have limited experience in dealing with the increasingly complex laws pertaining to public companies, which may increase the amount of their time devoted to these activities and result in less time being devoted to the management and growth of our business. We continue to evaluate whether we have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies. We may expand our employee base and hire additional employees to support our operations as a public company, which may in the future cause our operating costs to increase. If we fail to establish and maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
Being a public company also makes it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage, incur substantially higher costs to obtain coverage or only obtain coverage with a significant deductible. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors in the future, particularly to serve on our audit committee and compensation committee.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations in many cases due to the lack of specificity and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts, we fail to comply with new laws, regulations and standards or our efforts differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business, financial condition, and results of operations could be adversely affected.
We rely on an affiliated entity to provide key operational services, which exposes us to risks related to potential conflicts of interest, cost structure, operational dependency, and business continuity.
On March 18, 2026, we entered into an Affiliate Services Agreement with Vast Holdings, Inc., an affiliated entity, pursuant to which its wholly-owned OCC- chartered bank subsidiary, Vast Bank, provides strategic, operational, and administrative services supporting the further development of our tokenized deposit platform and related business lines (the “Services”). Under this arrangement, we reimburse Vast for the cost of the Services based on the actual costs incurred by Vast Bank, subject to a total reimbursement cap during the term of the agreement. Our reliance on an affiliated service provider exposes us to a number of risks including potential conflicts of interest, limitations on our operational independence, and reduced flexibility in managing our cost structure. In addition, because a significant portion of our operational infrastructure is supported by Vast, any disruption in services, disagreement regarding service levels or costs, or inability to scale services in line with our growth could adversely affect our business operations. Any of these factors could adversely affect our business, financial condition, results of operations, and ability to execute our strategic objectives.
Geopolitical and political instability, including armed conflicts, regional tensions, terrorism, sanctions, adverse economic conditions, and related disruptions in U.S. and global markets, could adversely affect our business and financial condition.
Political developments in the U.S. and other countries can cause uncertainty in the economic environment and market conditions in which we operate. Certain governmental policy initiatives, as well as heightened geopolitical tensions, could significantly affect U.S. and global economic growth and cause higher volatility in the financial markets, including: monetary policies and actions taken by the federal reserve and other central banks or governmental authorities; fiscal policies, including with respect to taxation and spending; foreign policies; economic or financial sanctions; the implementation of tariffs and other protectionist trade policies; and changes to immigration policies.
These types of political developments, and uncertainty about the possible outcomes of these developments, could: erode investor or consumer confidence in the U.S. economy and financial markets, which could potentially undermine the status of the U.S. dollar as a safe haven currency and cause stock price volatility; provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations; increase the risk of targeted cyber attacks; increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time; result in periodic shutdowns of the U.S. government; influence monetary policy actions of the federal reserve to moderate the economic impact of political developments; cause us to refrain from engaging in business opportunities that it might otherwise pursue; or cause us to have fewer business opportunities if governments or partners are unwilling to engage with us due to geopolitical tensions or adverse perceptions of U.S. businesses.
Ongoing geopolitical instability, including conflicts in the Middle East and related regional tensions, may contribute to volatility in global financial markets, including digital asset markets such as Bitcoin, which constitutes a significant portion of our treasury holdings. These events may also result in increased regulatory scrutiny, economic uncertainty, and disruptions to global capital markets, liquidity conditions, payment systems, or investor sentiment. Our ability to execute our business strategy, establish partnerships with financial institutions, and access capital may be adversely affected by changes in market conditions and investor sentiment resulting from geopolitical developments. Any such developments could adversely affect the value of our Bitcoin holdings and our ability to execute our broader treasury and growth strategies or cause us to have fewer business opportunities or partnerships.
The potential outcomes of these developments could be significant, which could adversely affect our stock price or our business, results of operations, financial condition or prospects.
| 17 |
| Table of Contents |
Risks Related to Ownership of our Common Stock
We are a “controlled company” within the meaning of the NYSE American rules and, as a result, we qualify for exemptions from certain corporate governance requirements. Our stockholders do not have the same protections afforded to stockholders of companies that are subject to such requirements.
Greg Kidd, our Chief Executive Officer and Chairman of the Board, beneficially owns a majority of the voting power of our outstanding common stock through his solely-owned entity, Goldeneye 1995 LLC (“Goldeneye”). As a result, we are a “controlled company” within the meaning of the NYSE American LLC Company Guide. Under the NYSE American rules, a company of which more than 50% of the voting power in the election of directors is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements. For example, controlled companies:
| · | are not required to have a board of directors composed of a majority of “independent directors,” as defined under the NYSE American rules; |
|
|
|
| · | are not required to have a compensation committee that is composed entirely of independent directors; and |
|
|
|
| · | are not required to have director nominations be made, or recommended to the full board of directors, by independent directors or by a nominations committee that is composed entirely of independent directors. |
Accordingly, because we qualify as a controlled company, we may elect to rely on these exemptions and not implement certain governance practices (such as a fully independent board or committees). To the extent we choose to do so, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE American’s corporate governance requirements. In addition, because our controlling stockholder also serves as our Chief Executive Officer and Chairman, the lack of independent oversight may increase the potential for related-party transactions or conflicts of interest that could be adverse to minority stockholders.
Our largest stockholder will continue to have a substantial influence over us for the foreseeable future, including the outcome of matters requiring stockholder approval. This concentration of control may prevent you and other stockholders from influencing significant corporate decisions, and it may result in conflicts of interest that could cause our stock price to decline.
As of February 28, 2026, Goldeneye, our largest stockholder, beneficially owned approximately 71.5% of the issued and outstanding shares of our common stock, on a fully diluted basis (and a higher percentage on a non-diluted basis), and exercised a corresponding level of voting control. As a result, Mr. Kidd, through Goldeneye, has the ability to control or heavily influence the election of our directors and the outcome of corporate actions requiring stockholder approval, such as: (i) a merger or a sale of the Company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation and bylaws. This concentration of voting power could discourage or prevent a change in control that minority stockholders might consider favorable and could result in the approval of transactions that might not reflect arm’s-length terms. The significant concentration of ownership may also reduce the liquidity and trading volume of our common stock and could result in a lower trading price. In addition, the significant concentration of stock ownership may adversely affect the market value of our common stock due to investors’ perception that conflicts of interest may exist or arise, or due to the reduced public float and liquidity of our shares. This risk overlaps with the risks discussed under “Risk Factors—Our Bitcoin treasury strategy exposes us to conflicts of interest and governance risks” because control by a single stockholder may also influence treasury-management decisions.
We underwent a fundamental change in capitalization during 2025, and the issuance, repricing, or sale of substantial amounts of our common stock could result in significant dilution and adversely affect the market price of our shares.
In 2025, in connection with our recapitalization and the adoption of our Amended and Restated 2021 Equity Incentive Plan, our outstanding shares of common stock increased materially from approximately 3 million as of December 31, 2024 to approximately 388 million as of December 31, 2025. The amended plan authorizes the issuance of up to 115.3 million shares of common stock, with an evergreen provision that may automatically add up to 15 million shares each year through 2030.
In August and October 2025, we implemented significant equity-compensation actions, including the grant of new stock option awards and, in October, the repricing of the options granted in August, materially increasing the number of shares that may become eligible for future issuance, increasing our stock-based compensation expense.
In March 2026, our Board of Directors approved the repricing of all outstanding stock options and the grant of new equity awards to new hire employees and consultants. The repricing will be accounted for as a modification under applicable accounting guidance and may result in incremental stock-based compensation expense. In addition, the issuance of new equity awards will increase our stock-based compensation expense in future periods.
We use equity-based compensation as a key component of our incentive and retention strategy and we expect to continue granting stock options and other equity awards in the future. The issuance, vesting, or exercise of these awards, as well as any future equity financings, will increase the number of shares outstanding and may further dilute existing stockholders, reduce our earnings per share, and adversely affect the market price of our common stock.
In addition, a significant portion of our outstanding common stock is held by our principal stockholder, members of management, and other affiliates, resulting in a relatively limited public float. A limited float may contribute to price volatility and reduced liquidity in our stock. Sales of substantial amounts of our common stock by us in future offerings, upon the exercise of equity awards, or by existing stockholders (including affiliates pursuant to Rule 144 or an effective registration statement), or even the perception that such sales could occur, could adversely affect the market price of our common stock.
| 18 |
| Table of Contents |
Future issuances of equity or debt securities could further dilute stockholders or adversely affect the value of our common stock.
Under our articles of incorporation, we are authorized to issue 750 million shares of common stock and 5 million shares of preferred stock. The issuance of additional equity or convertible securities could result in further dilution and may adversely affect the trading price of our common stock. Similarly, any issuance of debt securities could impose restrictive covenants or liens that limit our operational flexibility or subordinate equity holders’ claims in a liquidation.
We may also offer debt securities that have rights senior to those of our common stock or contain restrictive covenants, including liens on our assets. Because our decision to issue securities or incur debt in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings, reducing the value of your shares and diluting your interest in us.
We are currently operating under an accepted plan with the NYSE American to regain compliance with its continued listing standards, but there can be no assurance that we ultimately will do so, and additional or revised listing standards could increase the risk of suspension or delisting.
Our common stock is listed on the NYSE American, and the continued listing of our common stock on the NYSE American is contingent upon our ongoing compliance with a number of listing requirements. These include minimum share price, minimum number of public stockholders and minimum stockholders’ equity requirements, among others.
On September 27, 2024, we received a notice from the NYSE American stating that we were not in compliance with certain listing standards set forth in Sections 1003(a)(ii) and 1003(a)(iii) of the NYSE American LLC Company Guide. On December 10, 2024, the NYSE American accepted our plan to regain compliance and granted a plan period through March 27, 2026. As required by the NYSE American, we are obligated to provide quarterly updates concurrent with our interim and annual SEC filings and to demonstrate progress toward the initiatives outlined in our accepted plan. We will submit our required compliance update for the Transition Period ended December 31, 2025 to the NYSE American. Based on management’s current assessment, we expect that this submission will support a determination by the NYSE American that we have regained compliance with the applicable continued listing standards prior to the expiration of the plan period on March 27, 2026. However, the NYSE American retains sole discretion in evaluating our compliance status, and there can be no assurance that it will conclude that we have regained compliance.
The NYSE American may initiate delisting proceedings at any time if it determines that we are not making sufficient progress under the plan or otherwise fail to satisfy listing standards (including suitability standards under Section 1003(f)(v)). On January 29, 2025, the NYSE American announced that it would commence delisting proceedings against us for low bid price. We filed an appeal and continue to pursue corrective actions.
In addition, NYSE American has proposed amendments to its listing standards that, if adopted and applicable to us, could permit the exchange to suspend trading in, and commence delisting proceedings against, a listed company under stricter standards than those currently in effect. One pending proposal would permit immediate suspension and commencement of delisting proceedings if a listed company’s common stock falls below $0.25 per share. A separate pending proposal would permit immediate suspension and delisting proceedings if a listed company’s average global market capitalization over a consecutive 30 trading-day period falls below $5.0 million. The proposed amendments also provide that an issuer that falls below these proposed thresholds would not be eligible to submit a compliance plan under Section 1009 of the Company Guide. These proposed amendments to the NYSE American listing standards are subject to review and approval by the SEC and may be modified prior to adoption. If approved, the timing of implementation could occur during 2026 or later. The proposed rule change was filed with the SEC on December 3, 2025 and published by the SEC for public comment on December 12, 2025, and the SEC’s notice contemplates a comment period ending 21 days after publication in the Federal Register. In addition, NYSE American has proposed to make the $0.25 minimum trading price requirement effective on October 1, 2026.
| 19 |
| Table of Contents |
If these proposed amendments are adopted and become applicable to us, and if we are unable to maintain compliance with these or other continued listing standards, NYSE American could suspend trading in our common stock and commence delisting proceedings, regardless of whether we are otherwise operating under a compliance plan. Our stock price has recently traded in a range that is significantly closer to $0.25 than historical levels, and continued declines could increase the risk of suspension or delisting if the proposed amendments are approved and become effective. If our common stock is delisted from NYSE American and we are unable to list on another national securities exchange, our common stock may only be eligible for quotation on the over-the-counter market. This could result in significant adverse consequences, including:
| · | limited availability of market quotations for our common stock; |
|
|
|
| · | reduced liquidity for our common stock; |
|
|
|
| · | impaired ability to raise additional funds; |
|
|
|
| · | loss of institutional investor interest and decreased ability to issue additional securities or obtain financing in the future; |
|
|
|
| · | determination that our common stock is a “penny stock,” which would impose more stringent broker rules and possibly result in reduced trading activity; |
|
|
|
| · | limited news and analyst coverage; and |
|
|
|
| · | potential breaches of our agreements under which we made representations or covenants regarding compliance with listing requirements, which could result in costly litigation, liabilities and diversion of management’s time and attention. |
Although our compliance plan was accepted, and we have progressed through the plan period to our final compliance submission, there is no assurance that the NYSE American will determine that we have regained full compliance or that we will be able to maintain ongoing compliance with its continued listing requirements in the future. In addition, any delisting or prolonged non-compliance could delay or limit commercialization of our tokenized-deposit initiative by impairing counterparties’ or regulators’ willingness to proceed with required approvals and integrations.
We may consider implementing a reverse stock split in the future, which could adversely affect the market price and liquidity of our common stock.
From time to time, our Board of Directors may evaluate potential actions intended to increase the per-share trading price of our common stock or support compliance with applicable exchange listing requirements. One such action could include the implementation of a reverse stock split of our outstanding common stock, which would reduce the number of shares outstanding by combining multiple existing shares into a smaller number of shares.
We have not determined whether a reverse stock split will be pursued, and any such action would be subject to approval by our Board of Directors and, if required, our stockholders. However, if a reverse stock split were implemented, it may not result in a sustained increase in the market price of our common stock. Companies that implement reverse stock splits often experience declines in the market price of their securities following the transaction. In addition, a reverse stock split could reduce the liquidity of our common stock, increase price volatility, and reduce the number of investors willing or able to hold our shares.
Because we previously effected a reverse stock split within the last two years, NYSE American may review any additional reverse stock split under its continued listing and suitability standards. As a result, the ratio or effectiveness of any future reverse stock split could be limited. If a reverse stock split were implemented and the market price of our common stock does not increase proportionately or subsequently declines, our stockholders could experience a decrease in the value of their investment.
Because our stock price has fluctuated significantly and may remain volatile, the value of your investment may decline.
The market price of our common stock has been and is likely in the future to be volatile. Our common stock price may fluctuate in response to factors such as:
| · | changes in the market price of Bitcoin and resulting unrealized gains or losses from our Bitcoin treasury strategy; |
|
|
|
| · | pre-launch developments in our tokenized-deposit initiative, including announcements of partnerships, pilot timing, product design, or regulatory feedback; |
|
|
|
| · | changes to, delays in, or termination of relationships with our banking or distribution/technology partners for tokenized deposits; |
|
|
|
| · | fluctuations in our financial results reflecting fair-value adjustments related to digital-asset holdings or share-based compensation; |
| 20 |
| Table of Contents |
| · | announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments and litigation; |
|
|
|
| · | issuance of stock options or other equity awards, convertible or equity securities and related warrants for general corporate or merger and acquisition purposes; |
|
|
|
| · | issuance or repayment of debt, accounts payable or convertible debt for general corporate or merger and acquisition purposes; |
|
|
|
| · | actual or perceived dilution arising from future equity financings or conversions; |
|
|
|
| · | sale of a significant number of shares of our common stock by stockholders; |
|
|
|
| · | general market and economic conditions, including volatility in the digital-asset sector; |
|
|
|
| · | quarterly variations in our operating results; |
|
|
|
| · | investor and public relation activities; |
|
|
|
| · | announcements of technological innovations; |
|
|
|
| · | new product introductions by us or our competitors; |
|
|
|
| · | competitive activities; |
|
|
|
| · | low liquidity; and |
|
|
|
| · | additions or departures of key personnel. |
These broad market and industry factors may have a material adverse effect on the market price of our common stock, regardless of our actual operating performance. These factors could have a material adverse effect on our business, financial condition, and results of operations.
