FMHS 10-Q
Farmhouse, Inc. /Nv (FMHS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended: | |
or | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from: _____________ to _____________ | |
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FARMHOUSE, INC.
(Exact name of registrant as specified in its charter)
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NEVADA ( | ||
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
(Address of Principal Executive Office) (Zip Code)
(
(
N/A
(Former name, former address and former fiscal year, if changed since last report)
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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.
x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ |
| Accelerated filer ¨ |
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| Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act),
The number of shares of the issuer’s Common Stock issued and outstanding as of August 18, 2026 is
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the six months ended June 30, 2026 (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, and assumptions and involve risks and uncertainties that could cause actual results to differ materially. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Report. Although we believe our expectations are reasonable, we cannot guarantee future results. Except as required by law, we undertake no obligation to update any forward-looking statements.
CERTAIN TERMS USED IN THIS REPORT
Unless otherwise indicated, references to “we,” “us,” “our,” the “Registrant,” the “Company,” or “Farmhouse” refer to Farmhouse, Inc.
FARMHOUSE, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
June 30, 2026
INDEX |
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PART I – FINANCIAL INFORMATION |
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Item 1. | 3 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition | 20 |
Item 3. | 25 | |
Item 4. | 25 | |
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PART II – OTHER INFORMATION |
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Item 1. | 26 | |
Item 1A. | 26 | |
Item 2. | 26 | |
Item 3. | 26 | |
Item 4. | 26 | |
Item 5. | 26 | |
Item 6. | 27 | |
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28 | ||
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CERTIFICATIONS |
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1
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
FARMHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, |
| December 31, | |
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ASSETS |
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Current assets: |
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Cash |
| $ |
| $ |
Prepaid expenses |
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Due from Axiom |
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Due from related party |
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Crypto assets |
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Deferred offering costs |
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Total current assets |
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Long-term assets: |
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Investments, available for sale |
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Total long-term assets |
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Total assets |
| $ |
| $ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
| $ |
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Accrued legal fees |
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Accrued payroll and payroll taxes |
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Accrued liabilities |
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Accrued interest payable |
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Convertible notes payable, current, net of $1,814,521 and $32,483 debt discount, respectively. $70,000 and $45,000 in default, respectively |
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Notes payable, in default |
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Derivative liabilities - convertible instruments |
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Due to related parties |
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Total current liabilities |
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Long-term liabilities: |
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Convertible notes payable, long-term, net of $880 and $0 debt discount, respectively |
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Convertible notes payable to related party, long-term |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies |
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| - |
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Stockholders’ deficit: |
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Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Treasury stock, 17,380 shares |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
| $ |
| $ |
The accompanying notes are an integral part of these condensed consolidated financial statements
2
FARMHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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| For the three months |
| For the six months | ||||
| 2026 |
| 2025 |
| 2026 |
| 2025 | |
REVENUES |
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Revenues |
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| $ |
| $ |
| $ |
Costs of revenues |
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Gross margin |
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OPERATING EXPENSES |
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General and administrative |
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Professional fees |
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Total operating expenses |
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LOSS FROM OPERATIONS |
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OTHER INCOME (EXPENSE): |
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Gain on settlement of debt |
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Unrealized loss on crypto assets |
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Interest expense |
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| ( |
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Debt financing cost |
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Loss on derivative |
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Total other income (expense) |
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NET LOSS |
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Other comprehensive income (loss) |
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Unrealized loss on investments |
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Total other comprehensive income (loss) |
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TOTAL COMPREHENSIVE LOSS |
| $( |
| $( |
| $( |
| $( |
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BASIC AND DILUTED NET LOSS PER SHARE |
| $( |
| $( |
| $( |
| $( |
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BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
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The accompanying notes are an integral part of these condensed consolidated financial statements
3
FARMHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the six months ended June 30, 2026
(unaudited)
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| Other |
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| Common Stock |
| Treasury |
| Comprehensive |
| Accumulated |
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Shares |
| Par Value |
| Paid-in Capital |
| Stock |
| Income |
| Deficit |
| Total | |||||||
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Balance at December 31, 2025 |
| $ |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||
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Common stock issued for services rendered |
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Common stock issued for restricted |
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Stock-based compensation on RSA's vested |
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Net loss |
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Balance at March 31, 2026 |
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Stock-based compensation on RSA's vested |
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Purchase of treasury stock |
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Net loss |
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Unrealized loss on investments |
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Balance at June 30, 2026 |
| $ |
| $ |
| $ | ( |
| $ | ( |
| $ | ( |
| $ | ( | |||
The accompanying notes are an integral part of these condensed consolidated financial statements
4
FARMHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the six months ended June 30, 2025
(unaudited)
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| Other |
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| Common Stock |
| Treasury |
| Comprehensive |
| Accumulated |
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Shares |
| Par Value |
| Paid-in Capital |
| Stock |
| Income |
| Deficit |
| Total | |||||||
Balance at December 31, 2024 |
| $ |
| $ |
| $ |
| $ |
| $ | ( |
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Stock-based compensation on RSA's vested |
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Net income |
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Balance at March 31, 2025 |
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Stock-based compensation on RSA's vested |
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Net loss |
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Balance at June 30, 2025 |
| $ |
| $ |
| $ |
| $ |
| $ | ( |
| $ | ( | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements
5
FARMHOUSE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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| For the six months ended June 30, | ||
| 2026 |
| 2025 | |
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
| $( |
| $( |
Adjustments to reconcile net income (loss) to net cash used by operating activities: |
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Gain on settlement of debt |
| ( |
| ( |
Stock-based compensation on RSA's vested |
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Common stock issued for services rendered |
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Amortization of debt discount |
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Unrealized loss on crypto assets |
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Loss on derivatives |
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Derivative recorded as debt financing cost |
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Changes in operating assets and liabilities: |
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Prepaid expenses |
| ( |
| ( |
Accounts payable |
| ( |
| ( |
Accrued legal fees |
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Accrued payroll and payroll taxes |
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Accrued liabilities |
| ( |
| ( |
Accrued liabilities related party |
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Accrued interest payable |
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Accrued interest payable related party |
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Net cash used in operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchase of crypto assets |
| ( |
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Purchase of investments |
| ( |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from issuance of convertible notes payable - short term |
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Proceeds from issuance of convertible notes payable - long term |
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Proceeds from issuance of convertible notes payable - related party |
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Proceeds from related party loans and advances |
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Purchase of treasury stock |
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Repayment of notes payable |
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Repayment of related party loans and advances |
| ( |
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Net cash provided by financing activities |
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NET CHANGE IN CASH |
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CASH AT BEGINNING OF PERIOD |
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CASH AT END OF PERIOD |
| $ |
| $ |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Interest paid |
| $ |
| $ |
Income taxes |
| $ |
| $ |
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NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Accounts payable exchanged for convertible note payable |
| $ |
| $ |
Accrued legal fees exchanged for convertible note payable |
| $ |
| $ |
Accrued liabilities exchanged for convertible note payable |
| $ |
| $ |
Note payable exchanged for convertible note payable |
| $ |
| $ |
Accrued interest exchanged for convertible note payable |
| $ |
| $ |
Repayment of related party short-term advances with credit card |
| $ |
| $ |
Cryptocurrency consideration for convertible note |
| $ |
| $ |
Debt discount recorded for derivative liability |
| $ |
| $ |
The accompanying notes are an integral part of these condensed consolidated financial statements
6
FARMHOUSE, INC. AND SUBSIDIARIES
NOTES TO QUARTERLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
NOTE 1 – ORGANIZATION AND OPERATIONS
Farmhouse, Inc. (the “Company”) was incorporated in the State of Nevada and historically engaged in technology development and brand management activities. While the Company maintains certain licensing activities, such activities have generated limited revenue to date and are not material to the Company’s financial condition or results of operations.
