QUTX 10-K & 10-Q changes, risk factors and insider trading

In June 2025, the Company announced, after fully evaluating the legacy business, the Company is taking steps to reinvigorate it and establish a new pathway in the same business space. The Company will continue to evaluate opportunities both inside and outside the food industry, including, but not limited to, ventures within the digital asset, fintech and gig economy spaces.

DERIVATIVE LIABILITY

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Paragraph 815-15-25-1 the conversion feature and certain other features are considered embedded derivative instruments, such as a conversion reset provision, a penalty provision and redemption option, which are to be recorded at their fair value as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The Company records the resulting discount on debt related to the conversion features at initial transaction and amortizes the discount using the effective interest rate method over the life of the debt instruments. The conversion liability is then marked to market each reporting period with the resulting gains or losses shown in the statements of operations.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

The Company follows ASC Section 815-40-15 (“Section 815-40-15”) to determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. Section 815-40-15 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions.

The Company evaluates its convertible debt, options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-25-1 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then that the related fair value is reclassified to equity.

The Company utilizes the binomial option pricing model to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the remaining contractual term of the instrument granted.

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements — Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” The ASU amends the disclosure or presentation requirements related to various subtopics in the FASB ASC. The ASU was issued in response to the SEC’s August 2018 final amendments in Release No. 33-10532, Disclosure Update and Simplification that updated and simplified disclosure requirements that the SEC believed were duplicative, overlapping, or outdated. The guidance in ASU 2023-06 is intended to align GAAP requirements with those of the SEC and to facilitate the application of GAAP for all entities. The amendments introduced by ASU 2023-06 are effective if the SEC removes the related disclosure or presentation requirement from its existing regulations by June 30, 2027. If, by June 30, 2027, the SEC has not removed the applicable requirements from its existing regulations, the pending content of the associated amendment will be removed from the ASC and will not become effective for any entities. Early adoption is permitted. The adoption of ASU 2023-06 is not expected to have a material impact on the Company’s consolidated financial statements or related disclosures.

ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”), requires public companies to disaggregate key expense categories, such as inventory purchases, employee compensation and depreciation in their financial statements. This aims to improve investor insight into company performance. ASU 2024-03 was originally effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted.

ASU 2025-01, Income Statement – Expense Disaggregation Disclosures – Clarifying the Effective Date (“ASU 2025-01”), clarifies the effective date of ASU 2024-03. This amendment states that ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

ASU 2025-05, Financial Instruments-Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-profit Entities (PCC) (“ASU 2025-05”), updates accounting standards for revenue from contracts with customers (ASC 606). ASU 2025-05 permits an entity to assume that current conditions as of the balance sheet date will not change for the remaining life of the asset when estimated expected credit losses, and an accounting policy election to consider subsequent cash-collection activity after the balance sheet date. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact, if any, adoption will have on its consolidated financial statements and disclosures.

In June 2025, the Company announced, after fully evaluating the legacy business, the Company is taking steps to reinvigorate it and establish a new pathway in the same business space. The Company will continue to evaluate opportunities both inside and outside the food industry, including, but not limited to, ventures within the digital asset, fintech and gig economy spaces.

In June, 2025, the Issuer announced it has engaged renowned culinary expert Chef Einat Admony and accomplished executive Vanessa Fayzulin to lead the revitalization of its food service division.

During the year ended December 31, 2025, consulting expenses of $145,253 consisted of costs related to the development of new businesses and bookkeeping services.

Professional fees increased in 2025 due to an increase in legal fees from compliance and the review of proposed transactions and debt agreements.

During the year ended December 31, 2025 and 2024, the Company elected to convert $516,304 and $1,628,843 of principal and interest of promissory notes into 224,257,560 and 0 shares of common stock of the Company resulting in a loss on settlement of debt of $17,181 and $0, respectively.

During the year ended December 31, 2025 and 2024, the Company elected to convert $1,836,000 and $0 of principal and interest of promissory notes into 500,000,000 and 0 shares of common stock of the Company resulting in a gain on settlement of debt of $1,236,000 and $0, respectively.

During the year ended December 31, 2025 and 2024, the Company elected to convert $99,015 and $0 of principal and interest of convertible promissory notes into 138,019,999 and 0 shares of common stock of the Company resulting in a loss on settlement of debt of $41,279 and $0, respectively.

Initial derivative expense of $353,207 for the year ended December 31, 2025 represents the difference between the fair value of the total embedded derivative liability of $596,207 and the cash received of $243,000 for convertible note issued on April 16, 2025, November 13, 2025 and December 2, 2025.

During the year ended December 31, 2025 and 2024, the gain due to the change in fair value of derivative liabilities was $134,669 and $0, respectively.

On September 13, 2018, the Company entered into a Side Letter Agreement (“Original Note”) with a non-related investor, Jordan Turk, to amend and add certain terms to unsecured, non-interest bearing, due on demand notes payable totaling $40,000 issued by the Company during the period of July 10, 2018 to September 13, 2018. The issue price of the Note is $40,000 with a face value of $48,000 and the Note has an original maturity date of December 31, 2018 which is subject to automatic annual renewal. On June 29, 2021, the Company and Jordan Turk entered into an Agreement to change the original maturity date of the Note to December 31, 2025. At the option of the Company, the Company may convert principal and interest at a fixed conversion price of $0.0001 per share of the Company’s common stock. The Note allows the lender to secure a portion of the Company assets up to 200% of the face value of the Note. If the Note is not paid on December 31 each year, the outstanding face amount of the Note increases by 20% on January 1 the following year.

On December 30, 2024, Jordan Turk and the Company agreed to exchange $43,328 of principal and interest of Original Note for a New Promissory Note with a carrying value of $71,993 (see Note 7) resulting in a loss of extinguishment of $28,665.

