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

Since late 2025, policymakers in the United States and other jurisdictions have continued to consider legislation and regulatory proposals addressing digital assets, including frameworks relating to tokenized deposits, payment stablecoins, and other blockchain-based representations of financial assets. These proposals could impose new requirements relating to licensing, capital or reserve requirements, operational controls, consumer protections, and regulatory oversight of blockchain-based financial infrastructure. Because our business strategy includes the development of a tokenized deposit platform and related digital financial infrastructure, changes in law, regulation, or regulatory interpretation could affect our ability to launch or operate such services, require modifications to our platform architecture or compliance framework, or impose additional obligations on us or our partners. Regulatory developments could also impose additional supervisory expectations on bank-fintech partnerships or limit the types of institutions permitted to issue tokenized deposits. Any such developments could adversely affect our business, financial condition, and results of operations.

In March 2026, we entered into a Master Loan Agreement with Payward Interactive, Inc., pursuant to which we may borrow from time to time, borrow fiat currency or digital assets on the terms set forth therein in an aggregate principal amount of up to $25.0 million for up to a twelve-month term, subject to execution of one or more individual loan term sheets. The MLA contains customary conditions, initial collateral requirements, collateral maintenance and liquidation mechanics, and early return and recall rights. The Bitcoin collateralizing the borrowing facility is held for the benefit of the Lender by an affiliate of the Lender, Payward Financial, Inc. (the "Custodian") and subject to an account control agreement by and among the Lender, the Company and the Custodian. As of March 20, 2026, we entered into a term sheet for a fixed-term loan of $5.0 million bearing interest at 8.5% per annum under the MLA maturing on March 18, 2027. Borrowings under the MLA are solely secured by Bitcoin collateral held in and subject to collateral maintenance requirements based on specified margin ratios. Due to the inherent volatility of Bitcoin and other digital assets, declines in the value of our pledged collateral could result in margin calls requiring us to repay borrowings earlier than anticipated or post additional collateral within short timeframes, each of which may strain our liquidity, or result in the liquidation of pledged assets at unfavorable prices. Any such events could adversely impact our financial condition, results of operations and ability to execute our business strategy.

We rely on an affiliated entity to provide key operational services, which exposes us to risks related to potential conflicts of interest, cost structure, operational dependency, and business continuity.

On March 18, 2026, we entered into an Affiliate Services Agreement with Vast Holdings, Inc., an affiliated entity, pursuant to which its wholly-owned OCC- chartered bank subsidiary, Vast Bank, provides strategic, operational, and administrative services supporting the further development of our tokenized deposit platform and related business lines (the “Services”). Under this arrangement, we reimburse Vast for the cost of the Services based on the actual costs incurred by Vast Bank, subject to a total reimbursement cap during the term of the agreement. Our reliance on an affiliated service provider exposes us to a number of risks including potential conflicts of interest, limitations on our operational independence, and reduced flexibility in managing our cost structure. In addition, because a significant portion of our operational infrastructure is supported by Vast, any disruption in services, disagreement regarding service levels or costs, or inability to scale services in line with our growth could adversely affect our business operations. Any of these factors could adversely affect our business, financial condition, results of operations, and ability to execute our strategic objectives.

Geopolitical and political instability, including armed conflicts, regional tensions, terrorism, sanctions, adverse economic conditions, and related disruptions in U.S. and global markets, could adversely affect our business and financial condition.

Political developments in the U.S. and other countries can cause uncertainty in the economic environment and market conditions in which we operate. Certain governmental policy initiatives, as well as heightened geopolitical tensions, could significantly affect U.S. and global economic growth and cause higher volatility in the financial markets, including: monetary policies and actions taken by the federal reserve and other central banks or governmental authorities; fiscal policies, including with respect to taxation and spending; foreign policies; economic or financial sanctions; the implementation of tariffs and other protectionist trade policies; and changes to immigration policies.