The Company has shifted its focus toward evaluating strategic acquisitions and emerging opportunities, including initiatives in digital assets. In furtherance of this strategy, in September 2025, the Company formed Farmhouse Treasury LLC (“FT”), a wholly owned Nevada limited liability company, to support its digital asset treasury initiative.
Digital Asset Treasury Initiative
FT was established to develop and oversee the Company’s digital asset strategy, including treasury management, custody solutions, and capital allocation in digital assets, including Bitcoin and tokenized and physical gold. This initiative is intended to position the Company to participate in the emerging digital asset market while maintaining governance, reporting, and compliance standards consistent with those of a public company.
As of June 30, 2026, the Company has commenced implementation of its digital asset strategy and has engaged in discussions with various counterparties regarding potential structures to expand such activities. These discussions remain preliminary, and no binding agreements have been executed.
Going Concern and Management Plans
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2026, the Company had a stockholders’ deficit of $
During the six months ended June 30, 2026, the Company completed a financing transaction in the amount of $2 million. Management believes this financing provides additional liquidity to support operations and execute its strategic initiatives in the near term. See Note 8.
While the Company believes the recently completed financing will improve its liquidity position, there can be no assurance that additional funding will be available on terms acceptable to the Company, if at all. Accordingly, substantial doubt about the Company’s ability to continue as a going concern remains. Management will continue to evaluate the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
7
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), as issued by the Financial Accounting Standards Board (“FASB”) and the rules of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial reporting. Accordingly, they do not include all disclosures required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2025.
In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of results that may be expected for the full year.
Principals of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Farmhouse Washington, Farmhouse DTLA, Inc., and Farmhouse Treasury, LLC. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the consolidated financial statements. Significant estimates include, but are not limited to, convertible debt, valuation of deferred tax assets and any related valuation allowances, contingent assets and liabilities, and valuation of stock-based compensation awards. Actual results could materially differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash deposits held in checking and savings accounts with financial institutions and other highly liquid investments that are readily convertible to known amounts of cash with original maturities of six months or less at the time of purchase. The Company had no cash equivalents as of June 30, 2026 or December 31, 2025.
Digital Assets
The Company may hold certain digital assets for treasury and strategic purposes in accordance with its Treasury Policy. Digital assets are recorded as indefinite-lived intangible assets in accordance with ASC 350, with crypto assets recorded in accordance with ASC 350-60, Intangibles – Goodwill and Other – Crypto Assets, and are initially recognized at cost or fair value at the measurement date, as applicable.
Digital assets acquired through non-cash consideration are measured at fair value as of the transaction measurement date, determined using observable quoted prices on the principal market for the specific digital asset, when available. The Company does not capitalize internally generated digital assets.
Subsequent to initial recognition, crypto assets are presented on the balance sheet at fair value, with changes in fair value recognized in earnings in the period in which they occur. Fair value measurements are classified within Level 1 of the fair value hierarchy when based on quoted prices in active markets.
Digital assets are subject to ongoing monitoring in accordance with the Company’s Treasury Policy, including custody, liquidity, and risk management considerations. The Company does not use digital assets as hedging instruments and does not engage in digital asset trading activities outside of its treasury strategy.
8
Derivative Liabilities
The Company accounts for derivative liability in accordance with ASC 815, Derivatives and Hedging, and ASC 820, Fair Value Measurement. Convertible notes that have all the characteristics of an embedded derivative are bifurcated and valued at fair value at inception, conversion and each reporting date and related gains and losses are recorded in earnings. The Company estimates the fair value of derivative using the Black-Scholes option-pricing model or a probability weighted expected value approach.
Fair Value of Financial Instruments
The Company follows ASC 820 in determining the fair value of financial assets and liabilities when applicable. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in fair value measurements are classified into six levels within the fair value hierarchy based on their observability.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses, convertible notes payable, notes payable, and amounts due to related parties. The carrying amounts of these instruments approximate fair value due to their short-term nature or standard market terms.
The Company applies the guidance in ASC 820 to account for digital assets, investments and derivative liabilities measured on a recurring basis. Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.
The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following 3 categories:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.
•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following tables present, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025:
June 30. 2026
Class | Level 1 | Level 2 | Level 3 |
Derivative Liability | $- | $- | $ |
Crypto Assets | $ | $- | $- |
Investments | $ | $- | $- |
December 31, 2025
Class | Level 1 | Level 2 | Level 3 |
Derivative Liability | $- | $- | $ |
9
Revenue Recognition
The Company recognizes revenue in accordance with U.S. GAAP when control of the promised goods or services is transferred to customers in an amount that reflects the consideration it expects to receive. There were no revenues for the six months ended June 30, 2026 and 2025.
Related Party Transactions
The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures. Related party transactions, balances, and relationships are identified separately in the consolidated financial statements and related notes. Transactions with related parties are conducted on terms equivalent to those that prevail in arm’s length transactions, unless otherwise disclosed. Management evaluates all related party transactions for proper accounting, disclosure, and potential conflicts of interest. See Note 10.
Net Loss per Common Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share reflects potential dilution from securities that could be converted into common stock, unless such inclusion would be anti-dilutive. At June 30, 2026, all potentially dilutive securities were anti-dilutive due to the net loss reported. In November 2025 and May 2026, the Company issued a convertible note that if converted on June 30, 2026 would have converted to 15,581,375 shares. There were other convertible notes outstanding as of June 30, 2026, however certain events that triggered, or allowed for, conversion had not yet occurred and the conversion price that the convertible notes would convert at if an event occurred was unknown; therefore, as of that date, the Company had no other potentially dilutive securities. At June 30, 2025, there were no events that allowed for conversion of the Company’s outstanding convertible notes and the conversion rate at which the convertible notes could be converted was not determinable, therefore there were no potentially dilutive securities at that date.