We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to continue to retain all of our future net earnings, if any, to finance the growth and development of our business, and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Risks Related to Our Bitcoin Treasury Strategy and Holdings
Bitcoin price volatility and correlation to our stock could materially impact our financial results and market price.
Bitcoin’s price has experienced, and is expected to continue to experience, extreme volatility. Fluctuations in Bitcoin’s market price directly affect our reported net income or loss and may cause our stock to trade as a proxy for Bitcoin regardless of operational performance. Factors affecting Bitcoin’s price include investor sentiment, large-volume trading, market manipulation on unregulated venues, adverse publicity (including cybersecurity incidents or environmental critiques), regulatory posture and enforcement actions, macroeconomic conditions (such as interest rates and liquidity), technological competition, and breakthroughs that undermine cryptographic security. A material decline in Bitcoin’s price would directly reduce the value of our Bitcoin holdings, increase earnings volatility, and could adversely affect our financial condition and the market price of our common stock. See also “Risk Factors—Because our stock price has fluctuated significantly and may remain volatile, the value of your investment may decline.”
Concentration of our Bitcoin holdings and market-liquidity constraints magnify adverse outcomes.
A significant portion of our assets is concentrated in Bitcoin, limiting diversification and increasing exposure to Bitcoin-specific risks. Periods of limited market liquidity or exchange disruptions may impair our ability to liquidate positions at favorable prices—or at all—especially during stress events. Bitcoin held with custodians is not insured by the FDIC or SIPC, and private insurance may be limited. These factors reduce our financial flexibility in periods of market disruption and can exacerbate downside moves.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as "investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit of and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our Bitcoin strategy, our use of leverage, the manner in which our Bitcoin is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our Bitcoin holdings or other activities we may pursue, and has the power to change our current policies, including our Bitcoin strategy.
Our Bitcoin holdings are and will be less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the Bitcoin market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our Bitcoin at favorable prices or at all. For example, a number of Bitcoin trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (a major U.S.-based crypto exchange) has, to date, not done so. As a result, our Bitcoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, Bitcoin we hold with our custodians and transact with our trade execution partners will not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered Bitcoin or otherwise generate funds using our Bitcoin holdings, including in particular during times of market instability or when the price of Bitcoin has declined significantly. If we are unable to sell our Bitcoin, enter into additional capital raising transactions, including capital raising transactions using Bitcoin as collateral, or otherwise generate funds using Bitcoin holdings, or if we are forced to sell our Bitcoin at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
Counterparty, custody, and market-infrastructure risks, including contagion, could result in loss of assets or access.
We rely on U.S. institutional-grade custodians and contractual protections intended to establish our property interest in custodially-held Bitcoin; however, applicable insolvency and property law for digital assets remains unsettled. If a custodian were to become insolvent or enter receivership, our custodially-held Bitcoin could be treated as part of the custodian’s bankruptcy estate, and we could be deemed an unsecured creditor. Broader industry failures (such as FTX, Celsius, Voyager, and BlockFi, and banking exits affecting crypto-related services) illustrate counterparty and contagion risks that can depress liquidity and prices, restrict venues, and create new operational risks. Even absent insolvency, operational failures, security breaches, or non-performance by trading partners or service providers could delay access to or result in a partial or total loss of holdings, materially adversely affecting our condition and stock price. Insurance for digital-asset activities may be limited or unavailable, increasing residual loss exposure.
| 21 |
| Table of Contents |
Regulatory and accounting developments could increase compliance burdens and earnings volatility or restrict our strategy.
Digital assets exist within a rapidly evolving legal framework in the United States and abroad. Regulatory actions or new rules—covering securities, commodities, money-transmission, anti-money-laundering, tax, or prudential supervision, could impose licensing or registration requirements, restrict custodial or trading services, or otherwise limit our ability to hold or transact in Bitcoin. In 2025 we adopted Accounting Standards Update No. 2023-08, which requires fair-value measurement of certain crypto assets with changes in value recognized in net income (loss). This change could materially increase variability in our reported results and reduce period-to-period comparability.
If Bitcoin were deemed a “security,” our holdings could be treated as investment securities and we could be deemed an “investment company” under the Investment Company Act of 1940, fundamentally altering our operations and potentially forcing asset sales or restructuring to ensure conformity with exceptions provided by, and rules and regulations promulgated under, the Investment Company Act of 1940. We do not believe that we meet these definitions because we are primarily engaged in a non-investment company business.
Our valuation and financial-reporting controls for digital assets and derivatives are complex and involve significant judgment. Fair-value accounting requires estimates of market inputs and pricing data that may not be independently verifiable. If our valuation methods or internal controls prove inaccurate, we could be required to restate our financial statements or disclose a material weakness in internal control over financial reporting.
In addition, our Science Division’s sensor technologies may be classified as medical devices and hence could be subject to extensive and evolving FDA regulation; delays in review, additional data requirements, or changes in guidance could materially affect development timing and cost.
Yield-generation and derivative strategies are risky and relatively untested at public-company scale.
Bitcoin does not pay interest or dividends. We seek to generate yield or manage exposure through treasury strategies which may include lending, margin, or our current derivative trading strategy (such as selling calls or call spreads). These activities may expose us to leverage, counterparty default, and liquidity risk, including potential margin calls or forced liquidations during market volatility, which could materially reduce liquidity or magnify losses. In connection with these strategies, we may pledge digital assets as collateral under agreements that permit counterparties to exercise control and liquidate such assets without prior notice if margin requirements or other obligations are not met. While such arrangements are customary for institutional trading, they reduce our flexibility to deploy pledged assets and could result in asset sales at unfavorable prices during stress events. Our current Bitcoin treasury trading strategy, intended to boost holdings through premiums, has limited precedent across market cycles and may cap upside while increasing downside and earnings volatility under GAAP.
Operational, technology, cybersecurity, and market-access risks could disrupt execution of our strategy.
Secure custody depends on safeguarding private keys; loss, theft, or compromise (including custodian failures or cyberattacks) could permanently impair access to Bitcoin. Technological or cryptographic breakthroughs, including advances in quantum computing, or protocol failures could undermine Bitcoin’s security and value. We also rely on complex integrations, cloud infrastructure, and open-source and third-party software to operate securely and efficiently. Defects, outages, or vulnerabilities in these systems—or in the systems of our vendors—could interrupt service, delay transactions, or expose sensitive data. Cyberattacks, phishing, ransomware, or insider misconduct could compromise customer or company information and result in financial losses, regulatory scrutiny, or reputational harm. Perceived crypto-related risk may also limit access to traditional banking, payments, capital-markets services, or director-and-officer and other insurance, increasing costs and operational friction.
Risks Related to Our Product Development Initiatives
Our tokenized-deposit initiative has not yet launched and our Science Division remains in the development stage which subjects both initiatives to significant uncertainty.
We are continuing to develop our proposed products and services related to retail tokenized U.S.-dollar deposits, and our Science Division remains in the research and development stage. Our success depends on achieving technical validation and, where applicable, regulatory clearance for our proposed products, including our non-invasive glucose monitoring technology. The Science Division operates in a highly competitive and rapidly evolving field of medical-sensing technology, and advances by competitors could render our platform less attractive or obsolete before commercialization
On January 20, 2026, we entered into a Strategic Partnership Agreement with Uphold and Vast Bank, which formalized the parties’ respective roles and responsibilities in connection with the development and operation of the U.S. Bank Coin tokenized-deposit network. While this agreement represents an important milestone, the initiative remains subject to significant risks and uncertainties. Management believes the pilot program for the tokenized deposit initiative demonstrates commercial potential. However, the amount and timing of future revenue is uncertain and is subject to customer adoption. The ultimate plans for the rollout of the future retail launch are dependent on a number of factors, including the outcome of the pilot program, which may not reflect full-scale deployment.
| 22 |
| Table of Contents |
If we fail to demonstrate reliability, accuracy, and scalability, we may be unable to attract partners, obtain approvals, or generate revenue. There can be no assurance as to the timing, scope, or completion of any of these steps and either initiative may be delayed, modified, or discontinued if approvals are not obtained, if negotiations fail, or if our partners elect to pause or terminate participation.
We may be unable to launch retail tokenized U.S. dollar deposits within anticipated timelines, or at all, if required approvals are delayed, modified, or not obtained.
We may be unable to launch any retail tokenized-deposit product within anticipated timelines, or at all, if required regulatory, board, or banking-partner approvals are delayed, modified, or not obtained. Although we entered into a Strategic Partnership Agreement with Uphold and Vast Bank on January 20, 2026, the structure, rollout timeline and commercial launch of the contemplated product remain subject to ongoing technical, legal and regulatory review, the outcome of the pilot program, and required regulatory, board and banking-partner approvals. Any material changes in regulatory expectations, partner readiness, integration requirements, or supervisory feedback could delay, limit, or preclude commercialization.
Our ability to advance our tokenized-deposit initiative will depend entirely on the participation, regulatory standing, and technical readiness of third-party partners.
We will rely on the continuing engagement and performance of our banking and technology partners to design, integrate, and operate the contemplated platform. Changes in a partner’s regulatory posture, risk appetite, operational capacity, or strategic priorities could delay, limit, or halt development. Cybersecurity incidents, commercial disputes, or turnover among key personnel could also increase costs, require re-engineering, or force us to identify and onboard replacements, any of which could materially affect our plans.
In addition, heightened regulatory scrutiny of bank–fintech relationships may impose additional obligations or cause delays. U.S. banking regulators have issued guidance emphasizing enhanced oversight of third-party relationships, including due-diligence, monitoring, and approval expectations. If Vast Bank, or any future banking partner, becomes subject to restrictions, enforcement actions, or supervisory findings, it could be required to suspend or terminate its participation, which would compel us to seek alternative partners or pause the initiative altogether.
The legal and regulatory framework for tokenized deposits is unsettled and may impose obligations that make the initiative impractical.
The regulatory treatment of retail tokenized deposits, particularly with respect to FDIC insurance coverage, Regulation E, state money-transmission laws, bank third-party-risk-management standards, consumer-protection rules, and blockchain-settlement requirements, is evolving and uncertain, and may impose additional licensing, registration, or consumer-protection requirements that differ by jurisdiction. Regulators could determine that aspects of a proposed design are non-compliant or require licenses, charters, or additional controls, or could classify our tokenized deposits as securities, stablecoins, or other regulated instruments. Although we believe tokenized deposits represent traditional bank liabilities recorded on blockchain technology, regulators, including the SEC, OCC, or FDIC, could reach a different conclusion, which could require registration, licensing, or fundamental redesign of the program and materially limit or delay commercialization.
If regulators were to determine that any aspect of our activities constitutes custody or money transmission, we could be required to obtain federal or state money-transmitter licenses, register with FinCEN, or comply with additional custodial-safeguarding and reporting obligations. Satisfying these requirements or the process of seeking licenses in multiple jurisdictions could delay or prevent the commercial launch of our tokenized-deposit initiative, materially increase our ongoing compliance costs, or require structural changes to our business model.
Regulators may require banks to maintain traditional core-banking and general-ledger systems even if tokenized-deposit architecture is used, which could increase costs or limit the design of the product.
Although the contemplated tokenized-deposit design seeks to reduce reliance on traditional core-banking technology, U.S. banking regulators generally expect institutions to maintain comprehensive ledgering, reconciliation, operational-risk, and internal-control systems. There has been guidance, reports, and public statements issued by federal and state financial regulators regarding the legal permissibility of, and supervisory considerations relating to financial institutions engaging in blockchain-related activities. If regulators determine that blockchain-based infrastructure is insufficient to meet supervisory expectations, our banking partners may be required to maintain additional systems, controls, or vendors, which could increase costs, delay development, or limit the design of the product. Regulation of blockchain-related activities remains uncertain and will continue to evolve.
| 23 |
| Table of Contents |
Developing a tokenized-deposit platform exposes us to significant development, operational, security, and technology risks.
Our tokenized-deposit initiative will require substantial additional investments in software design, integration, and testing and require significant management time. Building and integrating mobile-application, blockchain, and banking-system infrastructure is costly, complex, and subject to execution risk. Development projects frequently exceed budget or schedule and may fail to deliver anticipated functionality or security. The product is heavily dependent on blockchain infrastructure and smart-contract functionality to represent deposit claims. Smart-contract defects, reconciliation errors between bank core systems and blockchain records, scalability limitations, or outages at infrastructure providers could result in loss of funds, service interruptions, or liability. Because these systems have not yet been formally implemented, the extent of these risks cannot yet be fully assessed.
Reputational or regulatory issues affecting our partners could harm the tokenized-deposit initiative, even if we are not directly implicated.
Adverse events at Vast Bank, Uphold, or other partners, such as enforcement actions, consent orders, or cybersecurity breaches, could reduce public trust, delay regulatory review, or constrain the design or rollout of any tokenized-deposit product which could damage our brand and adversely impact our results.
International access to tokenized deposits may be limited by sanctions, local-law restrictions, or bank-partner policies, which could materially reduce our addressable market and adversely affect our business, financial condition, results of operations and prospects.
Access to tokenized deposits by non-U.S. persons will depend on the issuing bank’s policies and compliance with applicable U.S. and foreign laws, including OFAC sanctions, anti-money-laundering rules, and local financial-services regulations. Foreign regulators may restrict, prohibit, or impose additional requirements on the offering of tokenized deposits in their jurisdictions. These limitations could delay or restrict international availability of tokenized deposits, materially reducing the addressable market and potentially increasing compliance costs.
Potential conflicts of interest involving our banking partner, if not appropriately addressed, could create regulatory or governance risks.
Our Vice Chair, Linda Jenkinson, also serves as Chair and Chief Executive Officer of Vast Holdings, Inc., the holding company that owns Vast Bank which will be our initial bank partner for the tokenized-deposit initiative. In addition, our Chairman and CEO, Greg Kidd, owns a controlling interest in Vast Holdings, Inc., which may cause regulators to view our relationship with Vast Bank as a related-party transaction subject to heightened scrutiny. All terms of the recent collaboration with Vast Bank and Uphold were negotiated at arm’s length and approved by disinterested members of our Board. Any actual or perceived conflict could invite additional regulatory review or require enhanced governance measures, which could increase costs or delay progress on the tokenized-deposit initiative.
Our success will depend on retaining qualified management and technical personnel.
Our business and future development efforts rely on the expertise of our management team and key technical employees, including software engineers, cybersecurity specialists, and compliance professionals. Competition for such talent in the fintech and digital-asset industries is intense. The loss of key employees could delay development initiatives, disrupt operations, or impair our ability to meet regulatory requirements. Replacing specialized personnel can be difficult and costly, particularly in emerging areas such as blockchain engineering and digital-asset compliance. If we fail to attract or retain qualified talent, our innovation and growth prospects could be materially and adversely affected.
Intellectual property challenges could impair our ability to protect or commercialize our technology.