These types of political developments, and uncertainty about the possible outcomes of these developments, could: erode investor or consumer confidence in the U.S. economy and financial markets, which could potentially undermine the status of the U.S. dollar as a safe haven currency and cause stock price volatility; provoke retaliatory countermeasures by other countries and otherwise heighten tensions in regulatory, enforcement or diplomatic relations; increase the risk of targeted cyber attacks; increase concerns about whether the U.S. government will be funded, and its outstanding debt serviced, at any particular time; result in periodic shutdowns of the U.S. government; influence monetary policy actions of the federal reserve to moderate the economic impact of political developments; cause us to refrain from engaging in business opportunities that it might otherwise pursue; or cause us to have fewer business opportunities if governments or partners are unwilling to engage with us due to geopolitical tensions or adverse perceptions of U.S. businesses.

Ongoing geopolitical instability, including conflicts in the Middle East and related regional tensions, may contribute to volatility in global financial markets, including digital asset markets such as Bitcoin, which constitutes a significant portion of our treasury holdings. These events may also result in increased regulatory scrutiny, economic uncertainty, and disruptions to global capital markets, liquidity conditions, payment systems, or investor sentiment. Our ability to execute our business strategy, establish partnerships with financial institutions, and access capital may be adversely affected by changes in market conditions and investor sentiment resulting from geopolitical developments. Any such developments could adversely affect the value of our Bitcoin holdings and our ability to execute our broader treasury and growth strategies or cause us to have fewer business opportunities or partnerships.

The potential outcomes of these developments could be significant, which could adversely affect our stock price or our business, results of operations, financial condition or prospects.

In March 2026, our Board of Directors approved the repricing of all outstanding stock options and the grant of new equity awards to new hire employees and consultants. The repricing will be accounted for as a modification under applicable accounting guidance and may result in incremental stock-based compensation expense. In addition, the issuance of new equity awards will increase our stock-based compensation expense in future periods.

On September 27, 2024, we received a notice from the NYSE American stating that we were not in compliance with certain listing standards set forth in Sections 1003(a)(ii) and 1003(a)(iii) of the NYSE American LLC Company Guide. On December 10, 2024, the NYSE American accepted our plan to regain compliance and granted a plan period through March 27, 2026. As required by the NYSE American, we are obligated to provide quarterly updates concurrent with our interim and annual SEC filings and to demonstrate progress toward the initiatives outlined in our accepted plan. We will submit our required compliance update for the Transition Period ended December 31, 2025 to the NYSE American. Based on management’s current assessment, we expect that this submission will support a determination by the NYSE American that we have regained compliance with the applicable continued listing standards prior to the expiration of the plan period on March 27, 2026. However, the NYSE American retains sole discretion in evaluating our compliance status, and there can be no assurance that it will conclude that we have regained compliance.

In addition, NYSE American has proposed amendments to its listing standards that, if adopted and applicable to us, could permit the exchange to suspend trading in, and commence delisting proceedings against, a listed company under stricter standards than those currently in effect. One pending proposal would permit immediate suspension and commencement of delisting proceedings if a listed company’s common stock falls below $0.25 per share. A separate pending proposal would permit immediate suspension and delisting proceedings if a listed company’s average global market capitalization over a consecutive 30 trading-day period falls below $5.0 million. The proposed amendments also provide that an issuer that falls below these proposed thresholds would not be eligible to submit a compliance plan under Section 1009 of the Company Guide. These proposed amendments to the NYSE American listing standards are subject to review and approval by the SEC and may be modified prior to adoption. If approved, the timing of implementation could occur during 2026 or later. The proposed rule change was filed with the SEC on December 3, 2025 and published by the SEC for public comment on December 12, 2025, and the SEC’s notice contemplates a comment period ending 21 days after publication in the Federal Register. In addition, NYSE American has proposed to make the $0.25 minimum trading price requirement effective on October 1, 2026.