Recently Issued Accounting Pronouncements
There have been no material changes to recently issued accounting pronouncements as disclosed in the Company’s Report on Form 10-K.
NOTE 3 – CRYPTO ASSETS
The Company maintains crypto assets for treasury and strategic purposes in accordance with its Treasury Policy. As of June 30, 2026, the Company held crypto assets with a fair value of $
As of June 30, 2026, the Company held 7.21 Bitcoin with a fair market value of $
For the six months ended June 30, 2026, the Company recognized an unrealized loss on digital assets of $
NOTE 4 – INVESTMENTS, AVAILABLE FOR SALE
The Company maintains an investment brokerage account with E*TRADE Securities LLC. During the six months ended June 30, 2026, the Company acquired securities consisting of 200 shares of STRC (Strategy, Inc.) and 200 shares of SATA (Strive, Inc.). The securities were acquired during the six months ended June 30, 2026 for an aggregate cost of $
The Company classifies these investments as available-for-sale securities. As of June 30, 2026, the investments had an aggregate fair value of $
As of June 30, 2026, the Company had not recognized any realized gains or losses related to these investments.
10
NOTE 5 – GHS EQUITY FINANCING AGREEMENT AND DEFERRED OFFERING COSTS
In November 2025, the Company entered into an Equity Financing Agreement (the “GHS Agreement”) with GHS Investments LLC, which provides for an equity line of credit of up to $20.0 million over a 24-month term, subject to the effectiveness of a registration statement. The related registration statement on Form S-1 was declared effective by the Securities and Exchange Commission in January 2026.
Under the GHS Agreement, the Company may, from time to time, direct GHS to purchase shares of its common stock through drawdowns (“Puts”) at prices based on prevailing market conditions, subject to contractual limitations. The GHS Agreement includes customary terms and conditions, including a $10,000 legal deposit payable upon the first draw and standard termination and default provisions. The facility expires 24 months from execution unless terminated earlier.
As of June 30, 2026, the Company had not issued any Put Notices and had not drawn funds under the facility.
In connection with the GHS Agreement, the Company issued 500,000 restricted shares of common stock to GHS as consideration for the facility. The fair value of these shares, $
The Company evaluated the GHS Agreement under applicable accounting guidance and concluded that it is indexed to the Company’s own stock and qualifies for equity classification. This conclusion will be reassessed upon each future draw under the facility.
NOTE 6 – CONVERTIBLE NOTES PAYABLE, NET
As of June 30, 2026 and December 31, 2025, the Company had outstanding convertible notes payable to unaffiliated individuals. The convertible notes bear interest at fixed rates, have stated maturities ranging from 2018 through 2028, and contain conversion features that permit or require conversion into shares of the Company’s common stock, as applicable, upon the occurrence of specified events or at the election of the holder. Certain notes were in default as of June 30, 2026.
Convertible notes outstanding as of June 30, 2026 were as follows:
Description |
| Interest Rate |
| Maturity |
| Stated Principal |
| Unamortized |
| Carrying Amount |
Convertible note payable – in default |
| 18% |
| July 2018 |
| $ |
| $ |
| $ |
Series 2023 convertible notes |
| 10% |
| Jun–Oct. 2026 |
|
|
| |||
Series 2025 convertible notes |
| 10% |
| Feb–Oct. 2028 |
|
|
| |||
November 2025 convertible promissory note |
| 15% |
| Sept. 7, 2026 |
|
| ( |
| ||
Series 2026 convertible notes |
| 10% |
| Feb 2029 |
|
| ( |
| ||
Axiom note |
| 15% |
| March 2027 |
|
| ( |
| ||
Total convertible notes payable |
|
|
|
|
|
| ( |
| ||
Less: current portion |
|
|
|
|
| ( |
|
| ( | |
Total convertible notes payable – long term |
|
|
|
|
| $ |
| $( |
| $ |
As of June 30, 2026, $
11
Convertible Note Payable – In Default
In July 2018, the Company issued a convertible promissory note to an unrelated individual with a principal amount of $
Interest expense related to this note was $
Series 2023 Mandatorily Convertible Notes
In May 2023, the Board of Directors authorized an offering of up to $1,000,000 of mandatorily convertible notes, designated as Series 2023 10% Mandatorily Convertible Notes (the “Series 2023 Notes”). During 2023 the Company raised $
The Series 2023 Notes mature 36 months from the issue date (which range between June 1, 2026 and October 2, 2026), and bear interest at 10% per annum. The Series 2023 Notes are mandatorily convertible 30 calendar days after the earliest to occur of: (i) the Company’s common stock achieving a closing price greater than $1.00 for ten consecutive trading days (a “Market Forced Conversion”), or (ii) the Company completing an offering of common stock resulting in gross proceeds of at least $1,000,000 (an “Offering Forced Conversion”). Upon conversion, the Series 2023 Notes will automatically convert into shares of common stock at a conversion price equal to 75.8% of: (i) the closing price of the Company’s common stock on the tenth trading day for a Market Forced Conversion, or (ii) the offering price of the Company’s common stock for an Offering Forced Conversion. These notes include an embedded conversion feature that is accounted for as a derivative under ASC 815. See note 9.
The number of shares issuable upon conversion is determined by adding the principal amount of the Series 2023 Notes, accrued and unpaid interest, and any applicable default interest, and dividing by the applicable conversion price. The conversion price is subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, combinations, recapitalizations, reclassifications, extraordinary distributions, and similar events.
Interest expense related to the Series 2023 Notes was $
Series 2025 Notes Mandatorily Convertible Notes
During 2025, the Company issued Series 2025 Notes. As of June 30, 2026, the outstanding balance of these notes was $
Interest expense was $
12
November 2025 Convertible Promissory Note (Original Issue Discount and Derivative Liability)
In November 2025, the Company issued an unsecured convertible promissory note to an unaffiliated accredited investor for cash proceeds of $
The derivative liability was recognized at fair value on the issuance date, with the initial value of $
In connection with the financing, the Company issued 100,000 shares of its common stock to the investor as additional consideration. Under ASC 470 shares issued with debt are required to be valued at relative fair value and recorded as a debt discount. The relative fair value of these shares on the date of issuance was $4,297 and was recorded as a component of the debt discount which is being amortized to interest expense over the term of the note.
