USBC, Inc 10-Q for FY2026 Q3
USBC, Inc. (USBC)
10-Q
2026-11-06
For: 2026-09-30
View Original
Added on
November 06, 2026
About this 10-Q
USBC, Inc filed this 10-Q on November 6, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $4.94M
- compared with a net loss of $12.35M a year earlier
- Diluted EPS
- $0.01
- compared with -$0.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2026
For the transition period from _______ to ________
Commission File number 001-37479
| (Exact name of registrant as specified in 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 | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | o | Accelerated filer | o | |||||||||||
| x | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of common stock, $0.001 par value, issued and outstanding as of November 4, 2026: 388,169,806 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
TABLE OF CONTENTS
| Page Number | ||||||||
2
ITEM 1. FINANCIAL STATEMENTS
USBC, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Prepaid expenses | |||||||||||
| Note receivable, net | |||||||||||
| Derivative assets and digital assets receivable, net | |||||||||||
| Total current assets | |||||||||||
| OTHER ASSETS | |||||||||||
| Digital assets | |||||||||||
| Deferred tax asset | |||||||||||
| Other non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable - trade | $ | $ | |||||||||
| Accrued expenses (1) | |||||||||||
| Loan payable | |||||||||||
| 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 14) | |||||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
Common stock - $ | |||||||||||
| Additional paid in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||||
(1) Includes approximately $0.6 million payable for costs incurred pursuant to service agreements with affiliated entities as of September 30, 2026. See Note 13.
(2) 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.
3
USBC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended, | Nine Months Ended, | ||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | $ | $ | $ | $ | |||||||||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (1) | |||||||||||||||||||||||
| 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 (loss), net | ( | ( | |||||||||||||||||||||
| Provision for credit losses | ( | ( | |||||||||||||||||||||
| Total other income (expense), net | ( | ( | ( | ||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ( | ( | ||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | ( | ||||||||||||||||||||
| NET INCOME (LOSS) | ( | ( | ( | ||||||||||||||||||||
| Deemed dividends on Series C, D and H Preferred Stock | ( | ( | |||||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Income (loss) per share | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted average shares of common stock outstanding (2) | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
(1) Includes approximately $1.9 million and $8.2 million of costs incurred pursuant to service agreements with affiliated entities for the three and nine months ended September 30, 2026, respectively.
(2) Information pertaining to the number of shares outstanding and per share data 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.
4
USBC, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
(Unaudited)
| Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Series H Convertible Preferred Stock | Common Stock | Additional Paid in Capital | Accumulated Deficit | Total Stockholders' (Deficit)/Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Share | $ | Shares(1) | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividends on Series C and D Preferred Stock | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for At The Market common stock offering | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt payment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impact of reverse stock split due to rounding | — | — | — | — | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividends on Series C and D Preferred Stock | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for At The Market common stock offering | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt payment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series H Convertible Preferred Stock | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend due to repricing of Series C, D and H Preferred Stock | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series C and D Convertible Preferred Stock | ( | ( | ( | ( | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series H Convertible Preferred Stock | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt payment | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impact of reverse stock split due to rounding | — | — | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock option exercises | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital contribution | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for stock option exercises | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Information pertaining to the number of shares outstanding and per share data 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.
5
USBC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended, | |||||||||||
| September 30, 2026 | September 30, 2025 | ||||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in | |||||||||||
| Operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
Loss on disposal of fixed assets (1) | |||||||||||
| Stock based compensation | |||||||||||
| Provision for credit losses | |||||||||||
| Amortization of operating lease right-of-use asset | |||||||||||
| Issuance of common stock for services | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Interest expense for default of convertible notes | |||||||||||
| Interest expense for repricing of warrants | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Change in fair value of digital assets | |||||||||||
| Other derivative income, net | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Interest income on note receivable | ( | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Prepaid expenses | ( | ( | |||||||||
| Operating lease right-of-use liability | ( | ( | |||||||||
| Derivative liabilities | |||||||||||
| Digital assets - receivable, net | ( | ||||||||||
| Derivative assets | ( | ||||||||||
| Accounts payable - trade and accrued expenses | |||||||||||
| Other long-term assets | |||||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ( | |||||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | |||||||||||
| Purchase of USDC | ( | ||||||||||
| Liquidation of USDC | |||||||||||
| Draws on note receivable | ( | ||||||||||
| NET CASH USED IN INVESTING ACTIVITIES: | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Capital contribution | |||||||||||
| Proceeds from draws on loan payable | |||||||||||
| Proceeds from issuance of common stock - Goldeneye 1995 LLC investment | |||||||||||
| Proceeds from debt offering | |||||||||||
| Proceeds from Original Issuance Notes | |||||||||||
| Proceeds from issuance of common stock for stock option exercise | |||||||||||
| Redemption of Series H Preferred Stock | ( | ||||||||||
| Repayment of convertible notes payable | ( | ||||||||||
| Proceeds from convertible notes payable | |||||||||||
| Proceeds from At The Market common stock offering | |||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | |||||||||||
| NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| 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 | $ | $ | |||||||||
| Premiums received in digital assets from treasury trading strategy | $ | $ | |||||||||
| Conversion of notes payable into Series H convertible preferred stock | $ | $ | |||||||||
(1) Represents the net book value of fixed assets sold in connection with the March 27, 2026 divestiture transaction. See Note 13.
The accompanying notes are an integral part of these consolidated financial statements.
6
USBC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited consolidated financial statements have been prepared by USBC, Inc. (“the Company,” “us,” “we,” or “our”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of our management, all adjustments, consisting of only normal recurring accruals, necessary for a fair presentation of the financial position, results of operations, and cash flows for the fiscal periods presented have been included.
These unaudited financial statements should be read in conjunction with the audited financial statements and related notes included in our Transition Report filed on Form 10-K for the three months ended December 31, 2025, filed with the SEC on March 25, 2026. The results of operations for the nine months ended September 30, 2026 are not necessarily indicative of the results expected for the full fiscal year ending December 31, 2026, or for any other fiscal period.
1. ORGANIZATION
USBC, Inc. (NYSE American: USBC) is a publicly traded technology company with a strategic focus on developing innovative financial-services network infrastructure to enable digital-asset banking capabilities and tokenized-deposit solutions for banks. USBC develops technology to deliver transformative financial services, including digital assets and banking solutions. USBC pursues long‐term value creation for its stockholders through advancement of the tokenized deposit program offering, a tokenized representation of a U.S.-dollar denominated bank deposit account that operates on blockchain technology and is embedded with digital identity.
The Company was incorporated under the laws of the State of Nevada in 1998. The Company changed its legal name and ticker symbol from Know Labs, Inc. (KNW) to USBC, Inc. (USBC), in August 2025, in connection with the strategic transaction with Goldeneye 1995, LLC.
On March 27, 2026, the Company completed the divestiture of its legacy non-invasive sensor technology business with the transfer of the issued and outstanding equity interests of its wholly-owned subsidiary, Particle, Inc., to a newly-formed entity controlled by its former Chairman, President and CEO, Ronald P. Erickson. The Company also agreed to provide short-term financing in an aggregate principal sum of up to $450,000 to help ensure a smooth transition of the business to independent ownership until permanent equity financing is in place. The financial impact of the divestiture transaction was not material to the Company's financial statements. As of September 30, 2026, the Company had advanced $450,000 of the total amount committed under the credit facility.
USBC has also implemented a Bitcoin treasury strategy to bolster pre-launch development and research across its various divisions. The Company recorded other derivative loss, net of $3,329,651 and $1,101,541 for the three and nine months ended September 30, 2026, respectively, reflecting realized and unrealized gains and losses associated with its treasury trading strategy. The Company began buying and selling call options on its Bitcoin holdings in the fourth fiscal quarter of 2025.
With a focus on identity, inclusion, innovation, and risk management, USBC is dedicated to creating long-term stockholder value in a rapidly evolving financial landscape. Its operating results for the nine months ended September 30, 2026 primarily reflect ongoing investment in these initiatives and continued development of its tokenized deposit platform and related technology infrastructure.
7
2. LIQUIDITY AND GOING CONCERN
As of September 30, 2026, the Company had cash and cash equivalents of $3.5 million and an accumulated deficit of approximately $231.9 million. The Company has historically incurred recurring operating losses and negative operating cash flows and expects to continue to incur operating losses as it invests in its financial technology platform and digital asset initiatives. For the nine months ended September 30, 2026, the Company incurred a net loss of approximately $41.4 million and used $23.5 million of cash in operating activities. The $41.4 million net loss for the nine months ended September 30, 2026, was comprised of several core non-cash items including a $4.0 million non-cash unrealized loss on the change in fair value of digital assets, $17.8 million of non-cash stock-based compensation expense, and a $3.5 million non-cash provision for credit losses, partially offset by a $10.6 million non-cash deferred income tax benefit.
The Company manages its liquidity through cash on hand, its Bitcoin treasury holdings and access to debt and equity financing, including its Bitcoin-backed credit facility, promissory note and at-the-market (“ATM”) equity offering program. The Company may monetize Bitcoin holdings through sales or collateralized borrowings, subject to applicable contractual and collateral requirements.
At September 30, 2026, $21.0 million was outstanding under the Company’s Bitcoin-collateralized Master Loan Agreement with Payward Interactive, Inc. On October 12, 2026, the aggregate borrowing commitment increased from $25.0 million to $40.0 million, leaving $19.0 million of additional borrowing capacity as of that date, subject to applicable borrowing conditions, collateral requirements and execution of individual loan term sheets. The amended collateral arrangements also provide for cross-collateralization of borrowings and certain digital asset derivative obligations. See Notes 7 and 16.
On September 25, 2026, the Company entered into an unsecured promissory note with Goldeneye 1995 LLC, the Company’s controlling stockholder and an entity solely owned and managed by the Company's Chairman and Chief Executive Officer. The note permits advances of up to $22.0 million, bears interest at 8.5 % per annum and matures on September 25, 2029. No amounts were outstanding at September 30, 2026. See Note 14.
On July 1, 2026, the Company entered into a Consulting Agreement with Hard Yaka Ventures Management Co., LLC (“Hard Yaka”), an affiliate of the Company’s Chairman and Chief Executive Officer, to support the continued development of the tokenized deposit program. During the nine months ended September 30, 2026, the Company received approximately $3.0 million in capital contributions from Hard Yaka. See Note 13.
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 evaluation considered projected cash requirements and available liquidity resources, including cash on hand, Bitcoin holdings available to be monetized or pledged as collateral to generate liquidity, and access to external financing arrangements. 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 consolidated financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES: ADOPTION OF ACCOUNTING STANDARDS
Basis of Presentation – These consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Certain prior-period amounts have been reclassified to conform to the current-period presentation. As of December 31, 2025, operating lease right-of-use assets of $186,900 , previously presented separately, have been reclassified to other non-current assets. This reclassification had no effect on total assets, total liabilities, stockholders’ equity, results of operations or cash flows.
Effective beginning in fiscal year 2026, the Company 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 their financial results on a calendar-year basis. The Company filed a Transition Report on Form 10-K that included the financial information for the transition period from October 1, 2025 to December 31, 2025 (the "Transition Period"). The Company did not recast the consolidated financial statements for the period from January 1, 2025 to December 31, 2025.
8
Restricted Cash – Restricted cash consists of cash balances held in escrow on behalf of an affiliate that are legally or contractually restricted as to withdrawal or use. The Company's restricted cash is presented separately from cash and cash equivalents on the consolidated balance sheets. For purposes of the consolidated statements of cash flows, cash, cash equivalents, and restricted cash are included in total cash, cash equivalents, and restricted cash.