Our success will depend on maintaining and enforcing patents and proprietary rights related to our sensor platform and other financial technologies. If competitors challenge, design around, or invalidate our patents, or if we fail to protect trade secrets, our competitive position could be materially weakened. Intellectual property disputes could also divert resources and delay development or commercialization.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
| 24 |
| Table of Contents |
ITEM 1C. CYBERSECURITY
Our cybersecurity and risk management program is designed to protect the confidentiality,
We leverage a combination of cybersecurity frameworks to protect our assets. We use the controls from these frameworks as well as guidelines and best practices from the industry to develop our cybersecurity plan. Our cybersecurity plan and its elements are reviewed regularly to ensure they meet the requirements and expectations of our security needs. We have a cybersecurity policy in place, which includes monthly meetings with internal cybersecurity and technology experts to review and maintain the procedures, ensuring they reflect current best practices.
Our cybersecurity program is spearheaded by our cybersecurity department, with support from external advisors and approval from executive management. The stakeholders have been identified and know their roles within the documented cybersecurity process.
Our
Risk is assessed based on multiple factors and is overseen by the Audit Committee. Our IT and cybersecurity teams update and maintain our digital asset inventory to ensure all digital assets are included in our risk management process. The same is also true for all physical records/files as well as physical assets that would be considered intellectual property. Key assets are identified, and risk is assessed based on business impact, availability of information, and attack feasibility. After the risks have been identified, they are reviewed with the Audit Committee and stakeholders to create action plans or exception requests for the acceptance of risk.
We leverage
An incident response plan has been established, which provides detailed information on actions to take in the event of an incident. The plan defines the incident response team, details the incident response lifecycle, and provides templates to make the process easier to document and follow. Timelines, communication methods, and notification information are included in the plan to ensure the process can be followed in high-pressure situations that can occur during incidents.
We have had
Sensitive and confidential data are an essential part of our business. We leverage a cybersecurity policy that identifies the type of information we store and what level of encryption and access role entitlement is required to store and access the data. This document also details the overarching requirements for encryption, such as encryption methods, and secret/key storage and retention. These requirements are periodically reviewed to ensure continued alignment with industry standards and regulatory expectations.
| 25 |
| Table of Contents |
ITEM 2. PROPERTIES.
Properties and Operating Leases
The address of our principal executive offices is located in Reno, Nevada.
We do not own any real property. Our Seattle facility is subject to a lease that is scheduled to expire in 2027. We believe that our existing leased facilities, together with our ability to obtain suitable additional physical office space as needed, are adequate to support our operations for the immediate future.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
| 26 |
| Table of Contents |
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock trades on the NYSE American under the symbol “USBC”.
Number of Holders of our Common Shares
As of December 31, 2025, there were 388,143,679 shares of common stock issued and outstanding, held by approximately 174 stockholders of record. This number does not include approximately 7,300 beneficial owners whose shares are held in the names of various security brokers, dealers and registered clearing agencies.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that could restrict our ability to declare or pay cash dividends on our common stock. Any future determination to declare dividends will be made at the discretion of our Board of Directors subject to limitations under applicable law (including Nevada Revised Statutes 78.288) and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our Board of Directors may deem relevant. See also Item 1A “Risk Factors—Risks Related to Ownership of Our Common Stock—We do not anticipate paying any cash dividends on our capital stock in the foreseeable future.”
Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K regarding securities authorized for issuance under equity compensation plans is incorporated by reference from our definitive proxy statement for its 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
Recent Sales of Unregistered Securities
During the Transition Period, we did not issue any securities in transactions that were not registered under the Securities Act of 1933.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the Transition Period, we did not repurchase any shares of our common stock.
| 27 |
| Table of Contents |
Description of Securities
Our authorized capital stock and the rights of holders of common stock are described in Exhibit 4.2 to this Transition Report on Form 10-K, which description is incorporated herein by reference. As of December 31, 2025, only shares of our common stock were outstanding.
Market Price of and Dividends on Common Equity and Related Stockholder Matters
Our common stock trades on the NYSE American under the symbol “USBC.” On December 31, 2025, the last reported sale price of our common stock on the NYSE American was $0.63 per share.
As of December 31, 2025, there were approximately 174 holders of record of our common stock. This number does not include approximately 7,300 beneficial owners whose shares are held in the names of various security brokers, dealers and registered clearing agencies.
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any future determination regarding dividends will be made at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, contractual restrictions, and other factors the Board deems relevant.
Transfer Agent and Registrar
We have appointed Equiniti Trust Company located at 48 Wall Street, Floor 23, New York, NY 10005, telephone number (800) 937-5449, as the transfer agent for our common stock.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Results of the Transition Period are not directly comparable to results for prior annual periods due to our fiscal year end change from September 30 to December 31. Accordingly, the operating results for the Transition Period should not be considered indicative of historical or future full-year operating performance.
Overview
USBC, Inc. is a publicly traded multi-disciplinary technology company that we believe is an industry leading innovator in digital financial technologies. Under the leadership of Chairman and Chief Executive Officer, Greg Kidd, USBC develops transformative financial services, including digital assets and banking solutions as well as non-invasive health monitoring research.
USBC, Inc. continues to focus on the development of its financial‑technology platform and related digital‑asset initiatives, including its pre‑launch tokenized‑deposit program and Bitcoin‑based treasury activities. Our operating results for the Transition Period primarily reflect ongoing investment in these initiatives, the integration of newly established banking and technology partnerships, and certain legacy research and development activities.
USBC has implemented a Bitcoin treasury strategy to bolster pre-launch development and research across its various divisions. A key focus of USBC is the further development of the USBC tokenized deposit offering, a U.S.-dollar denominated tokenized deposit that will operate on blockchain technology, be embedded with digital identity, and may offer high-yield rewards. With a focus on identity, inclusion, innovation, and risk management, USBC is dedicated to creating long-term shareholder value in a rapidly evolving financial landscape.
| 28 |
| Table of Contents |
A detailed description of our business, operating strategy and product development initiatives is included in Item 1 — Business, and the discussion below should be read together with that section as well as with the consolidated financial statements and accompanying notes. This MD&A focuses on the specific factors that affected our financial condition, results of operations, liquidity and capital resources during the Transition Period, including the impact of our digital‑asset treasury strategy, pre‑launch development expenditures, public‑company compliance requirements, and our recently implemented capital structure.
Recent Developments
On January 20, 2026, we entered into a Strategic Partnership Agreement with Uphold and Vast Bank, which formalized the parties’ respective roles and responsibilities related to the development and operation of the USBC tokenized deposit program, formalizing the terms of the parties’ preliminary partnership previously announced on October 23, 2025. Under the agreement, Vast Bank will serve as the issuing bank for customer deposit accounts, Uphold will provide platform integration and customer access, and we will operate the tokenized deposit network. The tokenized deposit program has not yet been commercially launched, and we continue to advance technical, operational, and regulatory readiness. The timing, scope, and ultimate commercial impact of the initiative remain subject to uncertainty and will depend on a number of factors, including regulatory considerations, partner alignment, and customer adoption.
In February 2026, we completed our evaluation of the legacy non-invasive sensor business and we have elected to proceed with a divestiture transaction. Negotiations with the potential buyer are nearing completion; however, there is no assurance that any transaction will be consummated. The financial impact of the potential divestiture transaction is not expected to be material to our financial statements.
On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit product to market. Phase 1 is being conducted with a limited group of internal users who have elected to participate in an expanded employee pilot program ahead of the public launch of the branded platform. Phase 1 is not a consumer offering and is not available to the public; it is intended solely to begin technical readiness testing. During this phase, testing activities are conducted exclusively with company-provided funds for internal evaluation purposes. The results of Phase 1 will inform our evaluation of the timing and scope of subsequent phases of the delivery strategy and when the tokenized deposit product offering may become available to retail customers. Any future retail launch will remain subject to the outcome of the pilot program and receipt of any required regulatory, board, and bank partner approvals.
On March 18, 2026, we entered into a secured borrowing facility with Payward Interactive, Inc. (the “Facility”), providing for aggregate borrowings of up to $25 million during the term of the Facility which matures on March 18, 2027. The Facility is collateralized by a portion of our Bitcoin treasury holdings and bears interest at a rate of 8.5% per annum. The Facility includes customary margin maintenance provisions that may require us to pledge additional Bitcoin collateral or partially repay outstanding borrowings in the event of a decline in the market value of Bitcoin. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.
On March 18, 2026, our Board of Directors approved the repricing of all outstanding stock options, including (i) options originally granted in August 2025 and subsequently repriced in October 2025 to $1.10 per share, (ii) options granted in October 2025 with an exercise price of $1.10 per share, and (iii) options granted in October 2025 with an exercise price of $0.87 per share. The repricing reduced the exercise price of all such awards to $0.37 per share. No changes were made to the vesting schedules or contractual terms of these awards.
On March 18, 2026, our Board of Directors approved the issuance of stock option grants for 10,470,000 shares at an exercise price of $0.37 per share. The stock option grants expire in ten years and vest over four years.
Subsequent to December 31, 2025, 13,137,500 unvested stock options were forfeited pursuant to the terms of the 2021 Plan. Accordingly, such forfeited awards became available for future grant under the 2021 Plan.
Results of Operations
The following table sets forth key components of our results of operations for the three months ended December 31, 2025 (the “Transition Period”) and the comparable prior-year period.
(dollars in thousands)
|
| Three Months Ended, |
| |||||||||
|
| December 31, 2025 (Transition Period) |
|
| December 31, 2024 (Unaudited) |
|
| $ Variance |
| |||
Operating expenses- |
|
|
|
|
|
|
|
|
| |||
Research and development expenses |
| $ | 254 |
|
| $ | 802 |
|
| $ | (548 | ) |
Selling, general and administrative expenses |
|
| 16,874 |
|
|
| 1,965 |
|
|
| 14,909 |
|
Total operating expenses |
|
| 17,128 |
|
|
| 2,767 |
|
|
| 14,361 |
|
Operating loss |
|
| (17,128 | ) |
|
| (2,767 | ) |
|
| (14,361 | ) |
Other (Expense) Income, Net: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 38 |
|
|
| 14 |
|
|
| 24 |
|
Interest expense |
|
| (11 | ) |
|
| (1,184 | ) |
|
| 1,173 |
|
Loss on debt settlements, net |
|
| - |
|
|
| (728 | ) |
|
| 728 |
|
Change in fair value of digital assets |
|
| (27,193 | ) |
|
| - |
|
|
| (27,193 | ) |
Other derivative income, net |
|
| 1,101 |
|
|
| - |
|
|
| 1,101 |
|
Total other (expense), net |
|
| (26,065 | ) |
|
| (1,898 | ) |
|
| (24,167 | ) |
Loss before income taxes |
|
| (43,193 | ) |
|
| (4,665 | ) |
|
| (38,528 | ) |
Income tax benefit |
|
| (15,737 | ) |
|
| - |
|
|
| (15,737 | ) |
Net loss |
| $ | (27,456 | ) |
| $ | (4,665 | ) |
| $ | (22,791 | ) |
Our operating results for the Transition Period, reflect the Company’s strategic transition towards its digital-asset treasury and financial-technology development initiatives following the Goldeneye capital investment completed on August 6, 2025.
| 29 |
| Table of Contents |
Revenues. We did not generate any operating revenue during the Transition Period or the comparable prior-year period. During the Transition Period, we continued to focus on financial-technology development activities, and we expect future operating revenues to be generated primarily from financial-technology network services, including the planned USBC tokenized deposit program.
Research and Development. R&D expense was $254,000 for the Transition Period, compared to $802,000 for the comparable prior-year period. The change of $548,000 was primarily driven by the Company’s strategic transition away from its legacy non-invasive diagnostics and sensor technology initiatives and toward the development of its tokenized deposit platform and related digital financial infrastructure. During the Transition Period, the Company reduced personnel and external consulting resources dedicated to its Science Division as it wound down certain research activities, resulting in lower expenditures related to the Bio-RFID™ technology.
Selling, General and Administrative. SG&A expense was $16.9 million for the Transition Period, compared to $2.0 million for the comparable prior-year period, representing an increase of $14.9 million. This increase was primarily attributable to non-cash stock-based compensation expense of $11.9 million, professional fees and other public-company and advisory costs associated with our strategic transition of $3.1 million, salary and benefits of $551,000 and, partially offset by reductions in legacy science-division expenses.
Other (Expense) Income, Net. Other expenses, net was $26.1 million for the Transition Period, compared to $1.9 million for the comparable prior-year period, representing an increase of $24.2 million. This increase was primarily driven by changes in the fair value of digital assets of $27.2 million, partially offset by derivative income, net of $1.1 million, generated from option premiums collected under our Bitcoin treasury trading strategy, reduced reliance on external financing of $1.2 million, and loss on debt settlements, net of $728,000 in the prior period.
Income tax benefit. Income tax benefit was $15.7 million for the Transition Period; there was no income tax benefit for the comparable prior-year period. This increase of $15.7 million is primarily related to the tax effect of the change in the fair value of digital assets during the Transition Period, driven by elevated volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, as well as the netting of deferred tax assets against the deferred tax liability.
Net Loss. We reported a net loss of $27.5 million for the Transition Period, compared with a net loss of $4.7 million for the comparable prior-year period. The increase of $22.8 million primarily reflects the change in fair value of digital assets of $27.2 million related to elevated volatility in digital asset markets, non-cash stock-based compensation expense of $11.9 million, professional fees and other public-company and advisory costs associated with our strategic transition of $3.1 million, partially offset by deferred income tax benefits of $15.7 million associated with the change in fair value of digital assets.
Although we expect our operating losses to continue in the near term, we believe our potential revenue opportunities and strong capital structure provide us with flexibility to pursue our digital-asset treasury and financial-technology initiatives.
Known Trends and Uncertainties
We anticipate that our future operating results will be heavily influenced by the following factors:
| · | Financing dependence: We expect to require additional liquidity sources in the near term to fund the shortfall in net operating revenue as we continue investing in the further development of the tokenized deposit program, which sources may include equity or debt financings, potential sales of Bitcoin, Bitcoin-collateralized financing arrangements, and related-party or other investor financing. |
|
|
|
| · | Digital-asset market volatility: Changes in the market price of Bitcoin could cause material non-cash gains or losses in our operating expenses each period. |
|
|
|
| · | Integration of banking partners: Our future results will depend on successful technical and regulatory integration with partner banks and technology providers supporting our tokenized-deposit platform. Delays or changes in partner strategy could affect timing of launches and revenue realization. |
|
|
|
| · | Regulatory developments: Evolving federal and state treatment of digital assets, stablecoins, and related financial-technology services could adversely affect our business model and accounting policies. |
|
|
|
| · | Potential divestiture: As part of the ongoing review of our business operations, management has concluded that the legacy non-invasive sensor business no longer aligns with our long-term strategy, capital allocation priorities and revenue generation opportunities. A definitive decision has been made to pursue a divestiture transaction although, there can be no assurance that any transaction will ultimately occur. |
| 30 |
| Table of Contents |
Liquidity and Capital Resources
As of December 31, 2025, we had cash and cash equivalents of $4.1 million and working capital of $3.1 million. We have historically incurred recurring losses and had an accumulated deficit of $190.5 million as of December 31, 2025. We recorded a net loss of $27.5 million for the Transition Period and a net loss of $4.7 million for the comparable prior-year period.
Our liquidity during the Transition Period primarily reflects the net proceeds of the equity issuance from the private placement completed on August 6, 2025 in which we issued approximately 357.8 million shares of common stock at $0.335 per share, for an aggregate purchase price consisting of 1,000 Bitcoin and $15 million in cash. As such, a substantial portion of our assets consist of Bitcoin. We view our Bitcoin holdings as long-term strategic reserves rather than trading assets although we may convert Bitcoin to cash periodically to fund operations. During the Transition Period, liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings are sufficient to fund operations for at least 12 months after issuance of these consolidated financial statements. Management expects that the Company may supplement its cash resources with additional liquidity sources as it executes its business plan. These sources may include sales of Bitcoin, potential Bitcoin-collateralized financing arrangements, related-party or other investor financing, and other debt or equity financings.