The Company recorded a total debt discount at issuance consisting of (i) the original issue discount, (ii) the fair value of the embedded derivative liability, and (iii) the fair value of shares issued in connection with the financing for a total of $39,499. This total debt discount is amortized to interest expense over the term of the note using the effective interest method.
As of June 30, 2026, the convertible note is presented net of an unamortized debt discount of $
Interest expense related to this note was $
Series 2026 Notes Mandatorily Convertible Notes
Interest expense totaled $
13
Convertible notes outstanding as of December 31, 2025 were as follows:
Description |
| Interest Rate |
| Maturity |
| Stated |
| Unamortized Debt Discount |
| Carrying Amount |
Convertible note payable – in default |
| 18% |
| July 2018 |
| $ |
| $ |
| $ |
November 2025 convertible promissory note |
| 15% |
| Sept. 7, 2026 |
|
| ( |
| ||
Series 2023 convertible notes |
| 10% |
| Jun–Oct. 2026 |
|
|
| |||
Series 2025 convertible notes |
| 10% |
| Feb–Oct. 2028 |
|
|
| |||
Total convertible notes payable |
|
| ( |
| ||||||
Less: current portion |
| ( |
|
| ( | |||||
Total convertible notes payable – long term |
| $ |
| $ |
| $ | ||||
As of December 31, 2025, $
The five-year maturity for the convertible notes payable is as follows:
Year / Category |
| Amount |
In default |
| $ |
2026 |
| |
2027 |
| |
2028 |
| |
2029 |
| |
2030 |
| |
Total |
| $ |
NOTE 7 – NOTES PAYABLE, IN DEFAULT
Notes payable is comprised of the following:
| June 30, |
| December 31, 2025 | |
Loan agreement with an unaffiliated individual, interest at 6% per annum, due December 16, 2021. In default. |
| $ |
| $ |
Note payable to unaffiliated individual, interest at 20% per annum, due October 26, 2024. In default. |
|
| ||
Note payable to unaffiliated individual, interest at 20% per annum, due October 26, 2024. In default. |
|
| ||
Note payable to unaffiliated individual, interest at 20% per annum, due March 30, 2025. In default |
|
| ||
Total Notes Payable |
| $ |
| $ |
One promissory note entered into in 2021 with an unaffiliated individual has a principal balance of $
During the six months ended June 30, 2026 the Company paid off three notes totaling $
As of June 30, 2026 the remaining outstanding note is in default.
Interest expense related to notes payable was $
14
NOTE 8 – CONVERTIBLE PROMISSORY NOTE FINANCING AND DUE FROM AXIOM
During the six months ended June 30, 2026, the Company completed a financing transaction with Axiom Holdings Group, LLC (the “Investor”) pursuant to a Securities Purchase Agreement (the “SPA”), Convertible Promissory Note (the “Note”), and Registration Rights Agreement (collectively, the “Transaction Documents”). The transaction closed and was funded on May 4, 2026.
The Note has an original principal amount of $
The Company received a $100,000 advance from the Investor in March 2026 in connection with the contemplated financing. Upon closing of the transaction, this advance was applied toward the Investor’s subscription and became part of the Note. On May 4, 2026, the Company received the remaining net cash funding of approximately $884,000, representing the balance of the $1,000,000 cash consideration after giving effect to the prior $100,000 advance and the withholding of approximately $16,000 for the Investor’s legal fees in accordance with the terms of the SPA.
During the six months ended June 30, 2026, the Investor transferred a portion of the required digital asset consideration to the Company, consisting primarily of Bitcoin. The digital assets received by the Company were recognized in accordance with the Company’s accounting policy for digital assets as described in Note 2 and are included in digital assets on the accompanying condensed consolidated balance sheet. See Note 3.
As of June 30, 2026, the Investor had not completed delivery of the full $1,000,000 of required digital asset consideration. The remaining amount due from the Investor was $
The Note bears interest at 15% per annum, calculated on a simple interest basis, and matures ten months from the original issue date unless earlier converted in accordance with its terms. Accrued interest is payable solely upon conversion, and no periodic cash interest payments are required. The Note is unsecured.
The Note provides for automatic and mandatory conversion into shares of the Company’s common stock upon the earliest of: (i) 180 days following the original issue date, (ii) the consummation of a firm underwritten public offering, uplisting, or other board-approved equity financing, (iii) a qualified financing resulting in at least $5.0 million of gross proceeds to the Company, or (iv) the Company’s common stock trading at or above $1.00 per share for twenty consecutive trading days.
The conversion price is equal to 75% of the lowest volume-weighted average price (“VWAP”) of the Company’s common stock during the twenty consecutive trading days immediately preceding the conversion date, subject to a floor price of $0.15 per share and a ceiling price of $0.50 per share.
The Company evaluated the accounting treatment of the Note and its embedded conversion features under applicable accounting guidance, including ASC 815, Derivatives and Hedging. As of June 30, 2026, the derivative liability associated with the Note is included in derivative liabilities – convertible instruments on the accompanying condensed consolidated balance sheet. See Note 9.
In connection with the financing, the Company entered into a Registration Rights Agreement requiring the Company to file a registration statement covering the resale of the shares issuable upon conversion of the Note within 90 days of the original issue date and to use commercially reasonable efforts to cause such registration statement to become effective.
The Transaction Documents contain customary representations, warranties, covenants, and restrictions, including limitations on certain additional financings, requirements to maintain sufficient authorized and reserved shares for conversion, and restrictions on certain corporate actions without Investor consent.
15
The Company recognized derivative liability at inception of $2,445,619, a debt discount of $
Interest expense during the three months ended June 30, 2026 was $
NOTE 9 – DERIVATIVE LIABILITIES ASSOCIATED WITH CONVERTIBLE NOTES
The Company evaluates the conversion features of its convertible debt instruments in accordance with ASC 815, Derivatives and Hedging, to determine whether such features require bifurcation and separate accounting as derivative liabilities. Certain of the Company’s convertible notes contain embedded conversion features with terms including variable conversion prices based on future market prices and mandatory conversion features. As a result, certain of these features are accounted for as derivative liabilities under ASC 815.
Derivative liabilities are recorded at fair value at inception and remeasured at fair value at each reporting date, with changes in fair value recognized in earnings. For convertible instruments issued with embedded derivative features, the initial fair value of the derivative is recorded as a debt discount to the extent permitted under applicable accounting guidance and amortized to interest expense over the contractual term of the related debt instrument using the effective interest method.
The fair value of derivative liabilities is estimated using valuation techniques that incorporate both observable and unobservable inputs. Due to the use of significant unobservable inputs, these measurements are classified within Level 3 of the fair value hierarchy under ASC 820, Fair Value Measurement. The Company utilized option-pricing models, including the Black-Scholes model for the derivative liability related to the November 2025 Convertible note and the Axiom Note.