The following table presents a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the corresponding amounts presented in the Consolidated Statements of Cash Flows:
| September 30, 2026 | December 31, 2025 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
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 September 30, 2026, the Company primarily held Bitcoin in its corporate treasury, with lesser amounts of USD Coin ("USDC"), a cryptocurrency backed by US dollars and equivalent assets. 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.
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 three and nine months ended September 30, 2026, the Company net paid 1.74 Bitcoin, and earned 13.88 Bitcoin, respectively, through its trading strategy, which has been recognized as other derivative income, net, in the Consolidated Statements of Operations. The Company settles its derivative transactions in both Bitcoin and fiat currency. During the three months ended September 30, 2026, the Company received $377,968 in cash from derivative settlements recognized as other derivative income. The Company obtained 2.617
A summary of activity in Bitcoin and digital assets - receivable, net for the nine months ended September 30, 2026 was as follows:
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| Digital assets | Digital assets - receivable, net | |||||||
| Bitcoin and digital assets - receivable, net at fair value as of December 31, 2025 | $ | $ | ||||||
| Bitcoin generated through trading | — | |||||||
| Fees | ( | — | ||||||
| Provision for credit losses | — | ( | ||||||
| Unrealized gain (loss) | ( | |||||||
| Bitcoin and digital assets - receivable, net at fair value as of March 31, 2026 | $ | $ | ||||||
| Bitcoin generated through trading | — | |||||||
| Fees | ( | — | ||||||
| Provision for credit losses | — | ( | ||||||
| Unrealized gain (loss) | ( | ( | ||||||
| Outstanding premium settlement receivable | ( | |||||||
| Bitcoin and digital assets - receivable, net at fair value as of June 30, 2026 | $ | $ | ||||||
| Bitcoin generated through trading | — | |||||||
| Fees | ( | — | ||||||
| Provision for credit losses | — | ( | ||||||
| Unrealized gain (loss) | ||||||||
| Outstanding premium settlement receivable | ( | |||||||
| Bitcoin and digital assets - receivable, net at fair value as of September 30, 2026 | $ | $ | ||||||
The table above excludes $4,998 of USDC included in digital assets on the Consolidated Balance Sheet as of September 30, 2026. The Company did no t hold any USDC as of December 31, 2025. The Company converted $10.0 million of USDC to USD on a one-to-one basis during the nine months ended September 30, 2026.
The Company stores its digital assets with third-party qualified custodians that employ 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.
The Company accounts for its digital assets, which are comprised primarily 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 uses call option strategies on its Bitcoin holdings to generate premium income. These derivative instruments are not designated as hedging instruments for accounting purposes under ASC 815. 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.
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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 ASU 2023-08.
The following table summarizes the activity in the allowance for credit losses on digital assets receivable for the nine months ended September 30, 2026:
| Allowance for Credit Losses | |||||
| Allowance for credit losses as of December 31, 2025 | $ | ||||
| Provision for credit losses | ( | ||||
| Net charge-offs/(recoveries) | |||||
| Allowance for credit losses as of March 31, 2026 | $ | ( | |||
| Provision for credit losses | ( | ||||
| Net charge-offs/(recoveries) | |||||
| Allowance for credit losses as of June 30, 2026 | $ | ( | |||
| Provision for credit losses | ( | ||||
| Net charge-offs/(recoveries) | |||||
| Allowance for credit losses as of September 30, 2026 | $ | ( | |||
Note receivable, net – The Company accounts for its note receivable, net at amortized cost, which represents the outstanding principal balance, net of unearned income, and expected credit losses. The Company records accrued interest within Interest income on the Consolidated Statements of Operations, and outstanding amounts in Note receivable, net on the Consolidated Balance Sheets (see Notes 6 and 14 for more information).
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Revenue Recognition– The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. The Company is currently developing its tokenized deposit platform and has not commenced revenue-generating operations. Accordingly, no revenue from contracts with customers has been recognized during the periods presented. Upon commencement of commercial operations, the Company will recognize revenue in accordance with ASC 606 based on the specific performance obligations and contractual arrangements with its customers.
Upon full commercial launch of the tokenized deposit program offering, revenue recognition from contracts with customers will be determined 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 ASC 606. 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 of these financial statements 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 evaluated the divestiture of the legacy non-invasive sensor technology business under ASC 205‑20, Presentation of Financial Statements—Discontinued Operations. Although the divested operations constituted a component of the Company, management concluded the disposal did not represent a strategic shift that has (or will have) a major effect on the Company’s operations and financial results. This conclusion was based on, among other factors, (i) the Company’s strategic pivot to financial‑technology and digital‑asset initiatives that was implemented prior to the divestiture, (ii) the substantially completed wind‑down of the legacy sensor research activities prior to the divestiture, (iii) the absence of meaningful revenue generated from the legacy sensor activities during the periods presented, and (iv) the immateriality of assets and liabilities associated with the divested operations. Accordingly, the results of the legacy sensor activities have not been reported as discontinued operations, and the Company has not reclassified prior‑period financial statements. Costs associated with the legacy sensor activities during the three and nine months ended September 30, 2026 and 2025 consisted primarily of research and development costs and were included in research and development expenses in the accompanying Consolidated Statements of Operations. The assets and liabilities related to the legacy sensor business were immaterial.
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Fair Value Measurements and Financial Instruments – ASC 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.
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 Sheet 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 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 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 Company has appointed Hyrcanian Asset Management, LLC (the “Manager”) to perform certain treasury management services, including execution and settlement of the options in physical delivery. The Company has 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 income (expense), net in the Consolidated Statements of Operations, depending on the nature of the derivative. Premiums collected in bitcoin from derivative contracts have been disclosed in the statement of cash flows as part of non-cash operating activities with valuation 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.
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Net Income (Loss) per Share – Under the provisions of ASC 260, Earnings Per Share, basic 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 income (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 stockholders increased the net loss available to common stockholders and impact the net loss per share calculation reported for historical periods prior to the redemption of all convertible securities in August 2025.
As of September 30, 2026 and December 31, 2025, the Company had 388,169,649 388,143,679 104,349,780 shares of common stock and warrants for the purchase of 955,626 shares of the Company’s common stock. As of December 31, 2025, there were options outstanding for the purchase of 96,150,750 shares of common stock and warrants for the purchase of 1,154,106 shares of the Company’s common stock.
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options.
The components of basic and diluted EPS were as follows:
| Three Months Ended, | Nine Months Ended, | ||||||||||||||||||||||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | ||||||||||||||||||||
| Net income (loss) attributable to common stockholders (A) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Weighted average outstanding shares of common stock (B) | |||||||||||||||||||||||
| Dilutive effect of stock options | |||||||||||||||||||||||
| Common stock and common stock equivalents (C) | |||||||||||||||||||||||
| Earnings (Loss) Per Share | |||||||||||||||||||||||
| Basic (A/B) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Diluted (A/C) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Stock options of 104,347,699 , and 48,634,480 , and warrants of 955,626 , and 1,204,106 , as of September 30, 2026 and September 30, 2025, respectively, were excluded from the computation of diluted net income (loss) per share because their inclusion would have been anti-dilutive.
Comprehensive income (loss) – Comprehensive income (loss) is defined as the change in equity of a business during a period from non-owner sources. The Consolidated Statements of Comprehensive Income (Loss) have been omitted, as net loss equals comprehensive income (loss).
Dividend Policy – The Company has never paid 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.
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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 100% of the Company’s total federal and state deferred tax assets was established as of September 30, 2025. Subsequent to September 30, 2025, the Company believes that the unrealized gain on its digital asset holdings may present future taxable income, and reversed the approximately $5.7 million valuation allowance as of December 31, 2025.
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.
Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements Not Yet Adopted
The following table summarizes recently issued accounting standards that may affect the Company's consolidated financial statements.
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| Accounting Standards Update (ASU) | Description | Effective Date | Expected Impact on the Company | ||||||||
| ASU 2024-03 and ASU 2025-01 — Disaggregation of Income Statement Expenses | Requires additional disclosures of specified expense categories in the notes to the financial statements. | Annual: January 1, 2027. Interim: January 1, 2028. | The Company is evaluating the additional disclosure requirements. Adoption is expected to affect disclosures rather than recognition or measurement. | ||||||||
| ASU 2025-06 — Internal-Use Software | Updates the criteria for capitalizing internal-use software development costs, including consideration of project authorization and probability of completion. | January 1, 2028. | The Company is evaluating the impact on its accounting for software development costs, including its tokenized deposit platform. | ||||||||
4. FAIR VALUE MEASUREMENTS
Fair Value Hierarchy: The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Consolidated Balance Sheets. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities measured on a recurring or nonrecurring basis.
The Company’s assets and liabilities measured at fair value on a recurring basis consist of digital assets, a money market account, 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 of Bitcoin, and USDC, 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.
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The following tables present the Company's assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy:
| Assets Measured at Fair Value at September 30, 2026 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting and Collateral | Total | |||||||||||||||||||||||||
| Digital assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Money market account | |||||||||||||||||||||||||||||
| Derivative assets and digital assets receivable, net | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Assets Measured at Fair Value as of December 31, 2025 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting and Collateral | Total | |||||||||||||||||||||||||
| Digital assets | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Money market account | |||||||||||||||||||||||||||||
| Derivative assets and digital assets receivable, net | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Liabilities Measured at Fair Value as of September 30, 2026 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting and Collateral | Total | |||||||||||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Liabilities Measured at Fair Value as of December 31, 2025 | |||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Netting and Collateral | Total | |||||||||||||||||||||||||
| Derivative liabilities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
There were no transfers in or out of Level 3 or between levels during the three and nine months ended September 30, 2026, or 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 reporting period and the fair value impacts are reflected within Other derivative income, net in the Consolidated Statements of Operations. The Company had outstanding digital asset option contracts as of September 30, 2026 and December 31, 2025 with gross notional values of approximately $212.0 million and $114.8 million, respectively. As of September 30, 2026, 89 % of these contracts will mature within three months, and 11 % of these contracts will mature between three and six months. As of December 31, 2025, 100 % of these contracts matured within three months.
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As of September 30, 2026, the Company had outstanding digital asset option contracts recognized as current assets within derivative assets with a fair value of $1,643,024 , and outstanding option contracts recognized as current liabilities within derivative liabilities with a fair value of $5,534,942 . 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 $61,348 , and outstanding option contracts recognized as current liabilities within derivative liabilities with a fair value of $509,022 .
The Company had unrealized loss, net related to outstanding option contracts of $2,066,624 , and $187,514 as of September 30, 2026, and 2025. During the three and nine months ended September 30, 2026, the Company recognized a realized gain (loss), net related to derivative contracts of $(1,263,028 ), and $942,907 , respectively, within Other derivative income (loss), net in the Consolidated Statements of Operations. The Company recognized a realized gain (loss), net related to derivative contracts of $470,668
6. NOTE RECEIVABLE, NET
On March 27, 2026, the Company entered into a short-term promissory note with Particle Acquisition Corporation, in connection with the Stock Purchase Agreement (see Note 13 for more information). The note provides for borrowing up to $450,000 , bears interest at 10 % per annum, and was scheduled to mature on September 23, 2026. Pursuant to the terms of the note, the maturity date was extended 180 days, and will mature on March 22, 2027. As of September 30, 2026 the Company funded $450,000 under the note, and had recorded an allowance for credit losses of $360,000 related to the funded note receivable. The Company recognized interest income of $8,610 , and $12,616 within Interest income on the Consolidated Statements of Operations during the three and nine months ended September 30, 2026, respectively.
7. LOAN PAYABLE
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 the execution of one or more individual loan term sheets (the "Facility"). 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 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 one year fixed-term loan of $5.0 million bearing interest at a rate of 8.5 % per annum under the MLA maturing on March 18, 2027. 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 offering. 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”).