On March 18, 2026, we entered into a secured borrowing facility with Payward Interactive, Inc., providing for aggregate borrowings of up to $25 million during the term of the Facility, which matures on March 18, 2027. The Facility is collateralized by a portion of our Bitcoin treasury holdings and bears interest at a rate of 8.5% per annum. The Facility includes customary margin maintenance provisions that may require us to pledge additional Bitcoin collateral or partially repay outstanding borrowings in the event of a decline in the market value of Bitcoin. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc., under the terms of the Affiliate Services Agreement we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.
Non-GAAP Financial Measure
Adjusted EBITDA is a non-GAAP financial measure used by our management to better help evaluate our financial performance and provide more useful information to investors and others in understanding our operating results. This measure removes the effect of certain non-cash items, non-recurring items, unrealized gains or losses or other similar non-cash items that are included in our net loss that otherwise do not contribute directly to management's evaluation of its operating results.
Adjusted EBITDA is defined as net loss excluding interest expense primarily incurred in connection with the conversion or extinguishment of our convertible debt obligations, stock-based compensation expense, non-cash changes in the fair value of digital assets, income taxes, and any other items that management has determined are not reflective of our operating performance because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. Adjusted EBITDA should be viewed independently of our reported GAAP net loss as this metric is meant to be considered in addition to, not as a substitute for or in isolation from, our net loss prepared in accordance with GAAP.
The following table reconciles Adjusted EBITDA to net loss, the most closely comparable GAAP financial measure, for the Transition Period and the comparable prior-year period:
|
| Three Months Ended, |
|
| Years Ended, |
| ||||||||||
|
| December 31, 2025 |
|
| December 31, 2024 |
|
| September 30, |
|
| September 30, |
| ||||
|
| (Transition Period) |
|
| (Unaudited) |
|
| 2025 |
|
| 2024 |
| ||||
Net Loss |
| $ | (27,456,000 | ) |
| $ | (4,666,000 | ) |
| $ | (22,123,000 | ) |
| $ | (16,582,000 | ) |
Plus: Change in fair value of digital assets |
|
| 27,193,000 |
|
|
| - |
|
|
| 823,000 |
|
|
| - |
|
Plus: Stock-based compensation |
|
| 11,868,000 |
|
|
| 551,000 |
|
|
| 8,774,000 |
|
|
| 3,318,000 |
|
Subtract: Income tax benefit |
|
| (15,737,000 | ) |
|
| - |
|
|
| (173,000 | ) |
|
| - |
|
Plus: Interest expense |
|
| 11,000 |
|
|
| 1,184,000 |
|
|
| 2,834,000 |
|
|
| 1,514,000 |
|
Plus: Loss on debt settlements, net |
|
| - |
|
|
| 728,000 |
|
|
| 942,000 |
|
|
| - |
|
Adjusted EBITDA |
| $ | (4,121,000 | ) |
| $ | (2,203,000 | ) |
| $ | (8,923,000 | ) |
| $ | (11,750,000 | ) |
Financing Transactions Related to the August 2025 Private Placement
There were no financing transactions completed during the Transition Period. The Company’s liquidity position during the period reflects the impact of the private placement completed on August 6, 2025, pursuant to which we issued approximately 357.8 million shares of common stock to Goldeneye 1995 LLC at a purchase price of $0.335 per share, for aggregate consideration consisting of 1,000 Bitcoin and $15 million in cash. The cash proceeds were used primarily to repay or redeem outstanding preferred equity and convertible debt, pay transaction-related costs, and fund working capital. In connection with the transaction, holders of our Series C and Series D Convertible Preferred Stock elected redemption for approximately 8.3 million shares of common stock, certain holders of convertible debt elected conversion for $75,000 in cash and approximately 3.3 million shares of common stock, we issued an aggregate of 7.8 million shares of common stock to financial advisors, the sole holder of Series H Convertible Preferred Stock elected redemption for $654,276 in cash and 2,000,000 shares of common stock, and we repaid in full the Lind Global Fund II LP promissory note for approximately $2.35 million, including prepayment penalties. As a result of these transactions the Company eliminated all outstanding preferred equity and convertible debt and simplified its capital structure. The remaining proceeds continue to support the Company’s ongoing operations and strategic initiatives.
| 31 |
| Table of Contents |
Operating Activities
Net cash used in operating activities during the Transition Period was $4,630,194, which was primarily attributable to the net loss for the Transition Period of $27,455,848, partially offset by non-cash expenses of $22,273,348. Non-cash expenses during the Transition Period were primarily comprised of stock-based compensation expense of $11,868,452, unrealized losses related to the change in the fair value of digital assets of $27,192,987, partially offset by net gains on derivatives of $1,101,011, and the deferred income tax benefit of $15,736,607.
The net operating cash outflows primarily reflect operating expenses incurred with the Company’s strategic transition following the August 2025 capital investment, including the introduction of digital-asset treasury activities, partially offset by reduced legacy research and development expenditures.
Financing Activities
Net cash used in financing activities during the Transition Period was $99,497, which was primarily attributable to repayments of notes payable during the Transition Period.
The financing cash flows primarily reflect the timing of debt repayments, the absence of capital-raising activity during the Transition Period, and reduced reliance on external financing following the August 2025 capital investment.
Capital Requirements and Future Liquidity
We expect to continue incurring operating losses as we fund the further development of our tokenized deposit program. Our ability to sustain operations and execute our strategy depends on our capacity to raise additional capital through equity or debt financings, monetize Bitcoin holdings, including through potential sales, or obtain other sources of liquidity, including potential Bitcoin-collateralized financing arrangements, or related-party or other investor financing.
Future capital needs will depend on, among other things:
| · | potential licensing or technology-development expenditures, |
|
|
|
| · | regulatory and compliance costs associated with financial technology activities, and |
|
|
|
| · | any acquisitions or strategic investments. |
Management has completed its evaluation of whether a divestiture of the legacy non‑invasive sensor business may enhance strategic focus and longer‑term value. See Item 1 — Business — Science Division for additional background regarding the planned divestiture of the legacy sensor operations.
Based on our current projections, management believes we have adequate resources to meet our obligations for the next twelve months. As we continue to execute our business strategy, management may supplement cash on hand with additional liquidity sources, which could include digital asset sales, financing arrangements, or other debt or equity financings. Continuation of operations beyond that period will depend on market conditions for additional capital and the financial performance of our tokenized deposit program.
| 32 |
| Table of Contents |
Contractual Obligations and Commitments
Our contractual cash obligations as of December 31, 2025 are summarized in the table below.
|
|
|
| Less Than |
|
|
| |||||
Contractual Cash Obligations |
| Total |
|
| 1 Year |
|
| 1-3 Years |
| |||
Operating leases |
| $ | 257,648 |
|
| $ | 101,412 |
|
| $ | 156,236 |
|
|
| $ | 257,648 |
|
| $ | 101,412 |
|
| $ | 156,236 |
|
As of December 31, 2025, digital assets totaling approximately $25,447,882 were pledged as collateral under agreements that permit the secured party to exercise control and liquidate such assets under certain conditions, including events of default or margin deficiencies related to our derivative trading strategy. As of December 31, 2025, we had experienced no such events of default or margin deficiencies.
We had no other off-balance-sheet arrangements as of December 31, 2025.
Critical Accounting Policies Involving Significant Estimates
The following discussion relates to critical accounting policies for our company which involve significant estimates. The preparation of financial statements in conformity with United States generally accepted accounting principles, or GAAP, requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation.
Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:
Valuation of Digital Assets
We hold Bitcoin as the principal component of our consolidated balance sheet. Digital assets such as Bitcoin are initially recorded at cost and subsequently measured at fair value, with changes in fair value recognized in the line item, change in fair value of digital assets.
Because active quoted prices exist only on certain trading platforms, we use observable Level 1 inputs when available and Level 2 inputs (such as composite or volume-weighted prices) when market liquidity or trading restrictions make Level 1 data less representative. The determination of fair value requires judgment, particularly during periods of volatility or when exchanges experience constrained trading volumes.
The large majority of our Bitcoin holdings are custodied by a third-party institutional custodian under multi-signature cold-storage arrangements designed to mitigate security risk.
Digital assets - receivable, net
When we pledge collateral to a third-party entity, we first evaluate whether to derecognize such digital assets based on an evaluation of relevant control and asset derecognition considerations. If we conclude derecognition is appropriate, we derecognize the digital asset collateral that we no longer control and recognize a right to receive back in the future such pledged digital assets.
In accordance with ASU 2023-08, digital asset receivable is recorded at the fair value of the underlying digital assets. Throughout the period that the digital asset receivable is outstanding, the receivable will be measured at fair value of the underlying loaned digital asset with changes recorded in changes in fair value of digital assets in current period earnings.
We consider and account for the credit risk of the counterparty using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses if deemed material. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. As of December 31, 2025, the Company did not record an allowance for credit losses as management’s current estimate of expected credit losses was immaterial.
| 33 |
| Table of Contents |
Accounting for Derivatives & Trading Activities
As part of our Bitcoin yield generation strategy trading activities, we enter into option derivative contracts on our Bitcoin holdings. We enter into short-term arrangements that result in obtaining the right to receive or obligation to deliver a fixed amount of Bitcoin crypto assets in the future. Derivatives are instruments that derive their value from changes in an underlying reference outside of our control. Derivatives may be traded on an exchange (exchange-traded) or they may be privately negotiated contracts, which are usually referred to as over the counter (“OTC”) derivatives. We account for these derivatives in accordance with ASC 815, Derivatives and Hedging.
Stock-Based Compensation
Estimating the fair value of stock‑based awards requires significant judgment, including assumptions regarding expected volatility, risk‑free interest rates and expected term. Changes in these inputs may materially affect compensation expense. See Note 10 — Equity Incentive Plans for additional information regarding our stock‑based compensation accounting. We account for stock-based awards under ASC 718, Compensation – Stock Compensation. The fair value of stock options and warrants is estimated using the Black-Scholes-Merton option-pricing model, which requires assumptions regarding expected volatility, risk-free interest rates, expected term, and dividend yield. For restricted stock awards, fair value is based on the closing market price of our common stock on the grant date.
Because volatility and expected-term assumptions involve significant judgment, changes in these inputs could materially affect compensation expense recognized under the Amended and Restated 2021 Equity Incentive Plan (see “Executive Compensation” in Part III of this report, which is incorporated by reference from our definitive proxy statement for the 2026 Annual Meeting of Stockholders).
Convertible Instruments and Derivatives
Evaluating embedded conversion and redemption features requires judgment, including volatility estimates and discount‑rate assumptions that may result in non‑cash gains or losses. See Notes 3 and 5 for additional information on our accounting for convertible instruments and embedded derivatives prior to the Transition Period. When we issued convertible debt or equity instruments that may have contained embedded conversion or redemption features, we evaluated whether those features required bifurcation and separate accounting as derivatives under ASC 815. Determining the fair value of embedded derivatives involves the use of valuation models incorporating market-based assumptions, such as the volatility of our stock price, expected term, and discount rates. Future volatility or interest-rate changes could result in material non-cash gains or losses each period.
Potential Divestiture of Business
If a sale of the non-invasive sensor business becomes probable, the business may be evaluated for classification as held for sale and potentially as a discontinued operation under ASC 205-20, Presenting Discontinued Operations. As of the filing date, management has not concluded that classification as held for sale is appropriate because negotiations have not reached a stage where a sale is probable.
Going Concern
In accordance with ASC 205-40, management evaluates our ability to continue as a going concern for a period of one year after the date the financial statements are issued. Our assessment considers current cash on hand, expected cash flows from operations, and our ability to raise additional capital. In March 2026, the Company analyzed its cash requirements and operations at least through March 2027 and determined that, based upon the Company’s current available cash, digital asset holdings, and expected operations, the Company has no substantial doubt about its ability to continue as a going concern. While the capital investment significantly improved our liquidity, our business model remains dependent on external financing and the value of digital assets, both of which are subject to market volatility and investor sentiment.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable as a smaller reporting company.
| 34 |
| Table of Contents |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our audited consolidated financial statements for the Transition Period are submitted as a separate section of this report on Form 10-K, beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
a) Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the Transition Period. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the Transition Period, December 31, 2025, our disclosure controls and procedures are effective at the reasonable assurance level.
b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of our company are being made only in accordance with authorization of management and directors of our company; and (iii) 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.
Management assessed the effectiveness of our internal control over financial reporting as of the end of the Transition Period. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 Internal Control-Integrated Framework. Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of the end of the Transition Period. In making this assessment, management considered the effects of the August 2025 capital investment, which resulted in significant changes to our ownership, leadership team, treasury strategy, and operating structure. As a result, our control environment and financial reporting processes continue to be enhanced and documented to reflect our evolving business model, including controls related to our Bitcoin treasury strategy.
Pursuant to Regulation S-K Item 308(b), and because we qualify as a smaller reporting company, this Transition Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
| 35 |
| Table of Contents |
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. A control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their cost.
c) Changes in Internal Control over Financial Reporting
During the Transition Period, other than the continued integration and documentation of controls related to the August 2025 capital investment and our Bitcoin treasury activities, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We continue to evaluate and enhance control activities related to digital-asset custody, valuation, treasury operations, and related financial reporting processes to ensure our internal control over financial reporting remains effective as our operations evolve.
ITEM 9B. OTHER INFORMATION.
Master Loan Agreement
On March 18, 2026, the Company entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the "Lender") pursuant to which the Company may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights.
Borrowings under the MLA are solely secured by Bitcoin collateral held in and subject to collateral maintenance requirements based on specified margin ratios. The Bitcoin collateralizing the borrowing facility is held for the benefit of the Lender by an affiliate of the Lender, Payward Financial, Inc. (the "Custodian") and subject to an account control agreement by and among the Lender, the Company and the Custodian.
On March 20, 2026, the Company entered into a term sheet for a fixed-term loan of $5.0 million bearing a fee of 8.5% per annum under the MLA maturing on March 18, 2027. The obligations under the MLA are prepayable at the Company's option after an initial term of three months. The MLA provides the Company with an additional source of liquidity to support its operations and strategic initiatives, primarily the further development and future launch of the tokenized deposit program.
The foregoing summary of the MLA does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which is filed as Exhibit 10.34 of this Transition Report on Form 10-K and incorporated herein by reference.
Affiliate Services Agreement
On March 18, 2026, the Company entered into an Affiliate Services Agreement (the “Services Agreement”) with Vast Holdings, Inc. ("Vast"), an affiliated entity, pursuant to which the Company will reimburse Vast for the cost it incurs to perform certain strategic operational, and administrative services in support of the further development of the tokenized deposit offering. Total reimbursements under the Services Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast with costs reimbursed by the Company as incurred and subject to detailed invoicing, documentation, and approval requirements. The Services Agreement expires on December 31, 2026. The Services Agreement and the transactions contemplated thereunder constitute related party transactions. Accordingly, the Services Agreement was reviewed and approved by the independent Audit Committee of the Company's Board of Directors (the "Board") and the Board prior to its execution.
The foregoing summary of the Services Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which is filed as Exhibit 10.35 of this Transition Report on Form 10-K and incorporated herein by reference.