Key assumptions for used in the Black-Scholes model for the derivative liability value related to the Axiom Note during the six months ended June 30, 2026 are as follows:
Stock Price | $ |
Volatility | |
Remaining Contractual Term | |
Risk-free interest rate | |
Exercise Price | $ |
The following table summarizes the change in derivative liabilities during the six months ended June 30, 2026:
| Amount |
Balance, December 31, 2025 | $ |
Derivative liabilities recognized at inception during 2026 | |
Change in fair value of derivative liabilities | |
Balance, June 30, 2026 | $ |
As of June 30, 2026, the aggregate fair value of the Company’s derivative liabilities was $
The Company will continue to remeasure the derivative liabilities at fair value at each reporting date, with changes in fair value recognized in earnings.
16
NOTE 10 – DUE TO RELATED PARTIES
Related party balances consisted of the following as of June 30, 2026 and December 31, 2025:
| June 30, |
| December 31, | |
Due from related party: |
|
|
|
|
Officer overpayment |
| $ |
| $ |
|
|
|
|
|
Due to related parties – current: |
|
|
|
|
Accrued liability to contracted CFO |
| $ |
| $ |
Accrued interest on related party notes |
|
| ||
Loans from officers |
|
| ||
Note payable to officer, in default |
|
| ||
Total due to related parties – current |
| $ |
| $ |
|
|
|
|
|
Due to related parties – long-term: |
|
|
|
|
Convertible note payable to related party |
| $ |
| $ |
During the six months ended June 30, 2026, the Company repaid in full the outstanding advances previously made by officers to fund operating expenses and other Company obligations. In connection with the settlement of these advances, payments exceeded the remaining amounts owed by $
The Company’s Chief Financial Officer provides services under a consulting arrangement. The Company recognized $
In August 2024, the Company issued an unsecured promissory note to its Chief Executive Officer in the principal amount of $
On April 18, 2025, the Company issued a $
Interest expense on related party notes were $
NOTE 11 – STOCKHOLDERS’ DEFICIT
The Company is authorized to issue
17
Common Stock Activity
Common stock transactions during the six months ended June 30, 2026 were as follows:
·On January 16, 2026, the Company issued
·In March 2026, the Company granted Restricted Stock Awards (“RSA’s”) totaling
As a result of these transactions, the Company had 19,105,950 shares of common stock outstanding as of June 30, 2026.
There were no common stock transactions during the six months ended June 30, 2025.
Treasury Stock
On May 12, 2026, the Company’s Board of Directors approved a share repurchase framework authorizing the Company, through its wholly owned subsidiary Farmhouse Treasury LLC (“Treasury LLC”), to purchase up to $250,000 of the Company’s common stock from time to time in open market or privately negotiated transactions. The Board authorized management to determine the timing, pricing, quantity and method of such repurchases based on market conditions, available liquidity and other capital allocation considerations. The Board also ratified and approved purchases of the Company’s common stock made through Treasury LLC prior to the date of the authorization.
During the six months ended June 30, 2026, Treasury LLC acquired
Shares acquired under the share repurchase program are intended to be held for treasury purposes pending retirement, cancellation or other disposition as determined appropriate by management and approved by the Board where required. As of June 30, 2026, the shares acquired under the program had not been retired or cancelled and remained held by Treasury LLC. Accordingly, the aggregate cost of $
NOTE 12 – STOCK-BASED COMPENSATION AND RESTRICTED STOCK AWARDS
In May 2021, the Board of Directors approved the Farmhouse, Inc. 2021 Omnibus Incentive Plan (“2021 OIP”), permitting the issuance of up to 3,000,000 shares of common stock through awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, other stock-based awards, and cash-based awards. The 2021 OIP was ratified by stockholders holding a majority of the Company’s outstanding shares.
Stock Options
Options granted under the 2021 OIP may be either incentive stock options, as defined by Section 422 of the Internal Revenue Code, or nonqualified stock options. The exercise price of options must not be less than 100% of the fair market value of the Company’s common stock on the date of grant (110% for holders of more than 10% of the voting stock). Options vest as determined by the Board of Directors and expire no later than ten years from the date of grant (five years for optionees owning more than 10% of voting stock).
No stock options or other equity instruments were granted during the periods presented.
18
Restricted Stock Awards (“RSA”)
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation, recognizing expense based on the grant-date fair value of awards over the requisite service period. RSAs are issued at fair market value on the grant date and typically vest over time, subject to continued service. Stock-based compensation is recognized on a straight-line basis over the vesting period unless the awards are fully vested upon grant.
The following table summarizes RSA activity for the six months ended June 30, 2026:
|
| Number of RSAs |
| Weighted Average Grant Date Fair Value |
Balance as of January 1, 2026 |
|
| $ | |
Awarded |
|
| $ | |
Vested |
| ( |
| $ |
Forfeited |
| - |
| $- |
Balance as of June 30, 2026 |
|
| $ |
During the six months ended June 30, 2026, the Company granted a total of
·120,000 shares granted to a consultant, vesting monthly through March 2027; and 10,000 shares granted to a consultant, vesting monthly through June 2026.
Stock-based compensation expense recognized was $5,370 and $3,145 for the three months ended June 30, 2026 and 2025, respectively. Stock-based compensation expense recognized during the six months ended June 30, 2026 and 2025 was $
As of June 30, 2026, the Company had $
NOTE 13 – COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in legal proceedings, claims, and regulatory matters arising in the ordinary course of business. Management, in consultation with legal counsel, evaluates such matters and records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of June 30, 2026, the Company is not aware of any pending or threatened matters that would have a material adverse effect on its financial position, results of operations, or cash flows.
The Company’s debt instruments, including certain convertible notes, contain provisions that may result in settlement through the issuance of shares of common stock or other adjustments upon the occurrence of specified events. See Notes 6 and 8.
The Company has entered into indemnification agreements with its officers and directors that provide for broad indemnification rights. The Company has not recorded any liabilities related to such indemnification obligations, as the likelihood of material payments is considered remote.
The Company does not have any material contractual commitments requiring future minimum payments as of June 30, 2026.
NOTE 14 – SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date these condensed consolidated financial statements were issued. Except as described herein, there were no subsequent events that required recognition or disclosure.
Subsequent to June 30, 2026, the Company, through Farmhouse Treasury LLC, purchased an additional 7,150 shares of the Company’s common stock at an aggregate cost of $1,445. The shares were acquired pursuant to the Company’s share repurchase initiative and are being held as treasury stock pending retirement, cancellation, or other disposition as determined appropriate by management and approved by the Board of Directors.
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q, as well as our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied in these forward-looking statements due to various factors discussed in this Report and in other filings with the Securities and Exchange Commission.