We may consider implementing a reverse stock split in the future, which could adversely affect the market price and liquidity of our common stock.

From time to time, our Board of Directors may evaluate potential actions intended to increase the per-share trading price of our common stock or support compliance with applicable exchange listing requirements. One such action could include the implementation of a reverse stock split of our outstanding common stock, which would reduce the number of shares outstanding by combining multiple existing shares into a smaller number of shares.

We have not determined whether a reverse stock split will be pursued, and any such action would be subject to approval by our Board of Directors and, if required, our stockholders. However, if a reverse stock split were implemented, it may not result in a sustained increase in the market price of our common stock. Companies that implement reverse stock splits often experience declines in the market price of their securities following the transaction. In addition, a reverse stock split could reduce the liquidity of our common stock, increase price volatility, and reduce the number of investors willing or able to hold our shares.

Because we previously effected a reverse stock split within the last two years, NYSE American may review any additional reverse stock split under its continued listing and suitability standards. As a result, the ratio or effectiveness of any future reverse stock split could be limited. If a reverse stock split were implemented and the market price of our common stock does not increase proportionately or subsequently declines, our stockholders could experience a decrease in the value of their investment.

We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.

Mutual funds, ETFs and their directors and management are subject to extensive regulation as "investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit of and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of our Bitcoin strategy, our use of leverage, the manner in which our Bitcoin is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our Bitcoin holdings or other activities we may pursue, and has the power to change our current policies, including our Bitcoin strategy.

Our Bitcoin holdings are and will be less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Historically, the Bitcoin market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our Bitcoin at favorable prices or at all. For example, a number of Bitcoin trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (a major U.S.-based crypto exchange) has, to date, not done so. As a result, our Bitcoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, Bitcoin we hold with our custodians and transact with our trade execution partners will not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered Bitcoin or otherwise generate funds using our Bitcoin holdings, including in particular during times of market instability or when the price of Bitcoin has declined significantly. If we are unable to sell our Bitcoin, enter into additional capital raising transactions, including capital raising transactions using Bitcoin as collateral, or otherwise generate funds using Bitcoin holdings, or if we are forced to sell our Bitcoin at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

If we fail to demonstrate reliability, accuracy, and scalability, we may be unable to attract partners, obtain approvals, or generate revenue. There can be no assurance as to the timing, scope, or completion of any of these steps and either initiative may be delayed, modified, or discontinued if approvals are not obtained, if negotiations fail, or if our partners elect to pause or terminate participation.

Results of the Transition Period are not directly comparable to results for prior annual periods due to our fiscal year end change from September 30 to December 31. Accordingly, the operating results for the Transition Period should not be considered indicative of historical or future full-year operating performance.

USBC, Inc. continues to focus on the development of its financial‑technology platform and related digital‑asset initiatives, including its pre‑launch tokenized‑deposit program and Bitcoin‑based treasury activities. Our operating results for the Transition Period primarily reflect ongoing investment in these initiatives, the integration of newly established banking and technology partnerships, and certain legacy research and development activities.

A detailed description of our business, operating strategy and product development initiatives is included in Item 1 — Business, and the discussion below should be read together with that section as well as with the consolidated financial statements and accompanying notes. This MD&A focuses on the specific factors that affected our financial condition, results of operations, liquidity and capital resources during the Transition Period, including the impact of our digital‑asset treasury strategy, pre‑launch development expenditures, public‑company compliance requirements, and our recently implemented capital structure.

On January 20, 2026, we entered into a Strategic Partnership Agreement with Uphold and Vast Bank, which formalized the parties’ respective roles and responsibilities related to the development and operation of the USBC tokenized deposit program, formalizing the terms of the parties’ preliminary partnership previously announced on October 23, 2025. Under the agreement, Vast Bank will serve as the issuing bank for customer deposit accounts, Uphold will provide platform integration and customer access, and we will operate the tokenized deposit network. The tokenized deposit program has not yet been commercially launched, and we continue to advance technical, operational, and regulatory readiness. The timing, scope, and ultimate commercial impact of the initiative remain subject to uncertainty and will depend on a number of factors, including regulatory considerations, partner alignment, and customer adoption.