On April 27, 2026, the Company drew an additional fixed-rate borrowing of $5.0 million (the "Second Draw") under the MLA. The Second Draw increases the aggregate principal amount outstanding under the MLA to $10.0 million and bears interest at a rate of 8.5 % per annum maturing on April 27, 2027, unless earlier terminated in accordance with the terms of the MLA.
On June 1, 2026, the Company drew an additional fixed-rate borrowing of $5.0 million (the "Third Draw") under the MLA. The Third Draw increases the aggregate principal amount outstanding under the MLA to $15.0 million and bears interest at a rate of 8.5 % per annum maturing on June 1, 2027, unless earlier terminated in accordance with the terms of the MLA.
On July 28, 2026, the Company drew an additional fixed-rate borrowing of $3.0 million (the "Fourth Draw") under the MLA. The Fourth Draw increases the aggregate principal amount outstanding under the MLA to $18.0 million and bears interest at a rate of 8.5 % per annum maturing on July 28, 2027, unless earlier terminated in accordance with the terms of the MLA.
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On September 11, 2026, the Company drew an additional fixed-rate borrowing of $3.0 million (the "Fifth Draw") under the MLA. The Fifth Draw increases the aggregate principal amount outstanding under the MLA to $21.0 million and bears interest at a rate of 8.5 % per annum maturing on September 11, 2027, unless earlier terminated in accordance with the terms of the MLA. The carrying value of this financial instrument approximates fair value due to the short-term maturity of this instrument.
The Facility is collateralized by Bitcoin which is pledged to the counterparty in an amount of $40.1 million held within Digital Assets on the Consolidated Balance Sheet as of September 30, 2026. Under the terms of the agreements, the secured party is permitted to exercise control and liquidate such pledged assets under certain conditions, including default or margin deficiencies. The Company was in compliance with all covenants associated with the MLA as of September 30, 2026. The Company recognized $386,042 , and $619,792 , in interest expense during the three and nine months ended September 30, 2026, respectively, in connection with the MLA as Interest expense on the Consolidated Statements of Operations, and unpaid balances as Accrued expenses on the Consolidated Balance Sheet as of September 30, 2026.
Under the terms of the MLA, the required initial margin ratio was 150 %. If the margin ratio declines to 130 % or lower, the lender may issue a margin call requiring the Company to either post additional Bitcoin collateral or partially repay outstanding borrowings within 24 hours in order to restore compliance with the required margin ratio. Under the MLA, if the margin ratio declines to 120 % or lower and the Company does not timely cure the deficiency in accordance with the terms of the MLA, the lender may exercise its contractual rights with respect to the collateral, including liquidation rights. In addition, under the MLA, the Company may request the release of excess collateral if the margin ratio exceeds 170 % for two consecutive days, subject to the terms and conditions of the MLA. The fair value of pledged Bitcoin collateral is determined based on the applicable Bitcoin market spot rate in accordance with the collateral valuation and maintenance provisions of the MLA.
8. PROPERTY AND EQUIPMENT
Property and equipment consisted primarily of machinery, computer equipment, and office furniture and was depreciated using the straight-line method over estimated useful lives of approximately three years . During the nine months ended September 30, 2026, the Company disposed all of its property and equipment, and recognized a loss on disposal of fixed assets of $22,363 in the Consolidated Statements of Operations. As of September 30, 2026, the Company had no remaining property and equipment.
9. LEASES
The Company previously evaluated its existing 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 takes 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.
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The Company’s operating leases primarily relate to vacant office and development facilities and generally have initial terms ranging from 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 September 30, 2026 and December 31, 2025, ROU assets were $89,489 and $186,900 , respectively, and operating lease liabilities were $172,244 and $234,818 , respectively. During the three months ended September 30, 2026 and 2025, the Company recognized total lease expense of $11,280 and $36,882 , respectively. During the nine months ended September 30, 2026 and 2025, the Company recognized total lease expense of $59,691 and $102,956 , respectively. During the nine months ended September 30, 2026 and 2025, cash paid for amounts included in the measurement of lease liabilities was $24,853 and $114,392 , respectively.
The weighted average remaining lease term for the operating leases was 10 months, and 19 months at September 30, 2026 and December 31, 2025, respectively. The weighted average discount rate for the Company's operating lease was 8.86
The minimum future lease payments as of September 30, 2026 are as follows:
| Operating leases | |||||
2026 (excluding the nine months ended September 30, 2026) | $ | ||||
| 2027 | |||||
| Total remaining payments | |||||
| Less imputed interest | ( | ||||
| Total lease liability | $ | ||||
10. EQUITY
Authorized Capital Stock
The following description summarizes important terms of the classes of the Company's authorized capital stock as of September 30, 2026. This summary does not purport to be complete and is qualified in its entirety by the provisions of the Company's articles of incorporation, as amended, and second amended and restated bylaws, as amended.
The Company’s authorized capital stock consists of 750,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of blank check preferred stock, par value $0.001 per share.
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 September 30, 2026, there were 388,169,649 175 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.
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.
Nine months ended September 30, 2026
During the nine months ended September 30, 2026, the Company issued 25,970 shares of common stock as a result of stock option exercises.
Nine months ended September 30, 2025
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 Company issued 1,708,124 shares under the Sales Agreement and received gross proceeds of $1,269,212 during the nine months ended September 30, 2025.
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The offer and sale of these shares was made pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-276246) filed with the SEC on December 22, 2023 and declared effective by the SEC on January 11, 2024, as supplemented to date (the "Shelf Registration Statement"). Pursuant to the Shelf Registration Statement, the Company may offer and sell up to a maximum of $5,000,000 of shares of its common stock under the Sales Agreement. On September 4, 2025, the Company determined to increase the amount available for sale under the Sales Agreement, up to an aggregate offering price of $14,500,000 .
During the nine months ended September 30, 2025, the Company issued 6,279,536 shares of its common stock at $0.41 per share related to a principal payment of senior convertible debt with Lind Global Fund II, LP for a total value of $2,599,920 .
During the nine months ended September 30, 2025, the Company issued 1,408,731 shares of common stock to employees, directors and investors. The shares were valued at $0.78 per share and the Company expensed $1,096,142 related to the issuances.
Warrants to Purchase Common Stock
A summary of the warrants outstanding as of September 30, 2026 was as follows:
| Shares | Weighted Average Exercise Price | ||||||||||
| Outstanding as of December 31, 2025 | $ | ||||||||||
| Issued | |||||||||||
| Exercised | |||||||||||
| Forfeited | |||||||||||
| Expired | ( | ||||||||||
| Outstanding as of September 30, 2026 | $ | ||||||||||
The outstanding and exercisable warrants of 955,626 had no aggregate intrinsic value as of September 30, 2026.
11. 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 65,000,000 shares. The 2021 Plan was previously amended effective July 31, 2025 to increase the plan share reserve to a total of 50,000,000 shares.
Under the 2021 Plan, all 115.3 million shares of common stock available under the Plan Share Reserve, as well as future shares added through the evergreen feature, are eligible for grants as “incentive stock options” intended to qualify for special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended.
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 (i) 15,000,000 shares, (ii) 4 % of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year and (iii) such lesser number of shares as determined by the Board, in each case subject to adjustment for any stock split, reverse stock split, stock dividend or similar change in capitalization. Effective January 1, 2026, pursuant to the evergreen provision of the 2021 Plan, the maximum number of shares of common stock authorized under the 2021 Plan was increased by 15,000,000 shares to 130.4 million shares.
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Stock Option Activity
Nine Months Ended September 30, 2026
During the nine months ended September 30, 2026, the Company issued stock option grants for 22,700,000 shares of common stock at a weighted average exercise price of $0.36 . These options generally vest quarterly over three years beginning on the one-year anniversary of the grant date, with certain grants vesting earlier in accordance with the applicable award agreements. The options have contractual terms of ten years from the date of grant.
During the nine months ended September 30, 2026, the Company repriced 82,000,000 stock options from an exercise price of $1.10 per share to $0.37 per share, representing the closing market price of the Company’s common stock on the date of Board approval. The Company recognized incremental stock-based compensation expense of $964,930 related to the option repricing during the nine months ended September 30, 2026, in accordance with ASC 718.
During the nine months ended September 30, 2026, stock option grants for 14,462,500 shares at an average exercise price of $1.04 per share were forfeited or cancelled, and vested stock option grants for 12,500 shares at an average exercise price of $1.10 expired without being exercised.
Stock option activity for the nine months ended September 30, 2026 was as follows:
| Number of | Weighted Average | ||||||||||
| Shares | Exercise Price | ||||||||||
| Outstanding as of December 31, 2025 | $ | ||||||||||
| Exercised | ( | - | |||||||||
| Granted | |||||||||||
| Forfeitures | ( | ||||||||||
| Expired | ( | ||||||||||
| Outstanding as of September 30, 2026 | $ | ||||||||||
The following table summarizes information about stock options outstanding and exercisable as of September 30, 2026:
| Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Life In Years | Weighted Average Exercise Price Outstanding | Number Exercisable | Weighted Average Exercise Price Exercisable | |||||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
The vested stock option grants of 14,087,280 shares had $2,395,238 aggregate intrinsic value as of September 30, 2026.
The significant weighted average assumptions relating to the valuation of the Company’s stock option grants issued and repriced during the nine months ended September 30, 2026 were as follows:
| Assumptions | |||||
| Dividend yield | % | ||||
| Exercise price | $ | ||||
| Expected term | |||||
| Expected volatility | % | ||||
| Risk free interest rate | % | ||||
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There were 104,349,780 options to purchase common stock at an average exercise price of $0.37 per share outstanding as of September 30, 2026 under the 2021 Plan. The Company recorded $6,585,718 and $6,262,704 of compensation expense relative to stock options for the three months ended September 30, 2026 and 2025, respectively, in accordance with ASC 718. The Company recorded $17,797,817 and $6,856,385 of compensation expense relative to stock options for the nine months ended September 30, 2026 and 2025, respectively, in accordance with ASC 718. The Company recorded $1,340,098 and $3,621,598 of income tax benefit for the three and nine months ended September 30, 2026, respectively. As of September 30, 2026, there is $73,306,452 of total unrecognized costs related to granted stock options that are not vested. As of September 30, 2026, approximately 26.0 million shares of common stock remained available for future grants under the 2021 Plan.
12. INCOME TAXES
The Company accounts for income taxes in interim reporting periods using the estimated annual effective tax rate (“AETR”) method in accordance with ASC 740‑270, Interim Reporting, which is applied to year‑to‑date ordinary income or loss. The estimated AETR reflects the Company’s core operating results and other rate‑impacting items and is determined without a valuation allowance, consistent with the release of the Company’s valuation allowance at December 31, 2025, which management continues to believe is supportable based on current facts and circumstances.
The estimated AETR excludes the effects of Bitcoin fair‑value adjustments, as the related fluctuations are inherently volatile and not reliably predictable for purposes of estimating annual pretax income. Changes in the fair value of Bitcoin holdings give rise to temporary differences, and the related deferred tax effects are recorded discretely in the period incurred and do not impact the AETR.
13. TRANSACTIONS WITH RELATED PARTIES
Transactions with Former CEO and Chairman Ronald P. Erickson, Particle Acquisition Corporation, and J3E2A2Z LP
Mr. Erickson previously served as the Company’s Chief Executive Officer and Chairman from January 2023 through August 6, 2025. Following the closing of the Goldeneye 1995 LLC capital investment on August 6, 2025, Mr. Erickson transitioned to the role of President of the Science Division, Senior Vice President. Mr. Erickson concluded his service as a member of the Board and as the President of the Company's Science Division, Senior Vice President in connection with the completion of the divestiture of the Company's legacy non‑invasive sensor technology business on March 27, 2026 to Particle Acquisition Corporation, an entity controlled by Mr. Erickson.