OVERVIEW
Farmhouse, Inc. (the “Company”) is a Nevada corporation that historically engaged in technology development and brand management activities. We currently operate as a public company platform focused on evaluating strategic acquisitions and emerging opportunities, including initiatives in digital assets. The Company currently generates minimal revenue and maintains limited licensing activities that are not material. The Company continues to evaluate opportunities to develop operating business lines; however, there can be no assurance that such activities will result in material revenue in future periods.
We operate through our wholly owned subsidiaries, including Farmhouse Washington, Farmhouse DTLA, Inc., and Farmhouse Treasury LLC (“FT”). Our strategic focus is to identify and complete acquisitions that enhance long-term shareholder value and to reposition the Company toward scalable business opportunities, including through our Farmhouse Treasury division and ongoing evaluation of additional operating businesses.
Digital Asset Treasury Initiative
In September 2025, we organized Farmhouse Treasury LLC (“FT”), a wholly owned Nevada limited liability company, to support our Anti-Debasement Digital Asset Treasury (“DAT”) initiative. FT is a manager-managed entity, with the Company as sole member and our Chief Executive Officer and Chief Technical Officer serving as managers.
FT was established to develop and oversee our digital asset strategy, including treasury management, custody solutions, and capital allocation in assets aligned with an anti-debasement framework, including Bitcoin and tokenized and physical gold. This initiative is intended to position the Company to participate in the emerging digital asset market while maintaining governance, reporting, and compliance standards consistent with those of a public company.
The Company has established an enterprise custody account with BitGo, which provides institutional-grade custody solutions for digital assets.
During the six months ended June 30, 2026, the Company commenced implementation of its digital asset treasury strategy. In connection with the Axiom Holdings Group, LLC financing described below, the Company received digital assets consisting primarily of Bitcoin. As of June 30, 2026, the Company held 7.21 Bitcoin with a fair value of $422,165 and 2.02 PAXG with a fair value of $8,086. The Company recognized an unrealized loss on its crypto assets of $61,977 during the six months ended June 30, 2026.
In addition, FT maintains an investment brokerage account through which it acquired securities during the period. As of June 30, 2026, these investments had an aggregate fair value of $35,182.
FT provides a dedicated structure through which we evaluate and implement digital asset and treasury-related strategies in a controlled and transparent manner. The Company continues to evaluate additional strategic opportunities and capital allocation initiatives. There can be no assurance that such initiatives will generate the anticipated benefits.
20
RESULTS OF OPERATIONS
Six months Ended June 30, 2026 Compared to Six months Ended June 30, 2025.
Operating Expenses
Total operating expenses for the six months ended June 30, 2026 were $274,653, compared to $208,352 for the same period in 2025, as shown below.
For the six months ended June 30, | 2026 |
| 2025 | ||
Accounting and professional fees | $ | 80,213 |
| $ | 77,349 |
Consulting |
| 25,940 |
|
| 1,250 |
Wages and benefits |
| 95,224 |
|
| 92,072 |
Public company related and filing fees |
| 13,760 |
|
| 11,885 |
Other general and administrative expenses |
| 59,516 |
|
| 25,796 |
Total operating expenses | $ | 274,653 |
| $ | 208,352 |
Total operating expenses increased by $66,301, or approximately 32%, for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily attributable to a $33,720 increase in other general and administrative expenses related to increased travel to digital asset conferences and cryptocurrency platform fees and a $24,690 increase in consulting expense. Accounting and professional fees increased by $2,864, wages and benefits increased by $3,152, and public company related and filing fees increased by $1,875.
Other Income (Expenses)
Total other expense for the six months ended June 30, 2026 was $2,804,078, compared to other income of $144,466 for the same period in 2025, as shown below.
For the six months ended June 30, | 2026 |
| 2025 | ||
Gain on settlement of debt | $ | 222 |
| $ | 174,935 |
Unrealized loss - Crypto |
| (61,977) |
|
| - |
Interest expense |
| (531,222) |
|
| (30,469) |
Debt financing cost |
| (445,619) |
|
| - |
Loss on derivative |
| (1,765,482) |
|
| - |
Total other income (expenses) | $ | (2,804,078) |
| $ | 144,466 |
The change from other income of $144,466 for the six months ended June 30, 2025 to other expense of $2,804,078 for the six months ended June 30, 2026 was primarily attributable to a $1,765,482 loss on the change in fair value of derivative liabilities, $445,619 of debt financing cost, a $61,977 unrealized loss on crypto assets, and an increase in interest expense to $531,222. In the prior-year period, the Company recognized a $174,935 gain on settlement of debt.
During the six months ended June 30, 2026, the Company recognized an unrealized loss on crypto assets of $61,977, reflecting changes in the fair value of digital assets held during the period.
The Company also recognized a loss on the change in fair value of derivative liabilities of $1,765,482 during the six months ended June 30, 2026. The increase in derivative liabilities was primarily associated with convertible financing arrangements, including the Axiom financing completed during the period.
Interest expense was $531,222 for the six months ended June 30, 2026, compared to $30,469 for the same period in 2025, primarily due to higher debt balances, the Axiom financing, and amortization of debt discounts associated with convertible debt instruments.
21
Net Income (Loss)
The Company reported a net loss of $3,078,731 for the six months ended June 30, 2026, compared to a net loss of $63,886 for the same period in 2025. The increase in net loss was primarily attributable to the $1,765,482 loss on the change in fair value of derivative liabilities, $445,619 of debt financing cost, increased interest expense, the $61,977 unrealized loss on crypto assets, and higher operating expenses.
Three months Ended June 30, 2026 Compared to Three months Ended June 30, 2025.
Operating Expenses
Total operating expenses for the three months ended June 30, 2026 were $165,204, compared to $117,558 for the same period in 2025, as shown below.
For the three months ended June 30, | 2026 |
| 2025 | ||
Accounting and professional fees | $ | 38,579 |
| $ | 53,665 |
Consulting |
| 25,690 |
|
| 625 |
Wages and benefits |
| 49,188 |
|
| 46,036 |
Public company related and filing fees |
| 6,493 |
|
| 5,722 |
Other general and administrative expenses |
| 45,254 |
|
| 11,510 |
Total operating expenses | $ | 165,204 |
| $ | 117,558 |
Total operating expenses increased by $47,646, or approximately 41%, for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily attributable to a $33,744 increase in other general and administrative expenses related to increased travel to digital asset conferences and cryptocurrency platform fees and a $25,065 increase in consulting expense. These increases were partially offset by a $15,086 decrease in accounting and professional fees. Wages and benefits increased by $3,152 and public company related and filing fees increased by $771.