In February 2026, we completed our evaluation of the legacy non-invasive sensor business and we have elected to proceed with a divestiture transaction. Negotiations with the potential buyer are nearing completion; however, there is no assurance that any transaction will be consummated. The financial impact of the potential divestiture transaction is not expected to be material to our financial statements.

On March 10, 2026, we initiated Phase 1 of our multi-phase delivery strategy for how we will bring the USBC tokenized deposit product to market. Phase 1 is being conducted with a limited group of internal users who have elected to participate in an expanded employee pilot program ahead of the public launch of the branded platform. Phase 1 is not a consumer offering and is not available to the public; it is intended solely to begin technical readiness testing. During this phase, testing activities are conducted exclusively with company-provided funds for internal evaluation purposes. The results of Phase 1 will inform our evaluation of the timing and scope of subsequent phases of the delivery strategy and when the tokenized deposit product offering may become available to retail customers. Any future retail launch will remain subject to the outcome of the pilot program and receipt of any required regulatory, board, and bank partner approvals.

On March 18, 2026, we entered into a secured borrowing facility with Payward Interactive, Inc. (the “Facility”), providing for aggregate borrowings of up to $25 million during the term of the Facility which matures on March 18, 2027. The Facility is collateralized by a portion of our Bitcoin treasury holdings and bears interest at a rate of 8.5% per annum. The Facility includes customary margin maintenance provisions that may require us to pledge additional Bitcoin collateral or partially repay outstanding borrowings in the event of a decline in the market value of Bitcoin. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc. (“Vast”) under the terms of the Affiliate Services Agreement (the “Agreement”) we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.

On March 18, 2026, our Board of Directors approved the repricing of all outstanding stock options, including (i) options originally granted in August 2025 and subsequently repriced in October 2025 to $1.10 per share, (ii) options granted in October 2025 with an exercise price of $1.10 per share, and (iii) options granted in October 2025 with an exercise price of $0.87 per share. The repricing reduced the exercise price of all such awards to $0.37 per share. No changes were made to the vesting schedules or contractual terms of these awards.

Subsequent to December 31, 2025, 13,137,500 unvested stock options were forfeited pursuant to the terms of the 2021 Plan. Accordingly, such forfeited awards became available for future grant under the 2021 Plan.

(dollars in thousands)

Research and Development. R&D expense was $254,000 for the Transition Period, compared to $802,000 for the comparable prior-year period. The change of $548,000 was primarily driven by the Company’s strategic transition away from its legacy non-invasive diagnostics and sensor technology initiatives and toward the development of its tokenized deposit platform and related digital financial infrastructure. During the Transition Period, the Company reduced personnel and external consulting resources dedicated to its Science Division as it wound down certain research activities, resulting in lower expenditures related to the Bio-RFID™ technology.

Income tax benefit. Income tax benefit was $15.7 million for the Transition Period; there was no income tax benefit for the comparable prior-year period. This increase of $15.7 million is primarily related to the tax effect of the change in the fair value of digital assets during the Transition Period, driven by elevated volatility in digital asset markets, which caused a significant decline in the fair value of Bitcoin, as well as the netting of deferred tax assets against the deferred tax liability.

Net Loss. We reported a net loss of $27.5 million for the Transition Period, compared with a net loss of $4.7 million for the comparable prior-year period. The increase of $22.8 million primarily reflects the change in fair value of digital assets of $27.2 million related to elevated volatility in digital asset markets, non-cash stock-based compensation expense of $11.9 million, professional fees and other public-company and advisory costs associated with our strategic transition of $3.1 million, partially offset by deferred income tax benefits of $15.7 million associated with the change in fair value of digital assets.