On May 5, 2025, the Company issued 100,000 shares of common stock to Mr. Erickson. The shares were valued at $0.44 per share.
Effective August 6, 2025, the Company issued 335,000 shares of common stock to Mr. Erickson that were valued at $0.50 per share, 50 % of which were fully vested upon grant and the remainder of which would vest, subject to Mr. Erickson’s continued employment through each vesting date, in eight quarterly installments with the first two installments vesting following a six-month cliff. The unvested restricted shares vested in full upon the Company’s March 27, 2026 divestiture of its legacy sensor technology business, which constituted a sale of all of the sensor related intellectual property.
J3E2A2Z LP. On January 30, 2024, the Company signed an Extension of Warrant Agreement with each of Mr. Erickson and J3E2A2Z LP, an entity controlled by Mr. Erickson, extending the exercise dates of the 47,367
On October 22, 2024, the due dates on the two Convertible Promissory Notes, each dated January 31, 2018, with J3E2A2Z LP, were extended to September 30, 2025 from September 30, 2024 and the interest rate was increased from 6 % to 8 %.
On June 2, 2025, the Company entered into a Promissory Note Conversion Agreement with J3E2A2Z LP, pursuant to which $1,184,066 of principal owed under the two outstanding Convertible Promissory Notes was exchanged for 16,916 shares of Series H Convertible Preferred Stock. Each share of Series H Preferred was convertible into shares of the Company’s common stock at an initial conversion price of $0.335 per share and carried an 8 % cumulative dividend. The Company recognized a deemed dividend of approximately $0.7 million upon the conversion.
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On August 6, 2025, upon election by J3E2A2Z LP, the Company redeemed all 16,916 issued and outstanding shares of Series H Convertible Preferred Stock held by J3E2A2Z LP for (i) cash of approximately $654,276 and (ii) the issuance of 2.0 million shares of common stock in the aggregate, at a conversion price of $0.335 per share, representing total consideration equal to the stated value of $70 plus all accrued and unpaid dividends in an amount of approximately $140,210 . As of September 30, 2026, all obligations under the Series H convertible preferred instrument had been satisfied.
Particle Acquisition Corporation. On March 27, 2026, the Company completed the divestiture of its legacy non-invasive sensor technology business pursuant to a Stock Purchase Agreement entered into by and among the Company, Particle, Inc., a Nevada corporation and wholly owned subsidiary of the Company, and Particle Acquisition Corporation, a Nevada corporation controlled by Ronald P. Erickson, former Chairman, President and CEO of Know Labs, Inc. (the "Buyer").
Under the terms of the Stock Purchase Agreement, the Company agreed to transfer to the Buyer, free and clear of all liens, all of the issued and outstanding equity interests of Particle in exchange for aggregate consideration of (i) USD One Dollar ($1.00 ), and (ii) the assumption of all obligations specifically related to the business, including the lease for the corporate office facility in Seattle, Washington.
The Stock Purchase Agreement also obligates the Buyer to pay to the Company a revenue share amount equal to ten percent (10 %) of all future net revenue generated from products that incorporate or utilize the proprietary non-invasive diagnostic and sensor technology platform or related intellectual property transferred to the Buyer (each, a “Covered Product”), payable during the period commencing on the Closing Date until the earlier of (i) the fifth anniversary of the first commercial sale of a Covered Product or (ii) the occurrence of a change of control of the Buyer. In addition, upon the consummation of any future acquisition or change of control of the Buyer or the Covered Products that occurs on or prior to the fifth anniversary of the Closing Date, the Buyer is required to pay to the Company an acquisition share payment ranging between five percent (5 %) and thirty-five percent (35 %) of such acquisition proceeds.
Effective as of the Closing Date of the divestiture of the legacy sensor business, Mr. Erickson concluded his service as a member of the Company's Board of Directors and as President of the Company's Science Division. The Company recognized compensation expense of approximately $275,000 related to the accelerated vesting of the unvested restricted stock awards during the nine months ended September 30, 2026.
Transactions with the Company's Vice Chair Linda Jenkinson and 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 48.6 million outstanding options, including 4,760,000 options granted to our Vice Chair Linda Jenkinson and 1,790,000 and 7,140,000 options granted to our non-CEO NEOs, Ms. Payne and Mr. Chapman, respectively, was reduced from $2.45 to $1.10 per share, the closing market price on the date of approval. The repricing applied uniformly to all participants and was reviewed and approved by the Board of Directors, which determined that the adjustment was in the best interests of stockholders to maintain the incentive and retention value of eligible awards in light of prevailing market conditions.
On October 7, 2025, the Board approved the grant of 55.0 million ten year stock options under the 2021 Plan, including 5,240,000 options granted to Vice Chair Linda Jenkinson and 1,960,000 and 7,860,000 options granted to non-CEO NEOs, Ms. Payne and Mr. Chapman, respectively. The exercise price of the options granted was $1.10 per share, the closing market price of our common stock on the date of Board approval. The options will vest 25 one-year anniversary of the grant date and in quarterly installments thereafter over the next three years , subject to their continued service.
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.
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On March 18, 2026, the Company’s Board approved a repricing of all outstanding stock options, 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 82.0 million outstanding options, including 10,000,000 options granted to Vice Chair Linda Jenkinson and 3,750,000 options granted to non-CEO NEO, Ms. Payne, was reduced from $1.10 to $0.37 per share, the closing market price on the date of approval. The repricing applied uniformly to all participants and was reviewed and approved by the Board of Directors, which determined that the adjustment was in the best interests of stockholders to maintain the incentive and retention value of eligible awards in light of prevailing market conditions.
Transactions with Vice Chair Linda Jenkinson, Chairman and CEO Robert Gregory Kidd, Vast Holdings, Inc., and Hard Yaka Ventures Management Co., LLC.
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 $53 million of capital into Vast Holdings, Inc. to support Vast Bank, both in Tulsa, Oklahoma. On October 23, 2025, the Company announced a collaboration with Vast Bank and Uphold to develop a network to deliver retail tokenized U.S.-dollar deposit products which was formalized in a strategic partnership agreement entered into on January 20, 2026. The Company’s collaboration with Vast Bank and Uphold contemplates joint development and pilot activities related to the deposit tokenization initiative. The terms of the collaboration were negotiated at arm’s length and reviewed by disinterested members of the Company’s Board.
On March 18, 2026, the Company entered into an Affiliate Services Agreement with Vast Holdings, Inc. pursuant to which the Company is reimbursing Vast Holdings, Inc. for certain strategic, operational and administrative services in support of the further development of the tokenized deposit program offering, subject to a reimbursement cap of $10.5 million during the term of the agreement unless otherwise agreed. The Company recognized $1.9 million and $6.2 million of expenses during the three and nine months ended September 30, 2026, respectively, in connection with this agreement, of which $0.5 million was recorded in Accounts payable - trade in the Consolidated Balance Sheet as of September 30, 2026.
On July 1, 2026, the Company entered into a Consulting Agreement with Hard Yaka Ventures Management Co., LLC (“Hard Yaka”), an affiliate of the Company’s Chairman and Chief Executive Officer and a related party. Under the agreement, Hard Yaka agreed to provide nonreciprocal capital funding to support the continued development of the Company’s tokenized deposit program. The funding is not repayable, does not bear interest, does not require the issuance of equity securities, and does not obligate the Company to provide goods or services to Hard Yaka. Accordingly, the Company accounted for the funding as a capital contribution from a related party. During the three and nine months ended September 30, 2026, the Company received capital contributions of $2,984,840
On September 25, 2026, the Company entered into an unsecured promissory note (the “Note”) with Goldeneye, pursuant to which Goldeneye may make advances to the Company from time to time in an aggregate principal amount of up to $22.0 million. See Note 14 for more information.
The Company did not engage in any other material transactions with related parties during the nine months ended September 30, 2026, and 2025 other than the transactions disclosed above.
14. 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 vacant executive and research and testing facilities in Seattle, Washington. On March 2, 2024, the Company entered into a lease for 5,996 square feet at 619 Western Avenue, Suite 610, Seattle, Washington 98104, at a net monthly payment of $11,492 , subject to 3 % annual increases after the first year. The lease commenced on May 1, 2024 and is originally scheduled to terminate on July 31, 2027. On July 9, 2025, the Company entered into a Deferred Rent Agreement with the landlord, pursuant to which the Company paid $31,732 and deferred $91,094 of contractual base rent
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through the remaining lease term. As a result of the Deferred Rent Agreement, a portion of the Company’s contractual base rent is deferred, reducing the monthly cash payment for base rent to approximately $8,000 , exclusive of applicable triple-net charges, with the deferred amounts payable over the remaining lease term.
Off-Balance Sheet Commitments
On September 25, 2026, the Company entered into an unsecured promissory note (the “Note”) with Goldeneye, pursuant to which Goldeneye may make advances to the Company from time to time in an aggregate principal amount of up to $22.0 million. Each advance made under the Note will constitute part of a single term loan, and amounts repaid or prepaid may not be reborrowed. Borrowings under the Note bear interest at a rate of 8.5 % per annum, payable quarterly beginning December 31, 2026, and mature on September 25, 2029, unless earlier repaid in accordance with the terms of the Note. The Note contains customary representations, warranties, covenants and events of default. Upon the occurrence and continuation of an event of default, amounts outstanding under the Note may become immediately due and payable and the interest rate may increase to 11.5 % per annum, as provided in the Note. There are no borrowings under this Note as of September 30, 2026.
15. 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 CODMs 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, and product development related to the tokenized deposit program offering, 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 net income (loss) as reported in the consolidated financial statements, as the primary measure of performance for assessing results and allocating resources.
16. SUBSEQUENT EVENTS
Management evaluated subsequent events, for purposes of determining whether adjustment to or disclosure in the consolidated financial statements was required through the date the consolidated financial statements were issued. No events occurred subsequent to September 30, 2026 that would require recognition or disclosure in the consolidated financial statements other than the transactions described below.
Stock Option Modifications
On October 1, 2026, our Board of Directors approved modifications to certain outstanding stock option awards under the 2021 Equity Incentive Plan, including the acceleration of vesting of 3,071,250 stock options held by 28 former employees and consultants. Separately, as part of the Company's executive leadership transition, our Board of Directors approved the acceleration of vesting of 490,000 stock options held by Kitty B. Payne, the Company's former Chief Financial Officer. In addition, the post-termination exercise periods for certain affected awards were extended from 3 months to one year following the applicable termination dates, subject to the original expiration dates of the awards. The Company estimates that these modifications will result in approximately $2.2 million of incremental stock-based compensation expense, expected to be recognized in the fourth quarter of 2026.
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Amendment to Master Loan Agreement and Collateral Arrangements
In connection with the Company's ongoing liquidity management and digital asset treasury activities, on October 12, 2026, the Company entered into a Second Addendum to Master Loan Agreement (the “Second Addendum”) with the Lender, amending its previously disclosed MLA. The Second Addendum increases the aggregate borrowing commitment under the MLA from $25.0 million to $40.0 million, subject to the terms and conditions of the MLA and the execution of individual loan term sheets. As of the date of this filing, $21.0 million of principal remained outstanding under the MLA, leaving $19.0 million of additional borrowing capacity, subject to the applicable borrowing conditions and collateral requirements. Additionally, in connection with the Second Addendum, the Company also amended its existing account control agreement governing Bitcoin collateral securing borrowings under the MLA. The amendment permits cross-collateralization of obligations under the MLA and certain digital asset derivative transactions, subject to the terms of the applicable agreements.