Also, on December 30, 2024, Jordan Turk entered into an agreement to assign the remaining outstanding principal and interest of the Original Note with a carrying value of $100,000 to Emil Assentato, the Chief Executive Officer of the Company.

The consolidated statement of operations includes interest expense of $20,000 and $23,888 for the year ended December 31, 2025 and 2024 respectively. On December 31, 2025 and 2024, the carrying amount of the Note is $120,000 (face value of $120,000 less $0 unamortized discount) and $100,000 (face value of $100,000 less $0 unamortized discount), respectively.

The Company is currently in the process of shifting its focus to becoming a technology company, specifically in the artificial intelligence and quantum computing spaces. The Company’s AI strategy is to address the needs three distinct economies, each of which requires a different solution: personal AI, enterprise automation, and compute frontier through a portfolio of three products: Pegasus, Scalova, and EntangleX.

On June 30, 2026, pursuant to stockholder consent, our Board of Directors authorized an amendment (the “Amendment”) to our Certificate of Incorporation, as amended, to change the name of the Corporation from Two Hands Corporation to Quantum X, Inc. The Company filed the Amendment with the Delaware Secretary of State on July 8, 2026. The name change will not be effective until it is cleared by the Financial Industry Regulatory Authority (“FINRA”).

On July 7, 2026, the Company voluntarily delisting its common shares from the Canadian Securities Exchange (the "CSE"). The Company’s common shares are no longer listed or posted for trading on the CSE. The Company’s common stock continues to be quoted on the OTC Markets under the symbol “TWOH”.

The Company evaluates the embedded features of its financial instruments, including convertible notes payable, in accordance with ASC 480 and ASC 815. Certain conversion options and certain contingent features are required to be bifurcated from their host instrument and accounted for separately as derivative financial instruments when applicable criteria are met. The Company applies significant judgment to identify and evaluate complex terms and conditions of its financial instruments to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives.

Bifurcated embedded derivatives are recognized at fair value at issuance, with the fair value recorded as a derivative liability and a corresponding debt discount limited to the proceeds received; any excess of the derivative’s fair value over the proceeds is recognized in the condensed consolidated statements of operations at issuance. Debt discounts are amortized to interest expense over the term of the related note. Bifurcated embedded derivatives are remeasured to fair value each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. Upon conversion, repayment, or extinguishment of the host instrument, the related derivative liability is remeasured to fair value with the change recognized in earnings and is then derecognized as part of the settlement or extinguishment accounting.

Stock-based compensation - services for the three months ended June 30, 2026 and 2025, comprise primarily compensation of our contractors of $650,782 and $0, respectively.

COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2026 and 2025

Operating expenses:

Our total operating expenses for the six months ended June 30, 2026 was $2,312,119, compared to $464,671, for the six months ended June 30, 2025, respectively. The increase in total operating expense is primarily due to increase in salaries and benefits, consulting, office and general expenses and stock based compensation, offset by decrease in professional fees.

Salaries and benefits for the six months ended June 30, 2026 and 2025, comprise primarily compensation of our officers, directors, and contractor of $159,000 and $130,000, respectively.

During the six months ended June 30, 2026 and 2025, consulting expenses of $257,366 and $33,952 consisted of costs related to the development of new businesses and bookkeeping services.

Professional fees comprise legal fees from compliance and the review of proposed transactions and debt agreements, annual audit and filling fees.

Stock-based compensation - services for the six months ended June 30, 2026 and 2025, comprise primarily compensation of our contractors of $650,782 and $0, respectively.

Other income (expense):

Amortization of debt discount and interest expense for the six months ended June 30, 2026 was $120,831, compared to $138,312 for the six months ended June 30, 2025. Amortization of debt discount and interest expense relates to the issuance of non-redeemable convertible notes, convertible notes and promissory notes.

Initial derivative expense of $33,804 for the six months ended June 30, 2026 represents the difference between the fair value of the total embedded derivative liability of $113,804 and the cash received of $80,000 for convertible notes issued on January 16, 2026 .

Gain on debt settlement of $5,272 for the six months ended June 30, 2026 represents the difference between the carrying value of convertible promissory notes, net and derivative liabilities settled of $279,760 and the cash paid of $274,488 for convertible notes issued on November 13, 2025 and December 2, 2025.

Net loss for the period:

Our net loss for the six months ended June 30, 2026 was $2,250,643, compared to $666,750 for the six months ended June 30, 2025, respectively. Our losses during the six months ended June 30, 2026 and 2025 are primarily due to costs associated with compensation to our officers and directors, consulting, professional fees, interest, and change in fair value of derivative liabilities.

Our net cash used in investing activities for the six months ended June 30, 2026 and 2025 is $292,879 and $0, respectively. During the six months ended June 30, 2026, we made deposits on contractual commitments related to our More Money, EntangleX and DailyLove projects

Software Development Agreement

On May 1, 2026, the Company entered into a contract with Ujjwal Roy, the Head of Strategy of the Company, to (a) complete the build-out of the user face for EntangleX and (b) provide ongoing maintenance, operations, marketing, sales, and engineering services (“monthly operating costs”) to EntangleX and Scalova. The Company is committed to $250,000 in expenditures for the EntangleX build-out project which is expected to be completed in three months. The Company is also committed to an estimated $35,000 of monthly operating costs for the support of EntangleX and Scalova ($20,000 for EntangleX and $15,000 for Scalova). Pursuant to the provisions of ASC 985-20, all payments made during the period under this agreement to Ujjwal Roy ($80,000 for EntangleX and $70,000 in operating costs) have been deemed research and development, which we have recorded in general and administrative expense on the condensed consolidated statements of operations and comprehensive income (loss).