Although we expect our operating losses to continue in the near term, we believe our potential revenue opportunities and strong capital structure provide us with flexibility to pursue our digital-asset treasury and financial-technology initiatives.

On March 18, 2026, we entered into a secured borrowing facility with Payward Interactive, Inc., providing for aggregate borrowings of up to $25 million during the term of the Facility, which matures on March 18, 2027. The Facility is collateralized by a portion of our Bitcoin treasury holdings and bears interest at a rate of 8.5% per annum. The Facility includes customary margin maintenance provisions that may require us to pledge additional Bitcoin collateral or partially repay outstanding borrowings in the event of a decline in the market value of Bitcoin. Proceeds from the Facility will be used primarily to fund further development costs of the tokenized deposit program offering, including costs paid to our affiliate, Vast Holdings, Inc., under the terms of the Affiliate Services Agreement we simultaneously entered into on March 18, 2026. Pursuant to the terms of the Agreement, we will reimburse Vast for the cost it incurs to perform certain strategic, operational, and administrative services in support of the further development of the tokenized deposit program offering. We believe that it will be more economical and efficient for certain services necessary for these operations to be performed by officers, employees or consultants of Vast, recognizing that cost reimbursements to Vast must be at least on or favorable to market terms. Total reimbursements under the Agreement are capped at $10.5 million during the term of the Agreement, unless mutually agreed upon with Vast and are subject to detailed invoicing, documentation, and approval requirements. The Agreement expires on December 31, 2026.

There were no financing transactions completed during the Transition Period. The Company’s liquidity position during the period reflects the impact of the private placement completed on August 6, 2025, pursuant to which we issued approximately 357.8 million shares of common stock to Goldeneye 1995 LLC at a purchase price of $0.335 per share, for aggregate consideration consisting of 1,000 Bitcoin and $15 million in cash. The cash proceeds were used primarily to repay or redeem outstanding preferred equity and convertible debt, pay transaction-related costs, and fund working capital. In connection with the transaction, holders of our Series C and Series D Convertible Preferred Stock elected redemption for approximately 8.3 million shares of common stock, certain holders of convertible debt elected conversion for $75,000 in cash and approximately 3.3 million shares of common stock, we issued an aggregate of 7.8 million shares of common stock to financial advisors, the sole holder of Series H Convertible Preferred Stock elected redemption for $654,276 in cash and 2,000,000 shares of common stock, and we repaid in full the Lind Global Fund II LP promissory note for approximately $2.35 million, including prepayment penalties. As a result of these transactions the Company eliminated all outstanding preferred equity and convertible debt and simplified its capital structure. The remaining proceeds continue to support the Company’s ongoing operations and strategic initiatives.

Net cash used in operating activities during the Transition Period was $4,630,194, which was primarily attributable to the net loss for the Transition Period of $27,455,848, partially offset by non-cash expenses of $22,273,348. Non-cash expenses during the Transition Period were primarily comprised of stock-based compensation expense of $11,868,452, unrealized losses related to the change in the fair value of digital assets of $27,192,987, partially offset by net gains on derivatives of $1,101,011, and the deferred income tax benefit of $15,736,607.

The net operating cash outflows primarily reflect operating expenses incurred with the Company’s strategic transition following the August 2025 capital investment, including the introduction of digital-asset treasury activities, partially offset by reduced legacy research and development expenditures.

Net cash used in financing activities during the Transition Period was $99,497, which was primarily attributable to repayments of notes payable during the Transition Period.

The financing cash flows primarily reflect the timing of debt repayments, the absence of capital-raising activity during the Transition Period, and reduced reliance on external financing following the August 2025 capital investment.

Management has completed its evaluation of whether a divestiture of the legacy non‑invasive sensor business may enhance strategic focus and longer‑term value. See Item 1 — Business — Science Division for additional background regarding the planned divestiture of the legacy sensor operations.