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ITEM 2. 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 in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026. Unless otherwise indicated or the context otherwise requires, references to "USBC," "we," "us," "our," and the "Company" refer to USBC, Inc.
The discussion contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties and are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. 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 deposit program development, digital asset 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. Investors should not consider non-GAAP financial measures referred to in this discussion in isolation or as substitutes for financial information presented in compliance with GAAP. Explanation of non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measure is included in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed in this report and as set forth in the section entitled "Risk Factors" in Part I, Item 1A, of our Transition Report on Form 10-K for the transition period from October 1, 2025 to December 31, 2025, filed with the SEC on March 25, 2026, as updated in the section entitled "Risk Factors" contained in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026.
Quarterly Overview
USBC, Inc. ("USBC" or the "Company") is a publicly traded financial technology company focused on the development of transformative financial services, including digital assets and banking solutions. A key focus of USBC is the further development of the USBC tokenized deposit program offering, a U.S. dollar-denominated tokenized deposit that operates on blockchain technology and incorporates digital identity. The USBC tokenized deposit offering combines the regulatory protections of traditional bank deposits with the efficiency and programmability of blockchain-based payments. Upon commercial launch, USBC will operate a U.S. dollar-denominated tokenized deposit network (the "USBC Network"). Each USBC tokenized deposit on the USBC Network is an on-chain representation of a U.S. dollar deposit held at an issuing bank, initially Vast Bank, N.A., a national bank chartered by the Office of the Comptroller of the Currency, headquartered in Tulsa, Oklahoma. USBC continues to advance subsequent phases of the product delivery strategy in preparation for a future public launch. USBC has also implemented a Bitcoin treasury strategy to bolster pre-launch development and research across its various divisions. With a focus on identity, inclusion, innovation, and risk management, USBC is dedicated to creating long-term stockholder value in a rapidly evolving financial landscape.
On August 6, 2025, following the closing of a strategic 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. Until August 2025, the Company operated under the name Know Labs, Inc. and was primarily focused on non-invasive diagnostic and sensor technologies. Our corporate evolution reflects a strategic pivot to a financial services and digital assets platform.
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On March 27, 2026, we completed the divestiture of our legacy non-invasive sensor technology business pursuant to a Stock Purchase Agreement entered into by and among USBC, Inc., its wholly owned subsidiary, Particle, Inc., and Particle Acquisition Corporation, an entity controlled by Ronald P. Erickson, former Chairman, President and CEO of Know Labs, Inc. (the "Buyer"). As part of the divestiture transaction, we agreed to provide the Buyer with limited operating capital to fund a portion of its operating expenses until the Buyer secures permanent equity financing. As of September 30, 2026, we had advanced $450,000 of the total amount committed under the credit facility, which was scheduled to mature on September 23, 2026, with an option to extend the maturity date for one additional period of one hundred eighty (180) days upon prior written notice. Pursuant to the terms of the note, the maturity date was extended 180 days, and will mature on March 22, 2027. Additional information regarding the Stock Purchase Agreement and our commitment to extend a short-term secured line of credit to the Buyer in connection with the divestiture transaction is incorporated by reference from the Current Report on Form 8-K filed on April 2, 2026.
Our tokenized deposit program offering is being developed as an integrated platform comprising a permissioned blockchain ledger, a digital identity layer, wallet and consumer-facing mobile and web applications, a bank operations console, and developer portal designed to support future third-party developer integrations. Following the successful completion of Phase 1 of the delivery strategy in June 2026, the Company initiated Phase 2 of its delivery strategy. Phase 2 expands testing to additional invited participants, builds upon the core technical infrastructure established during Phase 1 and focuses on further advancing the platform toward full market launch through continued product development, operational integration with Vast Bank, ecosystem expansion, and regulatory and operational readiness activities. The principal milestone for Phase 2 is to achieve operational readiness to support an initial commercial launch, subject to the outcome of the pilot program and receipt of any required bank board, regulatory and bank partner approvals.
We continue to execute under the Affiliate Services Agreement with Vast Holdings, Inc. (“Vast”), pursuant to which Vast provides strategic, operational and administrative services that support the further development of the tokenized deposit platform. As of September 30, 2026, we have incurred approximately $6.2 million in reimbursements to Vast for actual development-related costs under the $10.5 million cap contained in the Agreement which expires on December 31, 2026.
Recent Developments
On August 21, 2026, we appointed Daniel J. Beck to serve as the Company’s Chief Financial Officer, effective August 27, 2026. In connection with his appointment, Mr. Beck will receive an annual base salary of $400,000 and, on October 1, 2026, was granted options to purchase 2,500,000 shares of the Company’s common stock under the USBC, Inc. 2021 Amended and Restated Equity Incentive Plan, with an exercise price equal to $0.54, the market price per share at the time of issuance. The option will vest over four years, with 25% vesting on the first anniversary of the date of issuance and the remaining 75% vesting ratably over the following three years, subject to Mr. Beck’s continued employment through the applicable vesting dates.
On September 11, 2026, we drew an additional fixed-rate borrowing of $3.0 million under the Master Loan Agreement ("MLA") we entered into with Payward Interactive, Inc. on March 18, 2026, increasing the aggregate principal amount outstanding under the MLA to $21.0 million. We previously drew an initial fixed-rate borrowing of $5.0 million on March 20, 2026, followed by additional draws of $5.0 million on April 27, 2026 and June 1, 2026, and additional draws of $3.0 million on July 28, 2026, and September 11, 2026. Under the MLA, we may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $40.0 million (increased from $25.0 million on October 12, 2026) for up to a twelve-month term, subject to execution of one or more individual loan term sheets. Borrowings under the MLA bear interest at 8.5% per annum and mature on the anniversary of each draw (September 11, 2027 for the Fifth Draw) unless earlier terminated in accordance with the terms of the MLA. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. Borrowings under the MLA are solely secured by Bitcoin collateral held in custody with Payward Financial, Inc. and are subject to collateral maintenance requirements based on specified margin ratios.
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Under the terms of the MLA, the required initial margin ratio is 150% of the outstanding borrowings at the time of each loan draw, which is equivalent to a maximum loan-to-value ratio of approximately 66.7%. If the margin ratio declines to 130% or lower, the Lender may issue a margin call requiring us to either post additional Bitcoin collateral or partially repay outstanding borrowings within 24 hours in order to restore compliance with the required margin ratio. Under the MLA, if the margin ratio declines to 120% or lower and we do not timely cure the deficiency in accordance with the terms of the MLA, the Lender may exercise its contractual rights with respect to the collateral, including liquidation rights. In addition, under the MLA, we may request the release of excess collateral if the margin ratio exceeds 170% for two consecutive days, subject to the terms and conditions of the MLA. The fair value of pledged Bitcoin collateral is determined by the Lender based on the applicable Bitcoin market spot rate. Under the MLA, the "applicable Bitcoin market spot rate" is defined as the spot rate, as of the applicable date or time of determination, for the applicable digital currency published on CFBenchmarks.com, the website of CF Benchmarks Ltd., which publishes digital asset reference rates, or such other reference spot rate as may be mutually agreed by the parties to the MLA from time to time. When a valuation is required to be determined by the Lender under the MLA, the applicable Bitcoin market spot rate at the applicable time of determination is used by the Lender to determine the fair value of the pledged Bitcoin collateral. The "applicable date or time of determination" refers to the date and time at which the Lender is required to determine the fair value of the pledged Bitcoin collateral pursuant to the collateral valuation and maintenance provisions of the MLA, (e.g., at the point in time when the Lender is required to value the collateral or assess a collateral ratio for a margin-related event under the MLA).
The collateral valuation and maintenance provisions of the MLA provide that, prior to each loan advance, we must pledge Bitcoin collateral sufficient to satisfy the Required Margin Ratio specified in the applicable Loan Term Sheet. Thereafter, the Margin Ratio is determined based on the fair value of the pledged Bitcoin collateral and the Total Loan Balance. The Lender continuously monitors the collateral ratio of the MLA against the CF Benchmarks reference price feed to assess compliance with the collateral requirements under the MLA. If the Margin Ratio falls to or below the applicable Collateral Call Margin Ratio, the Lender may issue a collateral call requiring the Borrower to restore the Required Margin Ratio. If the Margin Ratio falls to or below the applicable Liquidation Ratio, the Lender may liquidate the pledged Bitcoin collateral in accordance with the terms of the MLA. The MLA also permits the Borrower to request the return of excess pledged Bitcoin collateral when the applicable Collateral Return Margin Ratio specified in the applicable Loan Term Sheet has been satisfied. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty. The MLA has an initial one-year term and automatically renews for successive one-year terms unless terminated in accordance with its terms. We may terminate the MLA at any time, and either party may terminate the MLA upon 30 days' written notice, provided that any outstanding loans remain in effect until repaid or otherwise terminated in accordance with the MLA.
On October 12, 2026, the Company entered into a Second Addendum to Master Loan Agreement (the “Second Addendum”) with the Lender, amending its previously disclosed MLA. The Second Addendum increases the aggregate borrowing commitment under the MLA from $25.0 million to $40.0 million, subject to the terms and conditions of the MLA and the execution of individual loan term sheets. The Second Addendum replaces the previous addendum to the MLA in its entirety, without affecting the existing outstanding borrowings, which remain subject to their respective terms and conditions. In connection with the Second Addendum, we also amended our account control agreement with Payward Financial, Inc. to permit cross-collateralization of borrowings under the MLA and certain digital asset derivative obligations, allowing collateral to be applied across agreements upon specified defaults. As of October 12, 2026, $21.0 million was outstanding and $19.0 million remained available for borrowing, subject to borrowing conditions and collateral requirements. See the Current Report on Form 8-K filed on October 14, 2026.
As of October 31, 2026, a decline of approximately 26% in the value of pledged Bitcoin collateral, assuming no repayment or additional collateral posting, would have reduced the collateral coverage ratio to the 130% collateral call margin ratio. No collateral calls, mandatory repayments, or liquidation events had occurred under the MLA as of October 31, 2026.
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Proceeds from the MLA are being used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we reimburse Vast's wholly-owned subsidiary, Vast Bank, for the costs of performing certain strategic, operational and administrative services that support the development of our tokenized deposit platform, subject to the reimbursement cap of $10.5 million contained in the Agreement. As of September 30, 2026, we had reimbursed approximately $6.2 million in development-related costs in accordance with the terms of the Agreement, leaving approximately $4.3 million in available reimbursement capacity through the Agreement's expiration on December 31, 2026. The Agreement may be terminated by us without cause upon 60 days' prior written notice. Either party may terminate the Affiliate Services Agreement immediately upon written notice if the other party breaches the Agreement and fails to cure such breach within 15 days after written notice. Either party may also terminate the Agreement if a state or federal regulatory authority requests or directs the terminating party to terminate the Agreement, or criticizes or challenges the terminating party's actions under the Agreement during a regulatory examination or otherwise.
Upon termination by us, we are responsible for certain reasonable, pre-approved third-party termination costs, subject to specified limitations. Specified limitations mean that we are not responsible for internal overhead, lost profits, unamortized internal costs, or severance or other employee-related termination payments unless expressly approved in advance in writing by us. These provisions are intended to ensure that, if we terminate the Bank Services, Vast Bank is reimbursed for certain unavoidable third-party costs that arise directly from the termination, while limiting our responsibility to documented, reasonable costs that were anticipated by the parties or approved in advance. Certain reasonable, pre-approved third-party termination costs mean that, in the event we terminate the Agreement with respect to the Bank Services, we shall be responsible for reimbursing Vast Bank for reasonable, documented, unavoidable, and non-cancelable third-party costs actually incurred by Vast Bank solely as a direct result of such termination, to the extent such costs were either expressly contemplated by this Agreement or approved in advance in writing by us. Examples of these costs include non-cancelable implementation fees, subscription commitments, software licensing fees, platform access fees, onboarding and integration costs, or other contractual obligations payable to third-party service providers that are directly attributable to the terminated services.