Trading Plans
During the Transition Period ended December 31, 2025, no director or officer of the Company adopted, modified, or terminated any ‘Rule 10b5-1 trading arrangement’ or ‘non-Rule 10b5-1 trading arrangement,’ in each case as defined in Item 408(a) of Regulation S-K. During the same period, the Company did not adopt or terminate any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
| 36 |
| Table of Contents |
PART III
The information required by Part III (Items 10–14) of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025, except as otherwise stated below.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information required by Item 10 of Part III of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by Item 11 of Part III of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Information required by Item 12 of Part III of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required by Item 13 of Part III of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information required by Item 14 of Part III of Form 10-K is incorporated by reference from our definitive proxy statement for our 2026 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after December 31, 2025.
| 37 |
| Table of Contents |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) List of Documents Filed as a Part of This Report:
The Company’s financial statements for the Transition Period, as indicated by the Index to Consolidated Financial Statements set forth below, begin on page F-1. Financial statement schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
| Page |
|
Report of BPM LLP (PCAOB ID |
| F-1 |
|
Consolidated Balance Sheets as of December 31, 2025, and September 30, 2025 |
| F-2 |
|
Consolidated Statements of Operations for the Transition Period from October 1, 2025 through December 31, 2025, Three Months Ended December 31, 2024, Year Ended September 30, 2025, and Year Ended September 30, 2024 |
| F-3 |
|
Consolidated Statements of Stockholders’ Equity (Deficit) for the Transition Period from October 1, 2025 through December 31, 2025, Year Ended September 30, 2025, and Year Ended September 30, 2024 |
| F-4 |
|
Consolidated Statements of Cash Flows for the Transition Period from October 1, 2025 through December 31, 2025, Three Months Ended December 31, 2024, Year Ended September 30, 2025, and for the Year Ended September 30, 2024 |
| F-5 |
|
Notes to Consolidated Financial Statements |
| F-6 |
|
(2) Index to Financial Statement Schedules:
All schedules have been omitted because the required information is included in the financial statements or the notes thereto, or because it is not required.
(3) Index to Exhibits:
See exhibits listed under Part (b) below.
| 38 |
| Table of Contents |
(b) Exhibits:
Exhibit No. |
| Description |
3.1 |
| Restated Articles of Incorporation, dated August 11, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 14, 2023). |
3.2 |
| Certificate of Amendment to Articles of Incorporation, dated July 31, 2025 (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 1, 2025). |
3.3 |
| Certificate of Amendment of Articles of Incorporation, dated August 6, 2025 (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). |
3.4 |
| Amended and Restated Series C Certificate of Designation, dated August 11, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed August 14, 2023). |
3.5 |
| Third Amended and Restated Series D Certificate of Designation, dated August 11, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed August 14, 2023). |
3.6 |
| Series D Certificate of Correction of Know Labs, Inc., dated August 11, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed August 14, 2023). |
3.7 |
| Series C Certificate of Correction of Know Labs, Inc., dated August 11, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed August 14, 2023). |
3.8 |
| Certificate of Withdrawal of Series F Preferred Stock, dated August 10, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K filed August 14, 2023). |
3.9 |
| Certificate of Designation of Series F Preferred Stock (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 3, 2018). |
3.10 |
| Certificate of Amendment to Articles of Incorporation, dated October 29, 2024 (incorporated by reference to the Company’s Current Report on Form 8-K filed, filed October 30, 2024). |
3.11 |
| Certificate, Amendment or Withdrawal of Designation, relating to the Series C Preferred Stock, filed with the Secretary of State of Nevada on December 11, 2025 (incorporated by reference to the Company’s Form 8-K, filed December 17, 2025). |
3.12 |
| Certificate, Amendment or Withdrawal of Designation, relating to the Series D Preferred Stock, filed with the Secretary of State of Nevada on December 11, 2025 (incorporated by reference to the Company’s Form 8-K, filed December 17, 2025). |
3.13 |
| Certificate, Amendment or Withdrawal of Designation, relating to the Series H Preferred Stock, filed with the Secretary of State of Nevada on December 11, 2025 (incorporated by reference to the Company’s Form 8-K, filed December 17, 2025). |
3.14 |
| Second Amended and Restated Bylaws, dated October 15, 2021 (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 7, 2021). |
3.15 |
| Amendment to the Second Amended and Restated Bylaws, dated December 15, 2025 (incorporated by reference to the Company’s Annual Report on Form 10-K filed on December 19, 2025). |
4.1† |
| Amended and Restated USBC, Inc. 2021 Equity Incentive Plan (incorporated by reference to the Company’s Form 8-K, filed October 3, 2025). |
4.2 |
| Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to the Company’s Annual Report on Form 10-K, filed December 19, 2025). |
10.1 |
| Note and Account Payable Conversion Agreement and related notes and warrants dated January 31, 2018 by and between Visualant, Incorporated and J3E2A2Z LP (incorporated by reference to the Company’s Current Report on Form 8-K, filed March 21, 2018). |
10.2† |
| Amended Employment Agreement dated April 10, 2018 by and between Visualant, Incorporated and Ronald P. Erickson (incorporated by reference to the Company’s Annual Report on Form 10-K, filed December 21, 2018). |
10.3 |
| Common Stock Purchase Warrant issued by Know Labs, Inc. to Boustead Securities, LLC on September 20, 2022 (incorporated by reference to the Company’s Current Report on Form 8-K, filed September 21, 2022). |
10.4 |
| Extension of Warrant Agreement dated December 7, 2022 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 9, 2022). |
10.5 |
| Extension of Warrant Agreement dated January 19, 2023 by and between Know Labs, Inc. and Ronald P. Erickson (incorporated by reference to the Company’s Current Report on Form 8-K, filed January 23, 2023). |
10.6 |
| Extension of Warrant Agreement dated January 19, 2023 by and between Know Labs, Inc. and J3E2A2Z LP (incorporated by reference to the Company’s Current Report on Form 8-K, filed January 23, 2023). |
10.7 |
| Common Stock Purchase Warrant issued by Know Labs, Inc. to Boustead Securities, LLC on September 29, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed September 29, 2023). |
10.8 |
| Common Stock Purchase Warrant issued by Know Labs, Inc. to The Benchmark Company, LLC on September 29, 2023 (incorporated by reference to the Company’s Current Report on Form 8-K, filed September 29, 2023). |
10.9 |
| Form of Warrant to Purchase Common Stock issued by Know Labs, Inc. to Lind Global II, LP on February 27, 2024 (incorporated by reference to the Company’s Current Report on Form 8-K, filed February 29, 2024). |
10.10 |
| Form of Warrant (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 13, 2024). |
10.11 |
| Unit Purchase Option, dated August 9, 2024, between the Company and Sutter Securities Group, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 13, 2024). |
10.12 |
| Form of Warrant (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 16, 2024). |
10.13 |
| Warrant Agency Agreement, August 15, 2024, between the Company and Equinity Trust Company, LLC (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 16, 2024). |
10.14 |
| Form of Warrant (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 17, 2024) |
10.15 |
| Warrant Agency Agreement, December 16, 2024, between the Company and Equinity Trust Company, LLC (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 17, 2024) |
10.16 |
| Extension of Warrant Agreement dated December 17, 2024 by and between Know Labs, Inc. and Clayton A. Struve (incorporated by reference to the Company’s Current Report on Form 8-K, filed on December 18, 2024). |
10.17 |
| Capital on Demand Sales Agreement, dated December 31, 2024, by and between Know Labs, Inc. and JonesTrading Institutional Services LLC (incorporated by reference to the Company's Current Report on Form 8-K, filed January 2, 2025). |
10.18 |
| Promissory Note, dated February 28, 2025, issued by the Company to 1800 Diagonal Lending LLC (incorporated by reference to the Company’s Annual Report on Form 10-K, filed on December 19, 2025). |
39 |
| Table of Contents |
10.19 |
| Promissory Note Conversion Agreement between Know Labs, Inc. and J3E2A2Z LP, dated June 2, 2025 (incorporated by reference to the Company’s Current Report on Form 8-K, filed June 4, 2025). | |
10.20 |
| Securities Purchase Agreement, dated June 5, 2025, by and between the Company and Goldeneye 1995, LLC (incorporated by reference to the Company’s Current Report on Form 8-K, filed June 6, 2025). | |
10.21 |
| Form of Support Agreement, by and between the Company, Goldeneye 1995, LLC and certain stockholders (incorporated by reference to Company’s Current Report on Form 8-K, filed June 6, 2025). | |
10.22 |
| Registration Rights Agreement, dated September 19, 2025, by and among the Company, Goldeneye 1995, LLC, Cohen & Company Securities, LLC and Fifth Era LLC (incorporated by reference to the Company’s Registration Statement on Form S-1, filed on September 19, 2025). | |
10.23† |
| Amendment No. 1 to the Amended Employment Agreement of Ronald Erickson (incorporated by reference to Company’s Current Report on Form 8-K, filed June 6, 2025). | |
10.24 |
| Asset Management Agreement, dated August 5, 2025, by and between the Company and Hyrcanian Asset Management, LLC (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.25† |
| Employment Agreement, dated August 6, 2025, by and between the Company and Robert Gregory Kidd (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.26† |
| Employment Agreement, dated August 6, 2025, by and between the Company and Kitty Payne (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.27† |
| Form of ISO Award Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.28† |
| Form of NQSO Award Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.29† |
| Form of Restricted Stock Award Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 7, 2025). | |
10.30† |
| Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 15, 2025). | |
10.31 |
| Amendment No. 1 to Registration Rights Agreement, dated November 18, 2025, by and among the Company, Goldeneye 1995, LLC, Cohen & Company Securities, LLC and Fifth Era LLC (incorporated by reference to the Company’s Annual Report on Form 10-K, filed December 19, 2025). | |
10.32 |
| Amended and Restated Digital Asset Management Agreement, dated December 12, 2025, by and between the Company and Hyrcanian Asset Management, LLC (incorporated by reference to the Company’s Annual Report on Form 10-K, filed December 19, 2025). | |
10.33*† |
| Separation and General Release Agreement, dated January 6, 2026, by and between the Company and Kirk Chapman. | |
10.34*# |
| Master Loan Agreement, dated March 18, 2026, between USBC, Inc. and Payward Interactive, Inc. | |
10.35* |
| Affiliate Services Agreement, dated March 18, 2026, between USBC, Inc. and Vast Holdings, Inc. | |
19 |
| Insider Trading Policy of USBC, Inc. dated September 24, 2025 (incorporated by reference to the Company’s Annual Report on Form 10-K, filed December 19, 2025). | |
21.1* |
| Subsidiary of the Registrant. | |
23.1* |
| Consent of BPM LLP, Independent Registered Public Accounting Firm. | |
31.1* |
| Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* |
| Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** |
| Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2** |
| Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
97.1 |
| USBC, Inc. Compensation Recovery Policy dated September 24, 2025 (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 1, 2023). | |
101.INS* |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document). | |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* |
| Cover page from the Company’s Report on Form 10-K for the Transition Period formatted in Inline XBRL (included in Exhibit 101). | |
* | Filed herewith |
** | Furnished herewith |
† | Executive compensation plan or arrangement |
# | Portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed |
| 40 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
USBC, Inc. (formerly Know Labs, Inc.)
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of USBC, Inc. (formerly Know Labs, Inc.) and its subsidiary (the “Company”) as of December 31, 2025 and September 30, 2025, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the three-month period ended December 31, 2025 and each of the two years in the period ended September 30, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and September 30, 2025, and the results of its operations and its cash flows for the three-month period ended December 31, 2025 and each of the two years in the period ended September 30, 2025 in conformity with the accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.
Evaluation of Audit Evidence Pertaining to the Existence and Control of Digital Assets
As described in Note 3 to the consolidated financial statements, the Company records digital assets at cost and subsequently measures at fair value, with changes in fair value recognized in change in fair value of digital assets. As of December 31, 2025, the fair value of the Company’s digital assets was $86,637,784. The Company’s digital asset holdings are custodied by a third-party institutional custodian under multi-signature cold-storage arrangements designed to mitigate security risk.
We identified the evaluation of audit evidence pertaining to the existence of the digital assets and whether the Company controls the digital assets as a critical audit matter. Especially subjective auditor judgment was involved in determining the nature and extent of evidence required to assess the existence of the digital assets and whether the Company controls the digital assets, as control over the digital assets is provided through private keys stored using third-party custodial services at multiple locations that are geographically dispersed. In addition, information technology (IT) professionals with specialized skills and knowledge in blockchain technology were needed to assist in the evaluation of the sufficiency of certain audit procedures.
Addressing the critical audit matter involved performing procedures and evaluating audit evidence over the digital assets in connection with forming our overall opinion on the consolidated financial statements. We evaluated the design and implementation of certain internal controls over the digital assets process, including a control over the comparison of the Company’s records of digital assets held to the custodial records. We involved IT professionals with specialized skills and knowledge in blockchain technology, who assisted in evaluating certain internal controls over the digital assets process related specifically to the generation of the private keys and the storing of these keys. We obtained confirmation of the Company’s digital assets in custody as of December 31, 2025 and compared the total digital assets confirmed to the Company’s record of digital asset holdings. We performed a test of control and custody, including proof of ownership and tested reconciliation of digital assets to the public blockchain ledger. We applied auditor judgment in determining the nature and extent of audit evidence required, especially related to assessing the existence of the digital assets and whether the Company controls the digital assets.
/s/
We have served as the Company’s auditor since October 2019.
March 24, 2026
| F-1 |
| Table of Contents |
USBC, INC.
(FORMERLY KNOW LABS, INC.)
CONSOLIDATED BALANCE SHEETS
|
| December 31, 2025 |
|
| September 30, 2025 |
| ||
ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Prepaid expenses |
|
|
|
|
|
| ||
Derivative assets |
|
|
|
|
|
| ||
Digital assets - receivable, net |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
Digital assets |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
Operating lease right-of-use asset |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable - trade |
| $ |
|
| $ |
| ||
Accounts payable - related parties |
|
|
|
|
|
| ||
Accrued expenses |
|
|
|
|
|
| ||
Current portion of convertible notes payable, net |
|
|
|
|
|
| ||
Current portion of operating lease right-of-use liability |
|
|
|
|
|
| ||
Derivative liabilities |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Operating lease liability, net of current portion |
|
|
|
|
|
| ||
Deferred tax liability |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Common stock - $ |
|
|
|
|
|
| ||
Additional paid in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders' equity |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of Contents |
USBC, INC.
(FORMERLY KNOW LABS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| Three Months Ended, |
|
| Years Ended, |
| ||||||||||
|
| December 31, 2025 (Transition Period) |
|
| December 31, 2024 (Unaudited) |
|
| September 30, 2025 |
|
| September 30, 2024 |
| ||||
OPERATING EXPENSES- |
|
|
|
|
|
|
|
|
|
|
|
| ||||
RESEARCH AND DEVELOPMENT EXPENSES |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
OPERATING LOSS |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE), NET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss on debt settlements, net |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| ||
Change in fair value of digital assets |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Other derivative income, net |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total other expense, net |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividends on Series C, D and H Preferred Stock |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding- basic and diluted (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
(1) Information pertaining to the number of shares outstanding gives retroactive effect to a 1 for 40 reverse stock split that became effective on February 19, 2025.
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
USBC, INC.
(FORMERLY KNOW LABS, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
|
| Series C Convertible |
|
| Series D Convertible |
|
| Series H Convertible |
|
|
|
|
|
|
|
|
|
| Total |
| ||||||||||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Accumulated |
|
| Stockholders' Equity |
| |||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| $ |
|
| Shares (1) |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| (Deficit) |
| |||||||||||
Balance as of October 1, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||||
Stock compensation expense |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of common stock for stock option exercises |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||||||
Issuance of common stock for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance of common stock for exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common stock dividends on Series C and D Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||||||
Deemed dividends on Series C and D Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Issuance of common stock for common stock offering |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance of shares and warrants in connection with debt offering |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Expenses for extension of notes and warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of common stock for debt payment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Balance as of September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | ||||||||
Stock compensation expense |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of common stock for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Deemed dividends on Series C, D and H Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Issuance of common stock for Goldeneye 1995 LLC investment, net of tax |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance of common stock for transaction fee |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance of common stock for common stock offering |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Deemed dividend due to repricing of Series C, D and H Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||||
Issuance of common stock for At The Market common stock offering |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issuance of Series H Convertible Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Conversion of Series C and D Convertible Preferred Stock |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Conversion of Series H Convertible Preferred Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) | ||||||
Issuance of common stock for debt payment |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Extension of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Impact of reverse stock split due to rounding |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Balance as of September 30, 2025 |
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
Stock compensation expense |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||||
Balance as of December 31, 2025 |
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
| - |
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||||
(1) Information pertaining to the number of shares outstanding gives retroactive effect to a 1 for 40 reverse stock split that became effective on February 19, 2025.