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.

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 June 30, 2026, we had advanced $225,000 of the total amount committed under the credit facility, which matures 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. 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.

On July 28, 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 $18.0 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. 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 $25.0 million 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, based on the borrowings outstanding as of July 28, 2026, mature on July 28, 2027 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.

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 will 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.

As of July 31, 2026, a decline of approximately 22.3% 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 July 31, 2026.

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. The Agreement expires on December 31, 2026. As of July 31, 2026, we had incurred approximately $5.1 million in reimbursements of actual development-related costs in accordance with the terms of the Agreement. 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 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.

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.

Following the successful completion of Phase 1 of the delivery strategy, we initiated Phase 2 of the delivery strategy. Phase 2 is intended to expand testing to additional invited participants, build upon the core technical infrastructure established during Phase 1 and focus on advancing the platform toward commercial readiness through continued product development, operational integration, 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 receipt of any required approvals.

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. 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.

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.

Our operating results for the three and six months ended June 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 six months ended June 30, 2026, or 2025. During the six months ended June 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 strong capital structure provide us with flexibility to pursue our digital asset treasury and financial technology development initiatives.

Three Months Ended June 30, 2026 compared to June 30, 2025

Six Months Ended June 30, 2026 compared to June 30, 2025

The following table sets forth key components of our results of operations for the six months ended June 30, 2026, and 2025.

(in thousands)

Research and Development. R&D expenses were $276,000 for the six months ended June 30, 2026, a decrease compared to $657,000 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 $27,822,000 for the six months ended June 30, 2026, compared to $2,805,000 for the comparable prior-year period, an increase of $25,017,000. 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 $10.4 million, operational expenses for tokenized deposit program offering development of $9.3 million (including $6.3 million incurred under agreements with affiliated service providers), and professional fees and other public company and advisory costs of $5.2 million associated with our strategic transition.

Other Expense, Net. Other expense, net for the six months ended June 30, 2026 was $30,221,000, compared to $1,646,000 for the comparable prior-year period, an increase of $28,575,000. 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 $29.7 million and a $2.5 million provision for credit losses, partially offset by derivative income, net of $2.2 million generated from option premiums collected under our Bitcoin treasury trading strategy, and a $1.4 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. There was no derivative income, net generated during the prior year period since we commenced buying and selling call options on our Bitcoin holdings during the fourth fiscal quarter of 2025.

Income tax benefit. Income tax benefit was $11,976,000 for the six months ended June 30, 2026; there was no income tax benefit for the comparable prior-year period, an increase of $11,976,000. The increase in the income tax benefit 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 decline in the fair value of Bitcoin, net of the benefit of the deferred tax asset.

Net Loss. We reported a net loss of $46,343,000 for the six months ended June 30, 2026, compared with a net loss of $5,108,000 for the comparable prior-year period, an increase of $41,235,000. The significant increase in the net loss compared to the prior-year period primarily reflects the change in fair value of digital assets of $29.7 million, provision for credit losses of $2.5 million, operational expenses for tokenized deposit program offering development of $9.3 million, non-cash stock-based compensation expense of $10.4 million, professional fees and other public company and advisory costs of $5.2 million, partially offset by a deferred income tax benefit of $12.0 million.

As of June 30, 2026, we had cash and cash equivalents (excluding restricted cash) of $3.0 million and working capital of $(15.4) million. The negative working capital position was primarily driven by the $15.0 million loan payable and costs incurred during the six months ended June 30, 2026, to develop the tokenized deposit program. Operational expenses for the tokenized deposit program offering development were $9.3 million (including $6.3 million incurred under agreements with affiliated service providers) and professional fees of $5.2 million associated with our development initiatives.

During the six months ended June 30, 2026, our liquidity was primarily utilized to fund operating expenses and working capital requirements. Management believes that existing liquidity and digital asset holdings are sufficient to fund 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.