On July 1, 2026, the Company entered into a Consulting Agreement with Hard Yaka Ventures Management Co., LLC ("Hard Yaka") (an affiliate of our Chairman and Chief Executive Officer, Greg Kidd), pursuant to which Hard Yaka will contribute capital to the Company to facilitate the continued development of the tokenized deposit program. Through September 30, 2026, we received capital contributions of $2,984,840 from Hard Yaka, recorded in additional paid-in capital (see Note 13).
On June 12, 2026, our Board of Directors approved a proposal to effect a reverse stock split of our outstanding common stock (the "Reverse Split") at a ratio ranging from 1-for-2 to 1-for-5. Our Board's primary purpose for approving and recommending the Reverse Split is to make our common stock more attractive to investors, provide for a stronger investor base, and to increase the per share price and bid price of our common stock to maintain compliance with the NYSE American continued listing requirements. On June 15, 2026, Goldeneye, the holder of approximately 92.2% of the voting power of our outstanding common stock, approved the Reverse Split by written consent in lieu of a special meeting of stockholders. The Reverse Split will not reduce the number of authorized shares of our common stock, and no fractional shares will be issued. We will determine the exact ratio and timing of the Reverse Split, which may be effected, if at all, within twelve (12) months following June 15, 2026. On June 22, 2026, we filed a preliminary Information Statement on Schedule 14C with the SEC, and a definitive Information Statement on Schedule 14C with the SEC on July 13, 2026. On July 20, 2026, we commenced mailing the Definitive Information Statement to stockholders of record in accordance with Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The Reverse Split will not become effective until the applicable Rule 14c-2 notice period has expired and the effective date of the Reverse Split has been determined. Once effective, the Reverse Split will have the effect of decreasing the number of shares of our common stock issued, but will have no effect on the number of shares of common stock we are authorized to issue. As of the date of this report, the Reverse Split has not been effected.
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On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit program offering to market in collaboration with Vast Bank, the initial issuing bank for the tokenized deposit program offering. Phase 1 was conducted with a limited group of internal users who elected to participate in an expanded employee pilot program ahead of the public launch of the branded platform. The principal milestone of Phase 1 was completion of technical readiness testing to support subsequent phases of the delivery strategy, including testing of customer onboarding and identity recovery, ACH funding, spending functionality, treasury conversion, messaging and activity logging. Phase 1 was not a consumer offering and was not available to the public, and testing activities during Phase 1 were conducted exclusively with company-provided funds for internal evaluation purposes. The results of Phase 1 served to inform our evaluation of the timing and scope of subsequent phases of the delivery strategy and when the tokenized deposit product offering may become available to retail customers.
As part of these ongoing product enhancements, we have developed USBC Pay, that supports merchant payments and settlement on the USBC tokenized deposit platform. USBC Pay represents the payment functionality of the USBC tokenized deposit platform and is intended to expand the use of tokenized deposits for everyday payment transactions as we advance through future phases of our product delivery strategy. USBC Pay is designed to enable eligible users to initiate blockchain-based U.S. dollar payment transactions between consumers and merchants directly through the USBC ledger without touching legacy card rails or ACH for point-of-sale transactions. We have developed the initial version of the USBC Pay functionality for iOS and Android devices and continue to focus on enhancements for the functionality.
We continue to advance iterative product enhancements, operational readiness, and subsequent phases of the delivery strategy in preparation for a future public launch, which remains subject to regulatory, operational, market, board, and bank partner considerations. The timing, cost and success of future phases of our strategy is subject to uncertainty in how successful we will be in executing Phase 2 of the strategy within anticipated parameters. Phase 3 is intended to support the initial commercial launch of the tokenized-deposit product through selected distribution partners. Phase 4 is intended to support broader commercialization through additional product functionality, integrations and distribution channels.
Following public launch and subject to applicable legal, regulatory and onboarding requirements, developers and partners are expected to be able to integrate the USBC Network into mobile and web-based applications, enabling eligible customers to access and transfer tokenized deposits through supported digital interfaces.
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 program 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. 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 program offering.
Vast Bank, USBC and Uphold (the "Parties") shall each be entitled to a proportionate revenue share under the terms set forth in the Tri-Party Agreement. Deposit Revenue shall be calculated monthly based on the anticipated yield attributable to the tokenized deposit balances allocated to each asset category as determined by Vast in its sole discretion. The anticipated yield for each category shall be multiplied by the portion of Tokenized Deposit Balances allocated to such category to determine total Deposit Revenue for the applicable period. USBC, as the revenue share agent, is responsible for preparing and delivering a monthly revenue share statement to each of the Parties to enable payment of the proportionate revenue share, net of allocated program expenses incurred in operating and supporting the tokenized deposit network, such as costs related to payments and other transaction types, risk management, and third-party processing. Except as otherwise provided in the Tri-Party Agreement, each of the Parties shall bear and pay all direct costs and expenses incurred by it or on its behalf, or assessed against it or on its behalf, in performing its obligations under the Tri-Party Agreement. See the Tri-Party Agreement filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on January 26, 2026.
The Tri-Party Agreement has an initial term of one (1) year following the general commercial launch of the tokenized deposit program on the Uphold platform and automatically renews for successive one (1) year terms unless timely notice of non-renewal is provided by either Party. The Tri-Party Agreement may also be terminated upon the occurrence of specified events, including an uncured material breach, insolvency or bankruptcy, certain force majeure events, or if a governmental authority directs a party to cease or materially limit its performance, and provides for an orderly transition or wind-down of the program following termination.
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The Tri-Party Agreement between Uphold, Vast Bank, and USBC provides that the non-binding memorandum of understanding signed by USBC, Vast Bank, and Uphold in October 2025 was terminated in its entirety as of the effective date of January 20, 2026. Additional information regarding the strategic partnership agreement by and among USBC, Vast Bank and Uphold is incorporated by reference from the Current Report on Form 8-K filed on January 26, 2026.
RESULTS OF OPERATIONS
Results of Operations
Our operating results for the three and nine months ended September 30, 2026 reflect the strategic transition to our digital asset treasury and financial technology development initiatives following the Goldeneye capital investment completed on August 6, 2025. Operating results for periods prior to August 6, 2025, reflect the Company's prior focus on non-invasive diagnostic and sensor technologies.
We did not generate any operating revenue during the nine months ended September 30, 2026, or 2025. During the nine months ended September 30, 2026, we continued to focus on financial technology development activities, and we expect any future operating revenues to be generated from financial technology network services, including the planned USBC tokenized deposit program offering.
Although we expect to continue to incur operating losses in the near term, we believe our potential future revenue opportunities and available liquidity sources, including our digital asset treasury holdings, existing borrowing arrangements and access to equity financing, subject to market conditions and applicable restrictions, provide us with flexibility to pursue our digital asset treasury and financial technology development initiatives.
Third Quarter 2026 Highlights. For the three months ended September 30, 2026, we reported net income of $4.9 million, compared with a net loss of $12.4 million in the prior-year period, driven by a $25.7 million non-cash gain on the change in fair value of digital assets as the price of Bitcoin increased by 43% during the quarter. The gain was partially offset by SG&A expenses of $14.8 million (including $6.6 million of non-cash stock-based compensation), a $3.3 million other derivative loss, net, a $0.9 million provision for credit losses and $1.4 million of income tax expense. As of September 30, 2026, we held cash and cash equivalents of $3.5 million and digital assets of $82.7 million, of which 479 Bitcoin with a fair value of $40.1 million were pledged as collateral, and had $21.0 million of borrowings outstanding under the MLA.
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Three Months Ended September 30, 2026 compared to September 30, 2025
The following table sets forth key components of our results of operations for the three months ended September 30, 2026, and 2025. Amounts are rounded to the nearest thousand.
(in thousands)
| Three Months Ended September 30, 2026 | |||||||||||||||||
| 2026 | 2025 | $ Variance | |||||||||||||||
| Operating expenses- | |||||||||||||||||
| Research and development expenses | $ | — | $ | 294 | $ | (294) | |||||||||||
| Selling, general and administrative expenses | 14,791 | 11,524 | 3,267 | ||||||||||||||
| Total operating expenses | 14,791 | 11,818 | 2,973 | ||||||||||||||
| Operating loss | (14,791) | (11,818) | (2,973) | ||||||||||||||
| Other Income (Expense), Net: | |||||||||||||||||
| Interest income | 20 | 49 | (29) | ||||||||||||||
| Interest expense | (386) | — | (386) | ||||||||||||||
| Loss on debt settlements, net | — | (214) | 214 | ||||||||||||||
| Change in fair value of digital assets | 25,724 | (823) | 26,547 | ||||||||||||||
| Other derivative income (loss), net | (3,330) | 283 | (3,613) | ||||||||||||||
| Provision for credit losses | (925) | — | (925) | ||||||||||||||
| Total other income (expense), net | 21,103 | (705) | 21,808 | ||||||||||||||
| Income (loss) before income taxes | 6,312 | (12,523) | 18,835 | ||||||||||||||
| Income tax expense (benefit) | 1,367 | (173) | 1,540 | ||||||||||||||
| Net income (loss) | $ | 4,945 | $ | (12,350) | $ | 17,295 | |||||||||||
Research and Development. The Company did not have R&D expenses for the three months ended September 30, 2026, a decrease of $294,000 compared to the comparable prior-year period. In February 2026, we completed our evaluation of the legacy non-invasive sensor technology business and the associated divestiture transaction closed on March 27, 2026.
Selling, General and Administrative. SG&A expense was $14,791,000 for the three months ended September 30, 2026, compared to $11,524,000 for the comparable prior-year period, an increase of $3,267,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to operational expenses for tokenized deposit program offering development of $2.3 million (including $1.9 million incurred under agreements with affiliated service providers), and professional fees and other public company and advisory costs of $1.8 million associated with our strategic transition, partially offset by decreases in non-cash stock-based compensation expense of $0.9 million.
Other Income/(Expense), Net. Other income, net for the three months ended September 30, 2026 was $21,103,000, compared to $(705,000) for the comparable prior-year period, an increase of $21,808,000. The significant increase in other income, net compared to the prior-year period was primarily driven by changes in fair value of digital assets of $25.7 million, partially offset by provision for credit losses of $0.9 million, and other derivative income (loss), net of $(3.3) million, generated from option premiums collected under our Bitcoin treasury trading strategy.
Income tax expense (benefit). Income tax expense was $1,367,000 for the three months ended September 30, 2026, compared to an income tax benefit of 173,000 for the comparable prior-year period, an increase of $1,540,000. The change compared to the prior-year period was primarily related to the tax effect of the change in fair value of digital assets, driven by volatility in digital asset markets, which caused a significant increase in the fair value of Bitcoin, net of the benefit of the deferred tax asset.
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Net Income (Loss). We reported a net income of $4,945,000 for the three months ended September 30, 2026, compared with a net loss of $12,350,000 for the comparable prior-year period, an increase of $17,295,000. The change compared to the prior-year period primarily reflects the change in fair value of digital assets of $26.5 million, partially offset by other derivative income (loss), net of $3.3 million, operational expenses for tokenized deposit program offering development of $2.3 million, professional fees and other public-company and advisory costs of $1.8 million, provision for credit losses of $0.9 million, and a deferred income tax expense of $1.4 million.