Other Income (Expenses)
Total other expense for the three months ended June 30, 2026 was $2,758,100, compared to other expense of $14,616 for the same period in 2025, as shown below.
For the three months ended June 30, | 2026 |
| 2025 | ||
Gain on settlement of debt | $ | 222 |
| $ | - |
Unrealized loss - Crypto |
| (60,786) |
|
| - |
Interest expense |
| (500,647) |
|
| (14,616) |
Debt financing cost |
| (445,619) |
|
| - |
Loss on derivative |
| (1,751,270) |
|
| - |
Total other income (expenses) | $ | (2,758,100) |
| $ | (14,616) |
The increase in other expense for the three months ended June 30, 2026 compared to the same period in 2025 was primarily attributable to a $1,751,270 loss on the change in fair value of derivative liabilities, $445,619 of debt financing cost, a $60,786 unrealized loss on crypto assets, and an increase in interest expense to $500,647.
During the three months ended June 30, 2026, the Company recognized an unrealized loss on crypto assets of $60,786 reflecting changes in the fair value of digital assets held during the period.
The Company also recognized a loss on the change in fair value of derivative liabilities of $1,751,270 during the three months ended June 30, 2026. The increase in derivative liabilities was primarily associated with convertible financing arrangements, including the Axiom financing completed during the period.
Interest expense was $500,647 for the three months ended June 30, 2026, compared to $14,616 for the same period in 2025, primarily due to the Axiom financing and amortization of related debt discounts.
22
Net Income (Loss)
The Company reported a net loss of $2,923,304 for the three months ended June 30, 2026, compared to a net loss of $132,174 for the same period in 2025. The increase in net loss was primarily attributable to the loss on the change in fair value of derivative liabilities, the debt financing cost, increased interest expense, the unrealized loss on crypto assets, and higher operating expenses.
Results for the three and six months ended June 30, 2026 reflect the Company’s continued transition in operations, including reduced activity related to certain legacy initiatives and an increased focus on evaluating strategic opportunities, including its digital asset treasury strategy. The Company did not generate revenues during either the current or prior year period and continued to incur costs associated with maintaining public company infrastructure, professional services, and regulatory compliance. Management continues to monitor operating expenses and evaluate capital formation and strategic opportunities.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses. One of the Company’s more significant estimates relates to the valuation of derivative liabilities associated with certain convertible debt instruments.
The Company measures derivative liabilities at fair value at inception and at each reporting date. During the six months ended June 30, 2026, the Company recognized derivative liabilities associated with convertible debt instruments, including the Axiom Note. The fair value of certain derivative liabilities was estimated using option-pricing models, including the Black-Scholes model, and other valuation techniques incorporating significant unobservable inputs. Accordingly, these derivative liabilities are classified as Level 3 measurements under the fair value hierarchy.
As of June 30, 2026, the aggregate fair value of the Company’s derivative liabilities was $4,301,556, compared to $89,455 as of December 31, 2025. Changes in valuation assumptions, including the Company’s stock price, volatility, remaining contractual term, risk-free interest rate and other factors, could result in significant changes in the fair value of these liabilities and the amount of gain or loss recognized in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, Going Concern and Working Capital
The following discussion summarizes our liquidity position, working capital needs and sources of capital as of June 30, 2026 and December 31, 2025.
Cash Flows and Working Capital
We had cash and cash equivalents of $678,462 as of June 30, 2026, compared to $14,188 as of December 31, 2025. The increase in cash during the period was primarily attributable to financing activities, including the Axiom financing completed in May 2026.
As of June 30, 2026, we had total current assets of $1,687,415 and total current liabilities of $7,004,260, resulting in a working capital deficit of $5,316,845, compared to a working capital deficit of $2,215,329 as of December 31, 2025. The increase in the working capital deficit was primarily attributable to the recognition and subsequent remeasurement of derivative liabilities associated with convertible instruments, including the Axiom financing. As of June 30, 2026, derivative liabilities totaled $4,301,556, compared to $89,455 as of December 31, 2025. These derivative liabilities are non-cash liabilities that are remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.
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The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of June 30, 2026, the Company had a stockholders’ deficit of $5,749,883, incurred a net loss of $3,078,731 for the six months ended June 30, 2026, and used $201,143 of cash in operating activities during the period. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.
The Company continues to have limited access to capital and expects additional financing will be necessary to fund operations. Market conditions for microcap companies remain challenging, making it difficult to secure financing on favorable terms. The Company’s capital structure includes convertible debt instruments, certain of which are in default and certain of which contain embedded derivative features that may result in additional non-cash expense and potential dilution.
Management’s plans to address liquidity needs include pursuing additional capital through equity and debt financings, including potential draws under the GHS equity financing agreement, renegotiating or restructuring certain debt obligations, managing operating expenditures, and evaluating strategic opportunities, including the Company’s digital asset treasury initiative and other potential business opportunities.
During the six months ended June 30, 2026, the Company completed the Axiom financing transaction providing $2.0 million of total consideration, consisting of $1.0 million in cash consideration and $1.0 million of digital asset consideration. As of June 30, 2026, $532,852 of the required digital asset consideration remained due from Axiom. Management believes the financing provides additional liquidity to support operations and strategic initiatives in the near term. However, these plans are not entirely within the Company’s control, and there can be no assurance that additional financing will be available on acceptable terms, if at all. Accordingly, substantial doubt about the Company’s ability to continue as a going concern remains.
Financing Activities
The Company has historically funded operations through private placements, convertible debt issuances, short-term advances and related party support.
For the six months ended June 30, 2026, the Company completed the following financing transactions:
The Company issued a $10,000 Series 2026 mandatorily convertible note to an unaffiliated investor. The note bears interest at 10% per annum and matures in February 2029.
On May 4, 2026, the Company completed a financing transaction with Axiom Holdings Group, LLC through the issuance of a convertible promissory note with an original principal amount of $2,222,222. The financing provided total consideration of $2.0 million, consisting of $1.0 million in cash and $1.0 million of digital asset consideration. The Company received a $100,000 advance in March 2026 that was applied toward the financing upon closing and received approximately $884,000 of additional net cash funding at closing after approximately $16,000 of investor legal fees.
During the six months ended June 30, 2026, Axiom transferred a portion of the required digital asset consideration to the Company. As of June 30, 2026, $532,852 of the required digital asset consideration remained due from Axiom.
The Axiom Note bears interest at 15% per annum and matures ten months from issuance. The Note contains mandatory conversion provisions and an embedded conversion feature accounted for as a derivative liability. At inception, the Company recognized a derivative liability of $2,445,619, a debt discount of $2,222,222, and debt financing cost of $445,619 due to the derivative liability exceeding the proceeds. During the six months ended June 30, 2026, the Company recognized $416,666 of amortization expense related to the debt discount. The carrying value of the Axiom Note was $416,666 as of June 30, 2026.