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
USBC, INC.
(FORMERLY KNOW LABS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Three Months Ended, |
|
| Years Ended, |
| ||||||||||
|
| December 31, 2025 (Transition Period) |
|
| December 31, 2024 (Unaudited) |
|
| September 30, 2025 |
|
| September 30, 2024 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock based compensation - stock option grants |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Issuance of common stock for services |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of operating lease right-of-use asset |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss on debt extinguishment |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense for default of convertible notes |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense for repricing of warrants |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense for extension of notes and warrants |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in fair value of digital assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other derivative income, net |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Deferred income taxes |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Operating lease right-of-use liability |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Derivative liabilities |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Digital assets |
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||
Derivative assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other long-term assets |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
Accounts payable - trade, related parties and accrued expenses |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
NET CASH USED IN OPERATING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of research and development equipment |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
NET CASH USED IN INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
| ( | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock - Goldeneye 1995 LLC investment |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from issuance of common stock offering, net |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from issuance of common stock for warrant exercise |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from At The Market common stock offering |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Redemption of Series H Preferred Stock |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Repayment of convertible notes payable |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Proceeds from convertible notes payable |
|
|
|
|
|
|
|
|
|
|
|
| ||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Taxes paid |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividends on Series C, D and H Preferred Stock |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Common stock issued for debt payment |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Common stock issued for contribution of digital assets |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Deferred tax liability recognized from contribution of digital assets |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Common stock issued for conversion of Series H convertible preferred stock |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Issuance costs from common stock offering |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Warrants issued for debt offering |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Conversion of notes payable into Series H convertible preferred stock |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Bitcoin received from treasury trading strategy |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
USBC, INC.
(FORMERLY KNOW LABS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Overview
USBC, Inc. (NYSE American: USBC) is a publicly-traded, diversified technology company with a strategic focus on developing innovative financial-services infrastructure to enable digital-asset banking capabilities and tokenized-deposit solutions for banks. Our principal executive offices are located in Reno, Nevada. We pursue long‐term value creation for our stockholders through advancement of our token offering, the “USBC deposit token,” and alignment of our research and business operations under a unified digital-finance and technology platform.
USBC, Inc. (the “Company”) was incorporated under the laws of the State of Nevada in 1998. As of December 31, 2025, the Company has authorized
Corporate History and Development
Until August 2025, the Company operated under the name Know Labs, Inc. and was primarily focused on non-invasive diagnostic and sensor technologies. In August 2025, following the closing of a controlling-interest acquisition by Goldeneye 1995 LLC (an affiliate of our Chairman and Chief Executive Officer, Greg Kidd), the Company changed its corporate name to USBC, Inc. and its ticker symbol to “USBC” on the NYSE American effective August 15, 2025. Our corporate evolution reflects a strategic pivot to a financial-services and digital-assets platform while continuing to maintain technology capabilities from our legacy sensor business.
Securities Purchase Agreement
On June 5, 2025, the Company entered into a Securities Purchase Agreement with Goldeneye 1995 LLC, a Nevada limited liability company, whereby the Company issued
2. LIQUIDITY AND GOING CONCERN
As of December 31, 2025, the Company had cash and cash equivalents of $
For the three months ended December 31, 2025 (transition period), the Company incurred a net loss of approximately $
In accordance with Accounting Standards Codification (“ASC”) 205-40, management evaluated the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued. This assessment considered the Company’s cash on hand, expected cash flows from operations, and access to liquidity, including its Bitcoin treasury reserve. Based on this evaluation, management concluded that there is no substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.
| F-6 |
| Table of Contents |
In addition to its existing liquidity resources, the Company continually evaluates potential financing alternatives to support its operating plan and long-term growth objectives.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation – These consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements include a three-month transition period ended December 31, 2025 resulting from the Company’s change in fiscal year-end. Accordingly, the results for the transition period are not necessarily comparable to the Company’s historical twelve-month fiscal periods. Unless otherwise indicated, references to “fiscal year 2025” refer to the fiscal year ended September 30, 2025, and references to the “Transition Period” refer to the three-month period ended December 31, 2025.
Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Particle. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates – Management makes estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements including, but not limited to, those estimates related to digital assets, digital assets receivable, derivatives, leases, debt stock-based compensation, and income taxes. Management believes that estimates utilized in preparing the financial statements are reasonable. Estimates, by their nature, are based on judgment and available information. As such, actual results could differ materially from these estimates included in these financial statements.
Cash and Cash Equivalents – The Company classifies highly liquid temporary investments with an original maturity of three months or less as cash equivalents.
Digital Assets – The Company began holding digital assets in the ordinary course of business as a treasury reserve asset upon receiving 1,000 Bitcoin as part of the closing of the Goldeneye capital investment on August 6, 2025. The Company holds Bitcoin principally as a long-term strategic treasury reserve and as a potential source of balance sheet flexibility and liquidity. From time to time, the Company may monetize a portion of its Bitcoin holdings, including through sales or collateralized financing arrangements, to fund operations, working capital needs, strategic initiatives or other corporate purposes.
As of December 31, 2025, the Company solely held Bitcoin in its corporate treasury. The Company views its Bitcoin as a productive asset, a source of liquidity, yield, and long-term capital appreciation. By activating substantially all of its Bitcoin holdings through structured trading arrangements, the Company seeks to generate incremental income that helps fund operations, expand infrastructure, and reduce the Company’s cost of capital. See description of the Company’s accounting policy for its digital asset derivatives below.
The Company generates yield through its derivative activities on its Bitcoin holdings and actively pursues risk-adjusted return opportunities that support its operating expenses. The Company reports its Bitcoin digital assets as part of the line item, non-current assets on the Consolidated Balance Sheets due to the Company’s intent to retain and hold Bitcoin under its Bitcoin investment approach. The Company engages in trading these assets via Bitcoin derivatives. Trades are executed over the counter via third party trading platforms. As of December 31, 2025, the Company had pledged 290 Bitcoin with a fair value of approximately $
The 1,000 Bitcoin received on August 6, 2025 as part of the Goldeneye capital investment was recorded at an average price of $115,567 per Bitcoin. During the Transition Period and the fiscal year ended September 30, 2025, the Company obtained 12.757 Bitcoin, and 2.617, respectively, through its trading strategy, which has been recognized as other derivative income, net, in the Consolidated Statements of Operations. While the Company may periodically make open market purchases of Bitcoin or opt to sell a portion of the Bitcoin it obtains through its treasury trading strategy from time to time, the Company did not purchase or sell any Bitcoin or any other digital assets during the Transition Period or in fiscal 2025.
| F-7 |
| Table of Contents |
A summary of the Bitcoin outstanding as of December 31, 2025 were as follows:
|
| Digital assets |
|
| Digital assets - receivable, net |
| ||
Bitcoin at fair value as of September 30, 2025 |
| $ |
|
| $ |
| ||
Bitcoin generated through trading |
|
|
|
|
|
| ||
Fees |
|
| ( | ) |
|
|
| |
Collateral |
|
| ( | ) |
|
|
| |
Unrealized gain/(loss) |
|
| ( | ) |
|
|
| |
Bitcoin at fair value as of December 31, 2025 |
| $ |
|
| $ |
| ||
The Company stores its digital assets with a third-party qualified custodian that employs multi-signature, cold-storage and other industry standard security controls. Access to wallets and private keys is restricted to authorized personnel. The Company evaluates its custodial arrangements periodically and monitors counterparty, operational and cybersecurity risks associated with digital asset custody.
From time to time, blockchain protocols may initiate hard forks or third parties may distribute airdrops that result in the creation or receipt of new digital assets. The Company recognizes such assets only when it obtains control which generally occurs when (i) the asset is accessible within the Company’s custodial wallet environment, (ii) the Company can transfer, sell, or exchange the asset, and (iii) no legal or operational restrictions prevent disposition. When control is obtained, the new asset is recorded at its fair value on the date of recognition in accordance with ASC 820. The corresponding gain is recognized in other income (expense), net, in the Consolidated Statements of Operations. If the Company is unable to access or control the new asset (e.g., due to custodian limitations or unsupported network upgrades), no asset is recognized until such time as control is achieved. The Company does not actively pursue, solicit, or take technical actions to claim hard forks or airdrops and it does not engage in strategies designed to influence protocol events.
Subsequent to the Company’s adoption of ASU 2023-08 on July 1, 2025, the Company accounts for its digital assets, which are comprised solely of Bitcoin, at fair value as of the end of each reporting period. The fair value for its Bitcoin holdings is determined by which eligible market is the Company’s principal market under ASC 820, Fair Value Measurement. The Company determines its principal market annually to determine if (i) there have been recent changes to each market volume and level of activity in the trailing twelve months, (ii) if any markets have developed that the Company has access to, or (iii) if recent changes to each market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Company’s determination of its principal market. Bitcoin is considered a level 1 instrument.
The Company does not use derivatives, futures, options, or other hedging instruments to mitigate its exposure to Bitcoin price volatility. Accordingly, the carrying value of Bitcoin may experience significant fluctuations. Changes in the fair value of digital assets from period to period are recognized within change in the fair value of digital assets in the Consolidated Statements of Operations. The Company uses the specific identification method for its digital asset portfolio.
Digital Assets - Receivable, net – The Company pledges Bitcoin as collateral for its derivative trading activities. The digital assets receivables are initially measured upon transfer at fair value and subsequently remeasured at fair value each reporting period. The changes in fair value are recognized on the Consolidated Statements of Operations, in accordance with ASC 2023-08.
The digital assets receivable balance is evaluated for expected credit losses, in accordance with ASC 326 - Financial Instruments - Credit Losses (“ASC 326”). The Company estimates the allowance for credit losses on digital assets receivables under the current expected credit loss (“CECL”) model using a probability of default (“PD”) and loss given default (“LGD”) methodology. In order to apply the PD LGD approach, management considers the remaining expected time horizon of the receivables and reasonable and supportable forecasts of future conditions. If deemed material, an allowance for credit losses is recorded as a valuation account, directly offsetting the digital assets receivables on the Consolidated Balance Sheets. As of December 31, 2025, the Company had digital asset receivables outstanding of $
| F-8 |
| Table of Contents |
Property and Equipment – Equipment consists of machinery, and furniture and fixtures, which are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives or lease period of the relevant asset, generally three years. The Company reviews its long-lived assets for impairment annually or when changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets under certain circumstances are reported at the lower of carrying amount or fair value. Assets to be disposed of and assets not expected to provide any future service potential to the Company are recorded at the lower of carrying amount or fair value (less the projected cost associated with selling the asset).
Revenue Recognition – The Company will determine revenue recognition from contracts with customers through the following steps:
· | identification of the contract, or contracts, with the customer; |
|
|
· | identification of the performance obligations in the contract; |
|
|
· | determination of the transaction price; |
|
|
· | allocation of the transaction price to the performance obligations in the contract; and |
|
|
· | recognition of the revenue when, or as, the Company satisfies a performance obligation. |
Revenue will be recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Revenue generated from financial instruments such as derivatives and investments are not subject to Financial Accounting Standards Board (“FASB”) ASC 606 - Revenue from Contracts with Customers (“ASC 606”), including revenue generated from financial instruments, such as derivatives and digital assets. The Company recognizes realized gains and losses, net from the trading of derivative contracts which are reported in other derivative income, net, in the Consolidated Statements of Operations. The Company carries certain assets and liabilities at fair value with changes in fair value reported in Change in fair value of digital assets and other derivative income, net, in the Consolidated Statements of Operations. Refer to Notes 4 and 5 for more information regarding fair value measurement.
Research and Development Expenses – Research and development expenses consist of the cost of officers, employees, consultants and contractors who design, engineer and develop new products and processes as well as materials, supplies and facilities used in producing prototypes.
The Company’s current research and development efforts are primarily focused on improving its radio frequency spectroscopy technology; extending its capacity and developing new and unique applications for this technology. The Company incurred research and development expenses of approximately $
Advertising – Advertising production and communication costs are expensed as incurred and included in selling, general and administrative expenses. Advertising and marketing expenses were $
Fair Value Measurements and Financial Instruments – Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement and Disclosures, 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. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:
Level 1 – Quoted prices in active markets for identical assets and liabilities;
Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
| F-9 |
| Table of Contents |
The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts payable, accrued expenses and accrued expenses - related parties approximate the fair value of the respective assets and liabilities as of December 31, 2025 and September 30, 2025 are based upon the short-term nature of the assets and liabilities. Digital assets and derivatives assets and liabilities are held at fair value in the Consolidated Balance Sheets and measured on a recurring basis.
Derivative Financial Instruments – Pursuant to ASC 815, Derivatives and Hedging, the Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company then determines if an embedded derivative must be bifurcated and separately accounted for. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Consolidated Statements of Operations. For stock-based derivative financial instruments, the Company uses a Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the Consolidated Balance Sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the consolidated balance sheet date.
Digital Asset Derivatives – As part of its Bitcoin yield generation strategy trading activities, the Company has entered into option derivative contracts on its Bitcoin holdings that resulted in obtaining the right to receive or obligation to deliver a fixed amount of Bitcoin crypto assets in the future. Derivatives are instruments that derive their value from changes in an underlying reference outside the control of the Company. Derivatives may be traded on an exchange (exchange-traded) or they may be privately negotiated contracts, which are usually referred to as over the counter (“OTC”) derivatives. The Manager settled the options in physical delivery. The Company accounted for these derivatives in accordance with ASC 815, Derivatives and Hedging.
These derivative contracts derive their value from underlying asset prices, other inputs, or a combination of these factors. Derivative contracts are recognized as either assets or liabilities in the Consolidated Balance Sheets at fair value, with changes in fair value recognized in other operating expense, net, or other (income) expense, net in the Consolidated Statements of Operations, depending on the nature of the derivative. Cash flows from derivative contracts have been recognized as investing activities and adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities in the Consolidated Statements of Cash Flows, depending on the nature of the derivative.
Stock Based Compensation – The Company maintains a share-based compensation plan under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of Company common stock at the fair market value per share at the time of grant. Stock-based compensation is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718. The Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. For an award that has a graded vesting schedule, compensation expense is recognized on a straight-line basis of the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The amount of compensation cost recognized at any date must at least equal the portion of the grant-date value of the award that is vested at that date.
Convertible Securities – Based upon ASC 815-15, the Company utilized a sequencing approach which outlined the application of ASC 815-40 to convertible securities. The Company evaluated its contracts based upon the earliest issuance date. In the event partial reclassification of contracts subject to ASC 815-40-25 was necessary, due to the Company’s inability to demonstrate it had sufficient shares authorized and unissued, shares were allocated on the basis of issuance date, with the earliest issuance date receiving first allocation of shares. If a reclassification of an instrument were required, it would have resulted in the instrument issued latest being reclassified first. No convertible securities were outstanding as of September 30, 2025 or December 31, 2025.
Net Loss per Share – Under the provisions of ASC 260, Earnings Per Share, basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Deemed dividends to preferred shareholders increase the net loss available to common shareholders and impact the net loss per share calculation.
| F-10 |
| Table of Contents |
As of December 31, 2025, and September 30, 2025, the Company had
Comprehensive loss – Comprehensive loss is defined as the change in equity of a business during a period from non-owner sources.