Nine Months Ended September 30, 2026 compared to September 30, 2025
The following table sets forth key components of our results of operations for the nine months ended September 30, 2026, and 2025.
(in thousands)
| Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | $ Variance | |||||||||||||||
| Operating expenses- | |||||||||||||||||
| Research and development expenses | $ | 276 | $ | 951 | $ | (675) | |||||||||||
| Selling, general and administrative expenses | 42,613 | 14,329 | 28,284 | ||||||||||||||
| Total operating expenses | 42,889 | 15,280 | 27,609 | ||||||||||||||
| Operating loss | (42,889) | (15,280) | (27,609) | ||||||||||||||
| Other Income (Expense), Net: | |||||||||||||||||
| Interest income | 45 | 52 | (7) | ||||||||||||||
| Interest expense | (620) | (1,650) | 1,030 | ||||||||||||||
| Loss on debt settlements, net | — | (214) | 214 | ||||||||||||||
| Change in fair value of digital assets | (3,987) | (823) | (3,164) | ||||||||||||||
| Other derivative income (loss), net | (1,102) | 283 | (1,385) | ||||||||||||||
| Provision for credit losses | (3,456) | — | (3,456) | ||||||||||||||
| Total other expense, net | (9,120) | (2,352) | (6,768) | ||||||||||||||
| Loss before income taxes | (52,009) | (17,632) | (34,377) | ||||||||||||||
| Income tax benefit | (10,609) | (173) | (10,436) | ||||||||||||||
| Net loss | $ | (41,400) | $ | (17,459) | $ | (23,941) | |||||||||||
Research and Development. R&D expenses were $276,000 for the nine months ended September 30, 2026, a decrease compared to $951,000 for the comparable prior-year period. In February 2026, we completed our evaluation of the legacy non-invasive sensor technology business and the associated divestiture transaction closed on March 27, 2026.
Selling, General and Administrative. SG&A expense was $42,613,000 for the nine months ended September 30, 2026, compared to $14,329,000 for the comparable prior-year period, an increase of $28,284,000. The significant increase in SG&A expense compared to the prior-year period was primarily attributable to increases in non-cash stock-based compensation expense of $10.9 million, operational expenses for tokenized deposit program offering development of $11.6 million (including $8.2 million incurred under agreements with affiliated service providers), professional fees and other public company and advisory costs of $7.1 million associated with our strategic transition, partially offset with decreases in non-cash stock-based expenses for services of $1.1 million.
Other Expense, Net. Other expense, net for the nine months ended September 30, 2026 was $9,120,000, compared to $2,352,000 for the comparable prior-year period, an increase of $6,768,000. The significant increase in other expense, net compared to the prior-year period was primarily driven by the change in fair value of digital assets of $3.2 million and a $3.5 million provision for credit losses, and derivative loss, net of $1.4 million generated from option premiums collected under our Bitcoin treasury trading strategy, partially offset by a $1.0 million reduction in interest expense as a result of higher non-cash financing-related charges in the prior year period, primarily related to repricing and extensions of convertible securities.
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Income tax benefit. Income tax benefit was $10,609,000 for the nine months ended September 30, 2026, compared to 173,000 for the comparable prior-year period, an increase of $10,436,000. The increase in the income tax benefit compared to the prior-year period was primarily related to the tax effect of net operating losses related to the continued development of the tokenized deposit program, and the change in fair value of digital assets, driven by volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, net of the benefit of the deferred tax asset.
Net Loss. We reported a net loss of $41,400,000 for the nine months ended September 30, 2026, compared with a net loss of $17,459,000 for the comparable prior-year period, an increase of $23,941,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $3.2 million, provision for credit losses of $3.5 million, operational expenses for tokenized deposit program offering development of $11.6 million, non-cash stock-based compensation expense of $10.9 million, professional fees and other public company and advisory costs of $7.1 million, partially offset by a deferred income tax benefit of $10.6 million.
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 offering, which sources may include equity or debt financings, potential sales of Bitcoin, Bitcoin-collateralized financing arrangements, and related-party funding 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 results of operations each period.
•Integration of bank and technology partners: Our future results will depend on successful technical and regulatory integration with partner banks and technology providers supporting our tokenized deposit platform offering. Delays or changes in bank and developer 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.
Liquidity and Capital Resources
As of September 30, 2026, we had cash and cash equivalents (excluding restricted cash) of $3.5 million and working capital of $(24.2) million. The negative working capital position was primarily driven by the $21.0 million loan payable and costs incurred during the nine months ended September 30, 2026, to develop the tokenized deposit program. Operational expenses for the tokenized deposit program offering development were $11.6 million (including $8.2 million incurred under agreements with affiliated service providers) and professional fees of $7.1 million associated with our development initiatives.
We have historically incurred recurring losses and had an accumulated deficit of $231.9 million as of September 30, 2026. We recorded a net loss of $41.4 million for the nine months ended September 30, 2026, a significant increase compared to a net loss of $17.5 million recorded for the comparable prior-year period. The increase in net loss was primarily attributable to increases in non-cash stock-based compensation expense of $10.9 million, operational expenses for tokenized deposit program offering development of $11.6 million (including $8.2 million incurred under agreements with affiliated service providers), professional fees and other public company and advisory costs of $7.1 million associated with our strategic transition, unrealized loss of $4.0 million to reflect the decline in the fair value of digital assets during the 2026 period, and partially offset with an increase in the tax benefit recognized due to net operating losses as a result of continued development of the tokenized deposit program, and decreases in non-cash stock-based expenses for services of $1.1 million. We continue to hold the underlying digital assets as of September 30, 2026 and currently intend to continue holding such digital assets for the foreseeable future.
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Our liquidity position as of September 30, 2026 was supported by borrowings under the MLA, capital contributions from Hard Yaka, and our Bitcoin treasury holdings. As of September 30, 2026, we had $21.0 million outstanding under the MLA and held $82.7 million in digital assets, a portion of which were pledged as collateral. Additional potential liquidity sources include financing under the Note and our ATM equity offering program, subject to applicable terms and conditions. We view our Bitcoin holdings as long-term strategic reserves rather than trading assets although we may convert Bitcoin to cash periodically to fund operations and pledge it as collateral under certain financing arrangements that provide capital to support product development and other general corporate purposes
During the nine months ended September 30, 2026, our liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings, together with available financing under the MLA, the Note with Goldeneye 1995 LLC (as described below), and capital contributions from Hard Yaka (as described below), are sufficient to fund our operations for at least 12 months after issuance of these consolidated financial statements. Management expects that we will supplement our cash resources with additional liquidity sources as we continue executing our business plan. These sources may include sales of Bitcoin, potential Bitcoin-collateralized financing arrangements, related-party funding or other investor financing, and other debt or equity financings.
We previously entered into a Master Loan Agreement (the “MLA”) with Payward Interactive, Inc. (the “Lender”) on March 18, 2026, pursuant to which we may, from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25 million for up to a twelve-month term, subject to the execution of one or more individual loan term sheets (the "Facility"). On October 12, 2026, the aggregate borrowing commitment increased from $25.0 million to $40.0 million, leaving $19.0 million of additional borrowing capacity as of that date, subject to applicable borrowing conditions, collateral requirements and execution of individual loan term sheets. The amended collateral arrangements also provide for cross-collateralization of borrowings and certain digital asset derivative obligations. The MLA provides us with an additional source of liquidity to fund our operations and strategic initiatives, primarily the further development and future launch of the tokenized deposit program offering. As of October 31, 2026, the aggregate principal amount outstanding under the MLA is $21.0 million. The loan is collateralized by 479 Bitcoin which we pledged to the counterparty in an amount of approximately $36.9 million based on the price of Bitcoin as of October 31, 2026.
On July 1, 2026, the Company entered into a Consulting Agreement with Hard Yaka Ventures Management Co., LLC (“Hard Yaka”), an affiliate of the Company’s Chairman and Chief Executive Officer, to support the continued development of the tokenized deposit program. During the nine months ended September 30, 2026, the Company received approximately $3.0 million in capital contributions from Hard Yaka.
On September 25, 2026, the Company entered into an unsecured promissory note (the “Note”) with Goldeneye 1995 LLC, pursuant to which Goldeneye may make advances to the Company from time to time in an aggregate principal amount of up to $22.0 million. Each advance made under the Note will constitute part of a single term loan, and amounts repaid or prepaid may not be reborrowed. Borrowings under the Note bear interest at a rate of 8.5% per annum, payable quarterly beginning December 31, 2026, and mature on September 25, 2029, unless earlier repaid in accordance with the terms of the Note. The Note contains customary representations, warranties, covenants and events of default. Upon the occurrence and continuation of an event of default, amounts outstanding under the Note may become immediately due and payable and the interest rate may increase to 11.5% per annum, as provided in the Note. There are no borrowings under this Note as of September 30, 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.
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Adjusted EBITDA is defined as net income (loss) excluding interest expense, stock-based compensation expense, non-cash changes in the fair value of digital assets, income taxes, provision for credit losses, and any other items that management has determined are not reflective of our operating performance because the amount of such non-cash adjustments in any specific period may not directly correlate to the underlying performance of our business operations. Adjusted EBITDA should be viewed independently of our reported GAAP net loss as this metric is meant to be considered in addition to, not as a substitute for or in isolation from, our net loss prepared in accordance with GAAP.
The following table reconciles Adjusted EBITDA to net loss, the most closely comparable GAAP financial measure, for the three and nine months ended September 30, 2026 and the comparable prior-year period:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net Income (Loss) | $ | 4,944,823 | $ | (12,350,204) | $ | (41,398,520) | $ | (17,457,841) | |||||||||||||||
| Plus (Subtract): Change in fair value of digital assets | (25,723,528) | 823,062 | 3,986,911 | 823,062 | |||||||||||||||||||
| Plus: Stock-based compensation | 6,585,718 | 6,262,704 | 17,797,817 | 6,856,385 | |||||||||||||||||||
| Plus (Subtract): Income tax expense (benefit) | 1,366,932 | (172,843) | (10,608,685) | (172,843) | |||||||||||||||||||
| Plus: Provision for credit losses | 924,563 | — | 3,455,833 | — | |||||||||||||||||||
| Plus: Interest expense | 386,042 | — | 619,792 | 1,649,710 | |||||||||||||||||||
| Adjusted EBITDA | $ | (11,515,450) | $ | (5,437,281) | $ | (26,146,852) | $ | (8,301,527) | |||||||||||||||
Operating Activities
Net cash used in operating activities during the nine months ended September 30, 2026 was $23,508,621, which was primarily attributable to the net loss for the nine months ended September 30, 2026 of $41,398,520, adjusted for non-cash adjustments of $15,846,759. Non-cash adjustments during the nine months ended September 30, 2026 were primarily comprised of stock-based compensation expense of $17,797,817, the unrealized loss related to the change in the fair value of digital assets of $3,986,911, and net losses on derivatives of $1,101,541, partially offset by the deferred income tax benefit of $10,608,685.
The net operating cash outflows primarily reflect operating expenses incurred with the Company’s strategic transition to development of the tokenized deposit program offering following the August 2025 Goldeneye capital investment.
Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2026 was $450,000, reflecting the secured financing disbursed in connection with the divestiture of the sensor technology business completed on March 27, 2026. For further details, see the section entitled "Divestiture Transaction" below.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2026 was $23,994,500, which was primarily attributable to proceeds from loan draws under the MLA collateralized by a portion of our Bitcoin holdings, and funding from Hard Yaka. For additional information on the impact of the private placement transaction completed on August 6, 2025 on the Company’s liquidity position, see "Liquidity and Capital Resources."