Reference is made to Notes 6, 8 and 9 to the condensed consolidated financial statements included under Item 1 of this Quarterly Report for additional information regarding the Company’s convertible debt, Axiom financing and derivative liabilities.
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Proceeds from financing activities have been used primarily for general corporate purposes, including working capital, public company expenses, professional fees, strategic initiatives and repayment of certain obligations.
Related Party Transactions
The Company has engaged in transactions with related parties, including advances from officers, accrued compensation and convertible debt.
During the six months ended June 30, 2026, the Company repaid in full the outstanding advances previously made by officers, as well as a $4,500 promissory note issued to the Company’s Chief Executive Officer and related accrued interest. The settlement of officer advances resulted in a $1,000 amount due from a related party as of June 30, 2026.
As of June 30, 2026, amounts due to related parties – current totaled $293,096, consisting of $290,000 of accrued compensation payable to the Company’s contracted Chief Financial Officer and $3,096 of accrued interest on related party notes.
In April 2025, the Company issued a $25,000 Series 2025 mandatorily convertible note to the spouse of a Company director. The note remained outstanding as of June 30, 2026 and is classified as a long-term related party liability.
Additional information regarding related party transactions is included in Note 10 to the condensed consolidated financial statements.
Capital Requirements and Outlook
The Company expects to require additional financing to support ongoing operations and strategic initiatives. The Company continues to incur costs associated with maintaining public company infrastructure, professional services and regulatory compliance while evaluating new business opportunities.
The Company maintains an equity financing arrangement with GHS Investments LLC that provides for up to $20.0 million in potential financing over a 24-month term, subject to contractual conditions and the Company’s election to utilize the facility. As of June 30, 2026, the Company had not drawn funds under the facility.
The Company is evaluating various financing alternatives, including debt and equity offerings, strategic partnerships and other capital formation opportunities. If the Company is unable to obtain additional financing, it may be required to further reduce expenditures, curtail operations or delay strategic initiatives.
Axiom Holdings Financing Transaction
During the three months ended June 30, 2026, the Company completed a financing transaction with Axiom Holdings Group, LLC resulting in $2.0 million of total consideration, consisting of $1.0 million in cash consideration and $1.0 million of digital asset consideration.
The financing was completed through the issuance of a convertible promissory note with an original principal balance of $2,222,222, reflecting a 10% original issue discount. The note bears interest at 15% per annum, matures ten months from issuance, and contains variable conversion provisions based on the Company’s future stock price, subject to stated floor and ceiling prices.
The Company received a $100,000 advance from Axiom in March 2026 in connection with the contemplated financing. Upon closing on May 4, 2026, the advance was applied toward Axiom’s subscription. The Company received approximately $884,000 of additional net cash funding at closing, representing the remaining cash consideration after giving effect to the prior advance and approximately $16,000 withheld for investor legal fees.
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During the six months ended June 30, 2026, Axiom transferred a portion of the required digital asset consideration to the Company, consisting primarily of Bitcoin. As of June 30, 2026, the Company held crypto assets with a fair value of approximately $430,251, and $532,852 of the required digital asset consideration remained due from Axiom and is presented as Due from Axiom on the accompanying condensed consolidated balance sheet.
Proceeds have been used for general corporate purposes, including working capital, strategic initiatives, digital asset treasury activities, and repayment of certain obligations. Reference is made to Notes 8 and 9 to the condensed consolidated financial statements included under Item 1 of this Quarterly Report for additional information regarding the Axiom financing and related derivative liability.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision of our Principal Executive Officer and Principal Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our officers concluded that our disclosure controls and procedures were not effective as of that date.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness
Our controls and procedures are designed to provide reasonable, not absolute, assurance of achieving their objectives. Because of inherent limitations, no control system can prevent all errors or fraud.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this report, there were no material pending legal proceedings against us, and we do not believe the outcome of any current claims or legal proceedings will have a material adverse effect on our financial position, results of operations, or cash flows.
ITEM 1A. RISK FACTORS
We qualify as a smaller reporting company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the six months ended June 30, 2026, the Company issued a $10,000 Series 2026 mandatorily convertible note to an unaffiliated investor. The note bears interest at 10% per annum, matures in February 2029, and contains conversion features substantially similar to the Company’s Series 2025 mandatorily convertible notes.
On May 4, 2026, the Company completed a financing transaction with Axiom Holdings Group, LLC pursuant to which the Company issued a convertible promissory note with an original principal amount of $2,222,222, reflecting a 10% original issue discount on total consideration of $2.0 million. The consideration consisted of $1.0 million in cash and $1.0 million of digital asset consideration. The note bears interest at 15% per annum, matures ten months from its original issue date, and is convertible into shares of the Company’s common stock pursuant to the terms of the note. Reference is made to Note 8 to the condensed consolidated financial statements for additional information regarding the Axiom financing.
In addition, on January 16, 2026, the Company issued 50,000 shares of restricted common stock for legal services rendered in connection with the Company’s registration statement. The issuance was made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of June 30, 2026, the Company was in default under the following debt obligations:
·a $45,000 convertible promissory note issued to an unrelated individual, which matured in July 2018;
·a $50,000 promissory note issued to an unrelated individual, which matured in December 2021;
·a $25,000 Series 2023 convertible note issued to an unrelated individual, which matured in June 2026;
The Company is currently evaluating alternatives with respect to these obligations, including repayment, extension, restructuring, or conversion where applicable. These defaults may adversely affect the Company’s liquidity and ability to obtain future financing.
Reference is made to Notes 6 and 7 to the condensed consolidated financial statements included under Item 1 of this Report for additional information regarding these obligations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are attached hereto unless otherwise indicated as being incorporated by reference, as follows:
Exhibit
Number |
|
Description |
|
|
|
31.1 |
| Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act. * |
|
|
|
31.2 |
| Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act. * |
|
|
|
32.1 |
| |
|
|
|
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 20, 2026 | By: | /s/ Evan Horowitz |
|
| EVAN HOROWITZ |
|
| Chief Executive Officer, Director |
|
|
|
| By: | /s/ Lanny R. Lang |
|
| LANNY R. LANG |
|
| Chief Financial Officer, Chief Accounting Officer |
|
| (Principal Financial and Accounting Officer) |
|
|
|
| By: | /s/ Michael Landau |
|
| MICHAEL LANDAU |
|
| Chief Technology Officer, Treasurer, Director |
|
|
|
| By: | /s/ Leslie Katz |
|
| LESLIE KATZ |
|
| Director |
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