Dividend Policy – The Company has never paid any cash dividends and intends, for the foreseeable future, to retain any future earnings for the development of its business. The Company’s future dividend policy will be determined by the board of directors on the basis of various factors, including results of operations, financial condition, capital requirements and investment opportunities.
Income Taxes - The Company uses an asset and liability approach for accounting for deferred income taxes, which requires recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements but have not been reflected in its taxable income. Estimates and judgments are required in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred income tax assets, which arise from temporary differences and carryforwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
The Company regularly assesses the likelihood that its deferred income tax assets will be realized from recoverable income taxes or recovered from future taxable income. To the extent that the Company believes any amounts are not “more likely than not” to be realized, the Company records a valuation allowance to reduce the deferred income tax assets. In the event the Company determines that all or part of the net deferred tax assets are not realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. Similarly, if the Company subsequently determines that deferred income tax assets, previously determined to be unrealizable, are now realizable, the respective valuation allowance would be reversed, resulting in an adjustment to earnings in the period such determination is made.
ASC 740, Income Taxes, requires that the tax benefit of NOLs, temporary differences, and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because the Company had previously concluded, based on all available evidence, it was not “more-likely-than-not” that sufficient tax earnings will be generated to utilize the NOL carryforwards, a corresponding valuation allowance equal to
The Company regularly reviews its tax positions. For a tax benefit to be recognized, the related tax position must be “more likely than not” to be sustained upon examination. Any amount recognized is generally the largest benefit that is “more likely than not” to be realized upon settlement. The Company’s policy is to recognize interest and penalties related to income tax matters as an income tax expense. The Company did not have any interest or penalties associated with unrecognized tax benefits for any periods presented in the accompanying financial statements.
On July 4, 2025, new U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBBA”), which made permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA made changes to certain U.S. corporate tax provisions, with certain provisions effective in 2025 and others to be implemented in 2026 and subsequent years. The Company is currently assessing the potential implications of the legislation on its operations and on the Company's consolidated financial statements and will continue to monitor future administrative guidance and regulations that clarify the legislative text of the OBBBA and the bill’s potential effect on the Company’s income taxes.
| F-11 |
| Table of Contents |
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced disclosures surrounding income taxes, particularly related to rate reconciliation and income taxes paid information. The standard is effective for the Company for annual periods beginning October 1, 2025 on a prospective basis with retrospective application permitted for all prior periods presented. The adoption will only impact annual disclosures. The Company adopted ASU No. 2023-09 for the Transition Period, with no material impact to the consolidated financial statements.
4. FAIR VALUE MEASUREMENTS
The Company’s assets and liabilities recorded at fair value measured on a recurring basis consist of investments in digital assets and derivative assets and liabilities.
In determining the fair value of its digital assets, the Company is able to cite quoted prices as determined by the Company’s principal market. As such, the Company’s digital assets and digital asset - receivables, net which consist entirely of Bitcoin were determined to be Level 1 assets.
In estimating the fair value of its derivative assets and derivative liabilities, the Company uses a market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities found on derivative exchanges. The Company determined that the derivative assets and liabilities are Level 2. Determining which category an asset or liability falls within the hierarchy requires significant judgment.
The Company has a money market account which is considered a Level 1 asset. The balance as of December 31, 2025 and September 30, 2025 was approximately $
There were no transfers in or out of Level 3 or between levels during the Transition Period or during the fiscal year ended September 30, 2025.
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, the Company enters into transactions involving derivative instruments for trading purposes. Risks arise from changes in the market values of the underlying digital assets as well as the possible inability of counterparties to meet the terms of their contracts. The credit risk associated with these contracts is typically limited to the cost of replacing all contracts on which the Company has recorded an unrealized gain.
The Company enters into OTC derivatives, which are negotiated and settled bi-laterally with the derivative counterparty. These trades have maturities of 12 months or less and are not designated as hedging instruments under the authoritative accounting guidance.
The underlying transactions and the corresponding contracts are marked to market at the end of each quarter and the fair value impacts are reflected within the consolidated financial statement line item, other derivative income, net in the Consolidated Statements of Operations. As of December 31, 2025, the Company had outstanding digital asset option contracts with gross notional values of approximately $
As of December 31, 2025, the Company had outstanding digital asset option contracts recognized as current assets within derivative assets with a fair value of approximately $
| F-12 |
| Table of Contents |
6. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2025 and September 30, 2025 was comprised of the following:
|
| Estimated Useful Lives |
| December 31, 2025 |
|
| September 30, 2025 |
| ||
Machinery and equipment |
|
| $ |
|
| $ |
| |||
Furniture and fixtures |
|
|
|
|
|
|
| |||
Less: accumulated depreciation |
|
|
|
| ( | ) |
|
| ( | ) |
|
|
|
| $ |
|
| $ |
| ||
Depreciation expense totaled $
7. LEASES
The Company evaluates lease agreements to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases. Right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The incremental borrowing taking into consideration the Company’s credit quality and borrowing rate for similar assets is used in determining the present value of future payments. Because the rate implicit in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the lease payments.
Lease expense is recorded within general and administrative expenses on the Company’s Consolidated Statements of Operations. The Company elected the package of transitional practical expedients, under which the Company (i) did not reassess whether any expired or existing contracts are or contain leases, (ii) the Company did not reassess the lease classification for any expired or existing leases and (iii) the Company did not reassess initial direct costs for any existing leases. Additionally, the Company elected the short-term lease recognition exemption, and does not recognize right-of-use assets or lease liabilities for leases with an initial term of twelve months or less. The Company also elected the practical expedient to not separate lease and non-lease components for all asset classes. In the event the Company is reasonably certain to exercise the option to extend a lease, the Company will include the extended terms.
The Company’s operating leases primarily relate to office and development facilities and generally have initial terms ranging from two to three years, with renewal options. ROU assets and Operating lease liabilities are recognized based on the present value of lease payments over the expected lease term. As of December 31, 2025 and September 30, 2025, ROU assets were $
The weighted average remaining lease term for the Company’s operating lease was approximately
| F-13 |
| Table of Contents |
The minimum future lease payments as of December 31, 2025 and September 30, 2025 were as follows:
|
| Year Ended Dec 31, |
|
| Year Ended Sep 30, |
| ||
2026 |
| $ |
|
| $ |
| ||
2027 |
|
|
|
|
|
| ||
Total remaining payments |
|
|
|
|
|
| ||
Less imputed interest |
|
| ( | ) |
|
| ( | ) |
Total lease liability |
| $ |
|
| $ |
| ||
8. CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE
As of December 31, 2025, the Company had no convertible notes payable or promissory notes outstanding. All legacy convertible notes and promissory notes were repaid, converted, or otherwise extinguished prior to December 31, 2025. Accordingly, there was no notes payable activity during the Transition Period from October 1, 2025 through December 31, 2025.
Convertible notes payable as of December 31, 2025 and September 30, 2025 are summarized below:
|
| December 31, 2025 |
|
| September 30, 2025 |
| ||
Convertible note - 1800 Diagonal Lending LLC |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Short term - third party |
| $ |
|
| $ |
| ||
|
| $ |
|
| $ |
| ||
The closing of the Goldeneye private placement on August 6, 2025 was contingent upon a number of closing conditions, including, among other things, the conversion by the holder of the shares of the Company’s Series H Convertible Preferred Stock into shares of common stock, and the termination of the Lind Senior Convertible Note and the Struve Loan Documents.
● Convertible Promissory Notes with Clayton A. Struve
On August 6, 2025, the Company repaid in full and extinguished legacy obligations of $
● Convertible Redeemable Promissory Notes with J3E2A2Z LP – Related Party
On June 2, 2025, the Company entered into a Promissory Note Conversion Agreement with J3E2A2Z LP, an entity affiliated with and controlled by Ronald P. Erickson, the Company’s former Chief Executive Officer and Chairman, and the holder of two convertible redeemable promissory notes, pursuant to which J3E2A2Z LP agreed to exchange $
J3E2A2Z LP received one share of Series H Convertible Preferred Stock for every $70.00 in principal converted under the Conversion Agreement. The Series H Convertible Preferred Stock was convertible into Company common stock at an initial conversion price of $
| F-14 |
| Table of Contents |
On August 6, 2025, J3E2A2Z LP elected redemption of all 16,916 shares of the Company’s Series H Convertible Preferred Stock, including interest, for a combination of $
● Senior Convertible Note with Lind Global Fund II, LP
During the fiscal year ended September 30, 2025, the Company issued
Promissory Note with 1800 Diagonal Lending LLC
On February 28, 2025, the Company entered into a Promissory Note with 1800 Diagonal Lending LLC, pursuant to which the Company issued a promissory note with principal face amount of $
Original Issuance Discount Notes
During the fiscal year ended September 30, 2025, the Company entered into Original Issuance Discount Notes (the “Notes”) with three investors for approximately $
Promissory Note with Goldeneye 1995 LLC
On July 28, 2025, Goldeneye 1995 LLC and the Company entered into a Promissory Note in connection with the private placement pursuant to which Goldeneye loaned the Company an aggregate amount of $
During the Transition Period and the year ended September 30, 2025, the Company recognized total interest expense of approximately $
9. EQUITY
Authorized Capital Stock
The following description summarizes important terms of the classes of our authorized capital stock as of December 31, 2025. This summary does not purport to be complete and is qualified in its entirety by the provisions of our articles of incorporation as amended, and our second amended and restated bylaws.
The Company’s authorized capital stock consists of
| F-15 |
| Table of Contents |
Outstanding Shares of Capital Stock. The Company’s common stock is the only security of the Company registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. All outstanding shares of the Company’s capital stock are fully paid and nonassessable. As of December 31, 2025, there were
Reverse Stock Split
The Board of Directors of the Company approved a reverse stock split of the Company’s authorized and issued and outstanding shares of common stock, par value $0.001 per share at a ratio of 1-for-40 (the “Reverse Stock Split”). The Company filed a Certificate of Change (the “Certificate of Change”) pursuant to Nevada Revised Statutes Section 78.209 with the Secretary of State of the State of Nevada on February 10, 2025. The reverse stock split was processed and announced by FINRA on February 18, 2025 and became effective on February 19, 2025.
As a result of the reverse stock split on the effective date, the number of shares of the Company’s authorized common stock was reduced from 300,000,000 shares to
The reverse stock split had no effect on the par value per share of the Company’s common stock or authorized or outstanding shares of preferred stock, and did not modify any voting rights or other terms of the common stock or preferred stock.
Common Stock Activity
Each share of common stock entitles its holder to one vote on each matter submitted to the stockholders for a vote, and no cumulative voting for directors is permitted. Stockholders do not have any preemptive rights to acquire additional securities issued by the Company.
Transition Period
During the Transition Period, the Company did not issue any shares of common stock, and there were no equity financings, conversions, or share issuances. As of December 31, 2025 and September 30, 2025, the Company had
Fiscal Year Ended September 30, 2025
On December 12, 2024, the Company entered into subscription agreements with certain investors for a registered direct offering of
On December 31, 2024, the Company entered into a Capital on Demand Sales Agreement (the “Sales Agreement”) with JonesTrading Institutional Services LLC, as sales agent, pursuant to which the Company may, from time to time, offer and sell shares of its common stock, through or to JonesTrading as its sales agent or manager.
The offer and sale of the Shares will be made pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-276246) filed with the U.S. Securities and Exchange Commission on December 22, 2023 and declared effective by the SEC on January 11, 2024, as supplemented by a prospectus supplement dated December 31, 2024 and filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended. Pursuant to the Prospectus Supplement, the Company may offer and sell up to a maximum of $
| F-16 |
| Table of Contents |
During the year ended September 30, 2025, the Company issued
During the year ended September 30, 2025, the Company issued
Securities Purchase Agreement with Goldeneye 1995 LLC and Related Transactions
On June 5, 2025, the Company entered into a Securities Purchase Agreement with Goldeneye 1995 LLC, a Nevada limited liability company, whereby the Company issued an amount of shares of the Company’s common stock to Goldeneye 1995 LLC in a private placement equal to the aggregate purchase price divided by the per share purchase price of $
In connection with the private placement, the Company issued
In connection with the private placement, the Company issued
During fiscal year 2025, the Company completed the conversion and redemption of all outstanding shares of its Series C, Series D, and Series H Convertible Preferred Stock in connection with strategic financing and recapitalization transactions. As of December 31, 2025, there were no shares of preferred stock issued or outstanding.
Warrants to Purchase Common Stock
Transition Period
During the Transition Period, warrants to purchase
As of December 31, 2025, the Company had warrants outstanding to purchase an aggregate of
| F-17 |
| Table of Contents |
A summary of the warrants outstanding as of December 31, 2025 were as follows:
|
|
|
|
| Weighted |
| ||
|
|
|
|
| Average |
| ||
|
|
|
|
| Exercise |
| ||
|
| Shares |
|
| Price |
| ||
Outstanding as of October 1, 2024 |
|
|
|
| $ |
| ||
Issued |
|
|
|
|
|
| ||
Exercised |
|
| - |
|
|
| - |
|
Forfeited |
|
| ( | ) |
|
| ( | ) |
Expired |
|
|
|
|
|
| ||
Outstanding as of September 30, 2025 |
|
|
|
| $ |
| ||
Issued |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
|
| |
Forfeited |
|
| ( | ) |
|
| ( | ) |
Expired |
|
|
|
|
|
| ||
Outstanding as of December 31, 2025 |
|
|
|
| $ |
| ||
Year Ended September 30, 2025
On June 2, 2025, the exercise price of the
On December 12, 2024, the Company closed a registered direct offering and issued
The Company issued a warrant to purchase common stock of
Warrants to purchase
10. EQUITY INCENTIVE PLANS
On August 12, 2021, the Company established the 2021 Equity Incentive Plan, which was adopted by the Company’s shareholders on October 15, 2021. The 2021 Plan was approved for
| F-18 |
| Table of Contents |
Amended and Restated 2021 Equity Incentive Plan
On August 25, 2025, our Board of Directors approved, and on September 29, 2025, our stockholders adopted the Amended and Restated USBC, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), effective September 29, 2025, which increased the plan share reserve by
Under the 2021 Plan, all
The 2021 Plan contains an evergreen provision pursuant to which, on January 1 of each calendar year during the term specified in the 2021 Plan, the number of shares available for issuance under the 2021 Plan automatically increases by a number of shares equal to the lesser of
Stock Option Activity
Transition Period
During the Transition Period, the Company issued stock option grants for
During the Transition Period,
Fiscal Year Ended September 30, 2025
During the fiscal year ended September 30, 2025, the Company issued stock option grants for
A summary of the stock options outstanding as of December 31, 2025 were as follows:
|
|
|
| Weighted |
| |||
|
|
|
| Averaged |
| |||
|
| Options |
|
| Exercise Price |
| ||
Outstanding as of September 30, 2024 |
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
| ||
Forfeitures |
|
| ( | ) |
|
| ( | ) |
Outstanding as of September 30, 2025 |
|
|
|
|
|
| ||
Granted |
|
|
|
|
|
| ||
Forfeitures |
|
| ( | ) |
|
| ( | ) |
Outstanding as of December 31, 2025 |
|
|
|
|
|
| ||
| F-19 |
| Table of Contents |
The following table summarizes information about stock options outstanding and exercisable as of December 31, 2025:
|
|
|
|
|
| Weighted |
|
| Weighted |
|
|
|
|
| Weighted |
| ||||||
|
|
|
|
|
| Average |
|
| Average |
|
|
|
|
| Average |
| ||||||
Range of |
|
| Number |
|
| Remaining Life |
|
| Exercise Price |
|
| Number |
|
| Exercise Price |
| ||||||
Exercise Prices |
|
| Outstanding |
|
| In Years |
|
| Outstanding |
|
| Exercisable |
|
| Exercisable |
| ||||||
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| ||||||
| $ |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| |||||||
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
| $ |
|
|
|
|
| $ |
| |||||
The significant weighted average assumptions relating to the valuation of the Company’s stock option grants issued and repriced during the Transition Period were as follows:
Assumptions |
|
|
| |
Dividend yield |
|
| 0 | % |
Exercise price |
| $ |
| |
Expected term |
| |
| |
Expected volatility |
|
| % | |
Risk free interest rate |
|
| % | |
Stock Option Outstanding and Exercisable
As of December 31, 2025, stock option grants of
| F-20 |
| Table of Contents |
11. INCOME TAXES
The Company has opted to implement ASU 2023-09 on a prospective basis. The Company computes its income tax provision by applying the estimated annual effective tax rate to pretax income or loss and adjusts the income tax provision for discrete tax items recorded in the period. A summary of the income expense (benefit) for the period is as follows:
Income Before Taxes By Jurisdiction |
|
|
| |
|
| 12/31/2025 |
| |
Domestic (U.S) |
| $ | ( | ) |
Foreign |
|
|
| |
Total Income Before Taxes |
| $ | ( | ) |
Income Tax Benefit |
|
|
| |
|
| 12/31/2025 |
| |
Current Tax Expense |
|
|
| |
Federal |
| $ |
| |
State |
|
|
| |
Foreign |
|
|
| |
Total Current Tax Expense |
| $ |
| |
|
|
|
|
|
Deferred Tax Expense (Benefit) |
|
|
|
|
Federal |
| $ | ( | ) |
State |
|
|
| |
Foreign |
|
|
| |
Total Deferred Expense (Benefit) |
| $ | ( | ) |
|
|
|
|
|
Total Income Tax Benefit |
| $ | ( | ) |
A reconciliation of the United States Federal Statutory rate to the Company’s effective tax rate for the Transition Period is as follows:
Rate Reconciliation |
|
|
|
|
|
| ||
|
| 12/31/2025 |
| |||||
Federal income tax provision at statutory rate |
| $ | ( | ) |
|
| % | |
Changes in valuation allowances |
|
| ( | ) |
|
| % | |
Other deferred |
|
| ( | ) |
|
| % | |
Nontaxable or nondeductible items |
|
|
|
|
| % | ||
Effective tax rate |
| $ | ( | ) |
|
| % | |
The Company’s effective tax rate differs from the federal statutory rate for the Transition Period principally due to the tax effect of the change in valuation allowance and nondeductible expenses.