Capital Requirements and Future Liquidity
We expect to continue incurring operating losses as we fund the further development of our tokenized deposit program offering. Our ability to sustain operations and execute our strategy depends on our ability to leverage our existing financing sources and capacity to raise additional capital through equity or debt financings, monetize Bitcoin holdings, including through potential sales, or obtain other sources of liquidity, including potential Bitcoin-collateralized financing arrangements, or related-party or other investor financing.
Future capital needs will depend on, among other things:
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•technology development expenditures, public company costs, and other expenditures associated with the continued development and launch of our tokenized deposit program offering;
•regulatory and compliance costs associated with financial technology activities, and
•any acquisitions or strategic investments.
Based on our current projections, management believes we have adequate resources to meet our obligations for at least the next twelve months. As we continue to execute our business strategy, management may supplement cash on hand with additional liquidity sources, which could include digital asset sales, financing arrangements, or other debt or equity financings. Continuation of operations beyond that period will depend on market conditions for additional capital and the financial performance of our tokenized deposit program offering.
Contractual Obligations and Commitments
Our contractual cash obligations as of September 30, 2026 are summarized in the table below:
| Less Than | ||||||||||||||||||||
Contractual Cash Obligations | Total | 1 Year | 1-3 Years | |||||||||||||||||
Loan payable (1) | $ | 22,814,750 | $ | 22,814,750 | $ | — | ||||||||||||||
| Operating leases | 181,838 | 181,838 | — | |||||||||||||||||
| $ | 22,996,588 | $ | 22,996,588 | $ | — | |||||||||||||||
(1) On March 20, 2026, we entered into a term sheet for a one year fixed-term loan of $5.0 million bearing interest at a rate of 8.5% per annum under the MLA maturing on March 18, 2027. On April 27, 2026, we drew the Second Draw under the MLA. The Second Draw increases the aggregate principal amount outstanding under the MLA to $10.0 million and bears interest at a rate of 8.5% per annum maturing on April 27, 2027. On June 1, 2026, we drew the Third Draw under the MLA. On July 28, 2026, we drew the Fourth Draw under the MLA. On September 11, 2026, we drew the Fifth Draw under the MLA. The Fifth Draw increases the aggregate principal amount outstanding under the MLA to $21.0 million and bears interest at a rate of 8.5% per annum maturing on September 11, 2027. The obligations under the MLA are prepayable at our option at any time after three months from the date of the initial loan draw without penalty.
Divestiture Transaction
On March 27, 2026 (the “Closing Date”), we completed the divestiture of our legacy non-invasive sensor technology business pursuant to a Stock Purchase Agreement entered into by and among the Company, its wholly-owned subsidiary, Particle, Inc., a Nevada corporation (“Particle”), Particle Acquisition Corporation, a Nevada corporation (the “Buyer”), and our former Chairman, President and CEO, Ronald P. Erickson, an individual and principal officer of the Buyer. Effective as of the Closing Date of the divestiture of the legacy sensor business, Mr. Erickson concluded his service as a member of the Board of Directors and as President of the Science Division.
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.
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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 Sheets. 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 in the Consolidated Statements of Operations, 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 third-party institutional custodians 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.
Allowance for Credit Losses
We apply the current expected credit loss ("CECL") model under ASC 326, Financial Instruments — Credit Losses, to estimate expected credit losses on financial assets measured at amortized cost and certain off-balance sheet credit exposures. This standard requires us to recognize lifetime expected credit losses upon origination of a financial asset or at the time an off-balance sheet commitment is made, rather than when losses are probable, and to incorporate forward-looking information into the estimate. The CECL model represents a critical accounting policy because it requires significant management judgment in the selection of inputs, assumptions, and methodologies.
Digital asset receivable. We consider and account for counterparty credit risk using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses if deemed material. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. As of September 30, 2026, we recorded an allowance for credit loss of $3.1 million as an offset to the digital asset receivable balance in our Consolidated Balance Sheets, based on management’s estimate of expected credit losses.
Note receivable. We are a party to certain off-balance sheet financing commitments that are subject to credit loss estimation under ASC 326. The ACL is estimated using a loss given default / expected exposure methodology that incorporates management's assessment of expected draw timing, obligor credit quality, collateral recovery values, and current and forecasted economic conditions. As of September 30, 2026, we recorded an allowance for expected credit losses of $360,000 on the fully funded $450,000 note receivable. The estimate of expected credit losses for the funded note receivable considers, borrower credit quality, collateral values, and current and forecasted economic conditions.
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.
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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 11 — 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.
We recognized incremental stock-based compensation expense of $964,930 during the nine months ended September 30, 2026 related to the repricing of 82,000,000 stock options from an exercise price of $1.10 per share to $0.37 per share during the nine months ended September 30, 2026, in accordance with ASC 718.
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, Item 11 of Amendment No. 1 to our Transition Report on Form 10-K for the transition period from October 1, 2025 to December 31, 2025 filed with the SEC on April 27, 2026).
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. All legacy convertible notes and promissory notes were repaid, converted, or otherwise extinguished in connection with the Goldeneye private placement transaction that closed on August 6, 2025. Accordingly, there was no convertible instruments activity during the nine months ended September 30, 2026. See Notes 3 and 5 to our financial statements included in Item 1 of this report for additional information on our accounting for convertible instruments and embedded derivatives prior to August 6, 2025. When we historically 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 have resulted in material non-cash gains or losses each period.
Going Concern
In accordance with ASC 205-40, management evaluates the Company's ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management's assessment considered the Company's projected cash requirement during the evaluation period and available sources of liquidity, including cash and cash equivalents, digital assets available for monetization or use as collateral, available borrowing capacity under its Bitcoin-collateralized Master Loan Agreement, the Note with Goldeneye, the Consulting agreement with Hard Yaka, anticipated cash generated from the Company's Bitcoin treasury strategy, and available capacity under its At-The-Market ("ATM") equity program. In November 2026, the Company analyzed its cash requirements and operations through November 2027 and determined that, based upon its available cash and cash equivalents, digital assets, available financing arrangements, projected cash generated from its Bitcoin treasury strategy, and available capacity under its ATM program, management concluded that no substantial doubt about its ability to continue as a going concern. Management will continue to monitor its liquidity position, operating performance, and capital resources as it executes its operating plan. The Company's 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable as a smaller reporting company.
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ITEM 4. 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. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities 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 SEC'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 September 30, 2026, our disclosure controls and procedures are effective at the reasonable assurance level.
b)Inherent Limitations on Internal Controls
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 three months ended September 30, 2026, 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.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may from time to time become a party to various legal proceedings arising in the ordinary course of our business. We are currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to our business.
ITEM 1A. RISK FACTORS
Other than disclosed below, there have been no material changes in, or additions to, the risk factors previously disclosed under the caption “Risk Factors” in Part I, Item 1A of our Transition Report on Form 10-K for the transition period from October 1, 2025 to December 31, 2025.
A reverse stock split approved by our controlling stockholder may not achieve its intended benefits and may adversely affect the liquidity and market price of our common stock.
On June 15, 2026, Goldeneye, as the holder of a majority of the voting power of our common stock, approved by written consent a reverse stock split of our outstanding common stock at a ratio ranging from 1-for-2 to 1-for-5, which our Board of Directors had approved and recommended on June 12, 2026. Because Goldeneye holds a majority of our voting power, stockholder approval of the reverse stock split was obtained without the vote of any other stockholder.
The exact ratio and timing of the reverse stock split will be determined by the Company's discretion and may be effected, if at all, within twelve months following June 15, 2026, and it will not become effective until the requirements of Rule 14c-2 under the Exchange Act have been satisfied.
There can be no assurance that the reverse stock split, if effected, will increase or maintain the market price of our common stock, improve the marketability or liquidity of our common stock, or facilitate future capital-raising efforts.
Because the reverse stock split will not reduce the number of authorized shares of our common stock, the resulting relative increase in authorized but unissued shares could be used for future issuances that dilute existing stockholders.
Our ability to execute our business strategy depends on attracting, retaining, and effectively managing a geographically distributed workforce.
Our ability to execute our business strategy, including the development and commercialization of our tokenized deposit platform, management of our Bitcoin treasury strategy, cybersecurity, regulatory compliance, and public company reporting obligations, depends on our ability to attract, retain, and effectively manage highly qualified employees and consultants with specialized expertise. Competition for personnel with experience in blockchain technology, digital assets, banking, software development, cybersecurity, finance, accounting, legal, and regulatory compliance is intense, and there can be no assurance that we will be able to attract or retain the talent necessary to support our growth.
Our workforce includes employees and consultants working remotely located across multiple U.S. states and international jurisdictions. As a result, we are subject to diverse and evolving employment, payroll, tax, labor, immigration, privacy, and other regulatory requirements. Changes in these laws, or our failure to comply with them, could increase our operating costs, result in penalties or litigation, or disrupt our operations.
In addition, managing a geographically distributed workforce presents operational challenges, including maintaining effective collaboration, ensuring cybersecurity, preserving institutional knowledge, and maintaining a consistent corporate culture. The loss of key personnel, our inability to hire qualified replacements on a timely basis, or our failure to effectively manage our workforce could delay product development, impair execution of our business strategy, and materially adversely affect our business, financial condition, results of operations, and prospects.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
During the three months ended September 30, 2026, there were no unregistered sales of equity securities.
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Use of Proceeds
Not applicable.
Issuer Purchases of Equity Securities
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
None
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2026, no director or officer of the Company adopted terminated
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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:
(a)Exhibits
| Exhibit No. | Description | ||||
| 10.1# | Prime Broker Agreement (including Custody Terms), dated May 29, 2025, by and among USBC, Inc. (formerly Know Labs, Inc.), Coinbase, Inc., Coinbase Custody Trust Company, LLC and Coinbase Credit, Inc. (incorporated by reference to Exhibit 10.46 to the Company's Registration Statement on Form S-1, filed July 13, 2026). | ||||
| 10.3# | Prime Broker Agreement (including Trading and Custody Terms), dated February 20, 2026, by and among USBC, Inc. and the Payward entities. (incorporated by reference to Exhibit 10.48 to the Company's Registration Statement on Form S-1, filed July 13, 2026). | ||||
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| 10.4 | |||||
| 10.5 | |||||
| 10.6 | |||||
| 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* | The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments) | ||||
*Filed herewith
**Furnished herewith
# 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.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 6, 2026 | USBC, INC. | |||||||
| By: | /s/ Robert Gregory Kidd | |||||||
Name: Robert Gregory Kidd | ||||||||
Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: November 6, 2026 | By: | /s/ Daniel Beck | ||||||
| Name: Daniel Beck | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||
i
EXHIBIT 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
I, Robert Gregory Kidd, certify that:
1.I have reviewed this quarterly report on Form 10-Q of USBC, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2026
| /s/ Robert Gregory Kidd | ||||||||
| Robert Gregory Kidd | ||||||||
Chief Executive Officer (Principal Executive Officer) | ||||||||
EXHIBIT 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
I, Daniel Beck, certify that:
1.I have reviewed this quarterly report on Form 10-Q of USBC, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2026
| /s/ Daniel Beck | ||||||||
| Daniel Beck | ||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of USBC, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Robert Gregory Kidd, Chief Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 6, 2026
| /s/ Robert Gregory Kidd | ||||||||
| Robert Gregory Kidd | ||||||||
Chief Executive Officer (Principal Executive Officer) | ||||||||
A signed original of this written statement required by Section 906 has been provided to USBC, Inc. and will be retained by USBC, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of USBC, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Daniel Beck, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 6, 2026
| /s/ Daniel Beck | ||||||||
| Daniel Beck | ||||||||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||||||||
A signed original of this written statement required by Section 906 has been provided to USBC, Inc. and will be retained by USBC, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.