| F-21 |
| Table of Contents |
The tax effects of temporary differences that give rise to the principal components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and September 30, 2025 are as follows:
Schedule of Deferred Tax assets |
|
|
|
|
|
| ||
|
| December 31, 2025 |
|
| September 30, 2025 |
| ||
Net operating loss carryforward |
| $ |
|
| $ |
| ||
Unrealized Loss on Derivative Contracts |
|
|
|
|
|
| ||
Stock based compensation |
|
|
|
|
|
| ||
Research and Development |
|
|
|
|
|
| ||
Accruals and reserves |
|
|
|
|
|
| ||
Total Deferred Tax Assets |
|
|
|
|
|
| ||
Valuation allowance against deferred tax assets |
|
|
|
|
| ( | ) | |
Net Deferred Tax Assets |
| $ |
|
| $ |
| ||
Change in valuation allowance during the year |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Schedule of Deferred Tax Liabilities |
|
|
|
|
|
|
|
|
Unrealized Gain on Derivative Contracts |
|
| ( | ) |
|
|
| |
Unrealized Gain on Digital Assets |
|
| ( | ) |
|
| ( | ) |
Net Unrealized Gain on Derivative Contracts and Digital Assets |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Net Deferred Tax Liabilities |
| $ | ( | ) |
| $ | ( | ) |
There were no income tax payments made during the Transition Period or the fiscal year ended September 30, 2025.
There were no state or foreign income taxes paid (net of refunds) exceeding 5 percent of total income tax paid (net of refunds).
The Company has incurred net losses since inception, which have generated net operating loss (NOL) carryforwards for federal and state tax purposes.
As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $
Because the Company had previously concluded, based upon all available evidence, it was not “more-likely-than-not” that sufficient tax earnings will be generated to utilize the NOL carryforwards, a corresponding valuation allowance equal to
Under the Tax Reform Act of 1986, the amounts of, and benefits from, NOLs may be limited in certain circumstances, including following a change in control. Section 382 and Section 383 of the Internal Revenue Code impose an annual limitation on the amount of U.S. tax attribute carry-forwards when a corporation has undergone a change in control. Based on the Company’s analysis of the change in control that occurred in 2025 as a result of the Goldeneye capital investment, the Section 382/383 limitation in conjunction with the twenty-year carryforward limitation caused approximately $
As of September 30, 2025, the Company recorded a deferred tax liability with respect to the unrealized gain on its digital asset holdings of approximately $
| F-22 |
| Table of Contents |
As of December 31, 2025, the Company recorded a deferred tax liability with respect to the unrealized gain on its digital asset holdings of approximately $
The Company recognized an income tax benefit of $
The Company is subject to possible tax examination by the IRS and various state taxing authorities for the years ended September 30, 2021 through December 31, 2025, although the Company is not currently under examination in any jurisdiction.
As of December 31, 2025, there were no uncertain tax positions. Management does not anticipate any future adjustments in the next twelve months which would result in a material change to its tax position. For the Transition Period and the year ended September 30, 2025, the Company did not have any interest and penalties.
12. SIGNIFICANT AND OTHER TRANSACTIONS WITH RELATED PARTIES
Transactions with Clayton A. Struve
On March 19, 2024, the Company signed an Extension of Warrant Agreement with Clayton A. Struve, a significant stockholder prior to the Goldeneye capital investment that closed on August 6, 2025, extending the exercise date of warrants covering
On August 6, 2025, Mr. Struve, the sole holder of Series C and D Convertible Preferred Stock, elected redemption of $
On August 6, 2025, Mr. Struve, the holder of convertible debt, elected conversion of $
As of December 31, 2025, all obligations under the Series C and D convertible preferred instruments and convertible notes payable had been satisfied.
Transactions with Former CEO and Chairman Ronald P. Erickson and J3E2A2Z LP
Mr. Erickson previously served as the Company’s Chief Executive Officer and Chairman from January 2023 through August 6, 2025, at which time he transitioned to his current position of President of the Science Division, Senior Vice President.
On January 30, 2024, the Company signed an Extension of Warrant Agreement with each of Mr. Erickson and J3E2A2Z LP, extending the exercise dates of the
On October 22, 2024, the due dates on the two Convertible Promissory Notes, each dated January 31, 2018, with J3E2A2Z LP, an entity controlled by Mr. Erickson, were extended to September 30, 2025 from September 30, 2024 and the interest rate was increased from
On June 2, 2025, the Company entered into a Promissory Note Conversion Agreement with J3E2A2Z LP, pursuant to which $
| F-23 |
| Table of Contents |
On August 6, 2025, upon election by J3E2A2Z LP, the Company redeemed all
On May 5, 2025, the Company issued
Effective August 6, 2025, the Company issued
Transactions with Former Chief Financial Officer Peter J. Conley
Mr. Conley served as our Chief Financial Officer from May 2022 through August 6, 2025. On October 10, 2023, the Company granted him options to purchase
On May 5, 2025, the Company issued
On August 6, 2025, the Company issued
Transactions with Goldeneye 1995 LLC and Robert Gregory Kidd
A majority of the voting power of our outstanding common stock is held by Goldeneye 1995 LLC, which is solely owned and managed by Robert Gregory Kidd, our Chairman and Chief Executive Officer.
On June 5, 2025, the Company entered into a Securities Purchase Agreement with Goldeneye 1995 LLC providing for a private placement of our common stock. At the closing on August 6, 2025, the Company issued approximately
As of December 31, 2025, Mr. Kidd beneficially owned approximately 82% of our outstanding common stock through Goldeneye 1995 LLC.
On July 28, 2025, Goldeneye 1995 LLC and the Company entered into a Promissory Note pursuant to which the Buyer has loaned the Company an aggregate amount of $
Transactions with our Vice Chair Linda Jenkinson and our non-CEO NEOs
On October 7, 2025, the Company’s Board approved a repricing of outstanding stock options granted on August 6, 2025 as permitted by our Amended and Restated 2021 Equity Incentive Plan, including options held by certain executive officers and directors. The exercise price of approximately
On October 7, 2025, our Board approved the grant of
| F-24 |
| Table of Contents |
On December 15, 2025, the Company and Kirk Chapman mutually agreed that Mr. Chapman would depart from his position as Chief Operating Officer, effective immediately. The departure was not the result of any disagreement with the Company on any matter related to the Company's operations, policies or practices. On January 6, 2026, the Company entered into a separation agreement with Mr. Chapman, in connection with his departure. Mr. Chapman’s separation from the Company became effective on December 31, 2025, at which time all of his unvested option awards were forfeited.
Transactions with Former Director John Cronin and ipCapital Group, Inc.
Mr. Cronin served as a director beginning in November 2023 and was the Company’s Interim Chief Technology Officer from September 2024 to August 2025. He is Chairman and CEO of ipCapital Group, Inc., to which the Company paid approximately $
Transactions with Vice Chair Linda Jenkinson, Chairman and CEO Robert Gregory Kidd and Vast Holdings, Inc.
Linda Jenkinson has served as the Company’s Vice Chair since August 2025 and is also the Chief Executive Officer and Chair of Vast Holdings, Inc., the holding company for Vast Bank. In 2024, the Company’s Chairman and CEO, Robert Gregory Kidd, personally invested $
Transactions with Directors
During the Transition Period, the Company did not issue any shares of common stock. During the year ended September 30, 2025, the Company issued an aggregate of
Other than the relationships described above, the Company did not engage in any material related-party transactions during the Transition Period, or the year ended September 30, 2025.
13. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
Legal Proceedings
The Company may from time to time become a party to various legal proceedings arising in the ordinary course of business. The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to the Company’s business.
Properties and Operating Leases
The Company maintains executive and research and testing facilities in Seattle, Washington.
| F-25 |
| Table of Contents |
The Company does not own any real property and believes the existing facilities are suitable and adequate for its current needs.
14. SEGMENT REPORTING
The Financial Accounting Standards Board, Accounting Standard Codification Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders. Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Makers (“CODMs”) to allocate resources and assess performance. The Company has determined that its Chief Executive Officer and Chief Financial Officer collectively function as the CODM because they jointly review consolidated operating results, evaluate performance and make decisions regarding the allocation of resources on a consolidated basis. The CODMs monitor the expense components of the various products and services we offer, but operations are managed and financial performance is evaluated on a corporation-wide basis in comparison to a business plan which is developed each year.
Although the Company conducts activities across multiple business initiatives, including digital asset treasury activities, product development related to tokenized deposits, and legacy technology development, the Company does not prepare or utilize separate financial information at a level below the consolidated financial statements. In addition, the CODMs do not regularly review revenue, expense, or profitability information by business line, product, or service. Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations included in the consolidated financial statements.
The CODMs use consolidated net income (loss) as reported in the consolidated financial statements, as the primary measure of performance for assessing results and allocating resources.
15. SUBSEQUENT EVENTS
Management evaluated subsequent events, for purposes of determining whether adjustment to or disclosure in the financial statements was required through the date the financial statements were issued. Subsequent to December 31, 2025, the Company had the following material transactions requiring disclosure:
Strategic Business Partnership with Vast Bank and Uphold
On January 20, 2026, the Company entered into a Strategic Partnership Agreement with Vast and Uphold, which formalized the parties’ respective roles in the tokenized deposit network, including the Company’s role as network operator, Vast’s role as the issuing bank, and Uphold’s role as platform developer and service provider. The agreement also establishes a revenue-sharing framework and other commercial terms governing the program. The Company’s Chairman and Chief Executive Officer Robert Gregory Kidd has significant ownership interests in Vast Holdings, Inc. (parent of Vast Bank) and Uphold and the Company’s Vice Chair, Linda Jenkinson, serves as President and Chair of Vast Holdings, Inc. No related party transactions requiring disclosure occurred between the Company and these entities during the fiscal year ended December 31, 2025.
Master Loan Agreement
On March 18, 2026, the Company entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”), pursuant to which the Company may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $
On March 20, 2026, the Company entered into a term sheet for a fixed-term loan of $
Affiliate Services Agreement
The Company entered into an affiliate services agreement with Vast (the “Agreement”) on March 18, 2026. Pursuant to the terms of the Agreement, the Company will reimburse Vast for costs incurred to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $
Repricing, Issuance, and Forfeiture of Stock Option Grants
On March 18, 2026,
On March 18, 2026, the Company’s Board of Directors approved the issuance of stock option grants for an aggregate of
Subsequent to December 31, 2025,
Bitcoin Market Price Volatility and Potential Earnings Impact
Subsequent to December 31, 2025, digital asset markets have exhibited elevated volatility. The fair value of Bitcoin has declined significantly compared to its reported fair value as of December 31, 2025. ASU No. 2023-08 requires that the fair value of the Company’s Bitcoin holdings be measured at the end of each reporting period with gains and losses from changes in the value of Bitcoin recognized in net income (loss). As a result, the Company’s earnings results are highly sensitive to and directly correlated with changes in the market price of Bitcoin.
None of these subsequent events affected conditions existing at December 31, 2025, and therefore, no adjustments have been made to the accompanying consolidated financial statements.
| F-26 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 2026 | USBC, INC. |
|
|
|
|
| /s/ Robert Gregory Kidd |
|
| Name: Robert Gregory Kidd |
|
| Title: Chief Executive Officer |
|
| (Principal Executive Officer) |
|
|
|
|
| /s/ Kitty Payne |
|
| Name: Kitty Payne |
|
| Title: Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE | TITLE |
| DATE | |
|
|
|
| |
/s/ Robert Gregory Kidd |
| Chief Executive Officer and Director (principal executive officer) |
| March 25, 2026 |
Robert Gregory Kidd |
|
|
| |
|
|
|
| |
/s/ Kitty Payne |
| Chief Financial Officer (principal financial and accounting officer) |
| March 25, 2026 |
Kitty Payne |
|
|
| |
|
|
|
| |
/s/ Linda Jenkinson | Director, Vice Chair |
| March 25, 2026 | |
Linda Jenkinson |
|
|
| |
|
|
|
| |
/s/ Larry K. Ellingson | Director |
| March 25, 2026 | |
Larry K. Ellingson |
|
|
| |
|
|
|
| |
/s/ Ronald P. Erickson |
| Director |
| March 25, 2026 |
Ronald P. Erickson |
|
|
| |
|
|
|
| |
/s/ William A. Owens |
| Director |
| March 25, 2026 |
William A. Owens |
|
|
| |
|
|
|
| |
/s/ Jon Pepper |
| Director |
| March 25, 2026 |
Jon Pepper |
|
|
| |
|
|
|
| |
/s/ Ichiro Takesako |
| Director |
| March 25, 2026 |
Ichiro Takesako |
|
|
|
| 41 |
FAQ
What major strategic change does USBC (USBC) describe in this transition report?
How did the Goldeneye 1995 LLC transaction affect USBC’s capital structure and strategy?
What is USBC’s tokenized deposit program and who are its key partners?
How is USBC using Bitcoin within its treasury strategy?
What borrowing facilities does USBC have that are secured by Bitcoin?
Why did USBC change its fiscal year-end and what is the transition period?
What are the key risks USBC highlights related to its new business model?
