NOTE 6 – UNICOIN RIGHTS FINANCING OBLIGATION

As of March 31, 2025, the Company has not issued any unicoins. However, on July 16, 2025, the Company entered into a settlement agreement under which it granted the counterparty rights to receive 350,000 unicoins, subject to certain restrictions and conditions. The agreement arose in connection with the resolution of a legal dispute. No unicoins have been issued to date under that agreement. There can be no assurance as to when, or on what additional terms, further unicoins will be available to be issued, if at all.

The Company is offering rights (“unicoin rights” or “rights”) to receive unicoins upon tokenization (Unicoin’s definition of tokenization reflects industry usage and is not based on statutory or judicial authority) with terms and conditions set forth in a confidential private placement memorandum initially dated February 2022 and updated periodically thereafter (“the Offering”). The Offering is being conducted pursuant to an exemption from U.S. securities registration requirements provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(c) thereunder. Each U.S. domiciled investor in unicoin rights must be an “accredited investor,” as defined in Rule 501 of the Securities Act.

The Company accounts for unicoin rights by recording a liability representing the amount that management believes the Company would be obligated to pay or refund (i.e., the amount holders have a right to claim and would likely be awarded in settlement) for fair value exchanged as consideration for rights to receive unicoins in the future and in the event the unicoin is never launched. The Company concluded that it has a legal or contractual obligation and recorded an amount necessary to refund the amount originally paid by investors if holders’ reasonable expectation to receive unicoins is not achieved.

To date, the Company has issued 5,110,252,573 unicoin rights (excluding those unicoin rights the Company has committed but not issued pursuant to the five-year deferred payment program and the ten-year prepaid plan, and the token rights granted under a settlement agreement executed on July 16, 2025). There are currently 75,932 total holders of unicoin rights listed in the Company’s registry (not accounting for duplication for individuals who invested more than once), including the holders of free coins, and 5,564 purchasers worldwide. Of these, 1,538 are US Citizen investors (27.64% of purchasers), and 4,026 (4.43% of holders) are non-US citizens or were not verified (72.36%). Note that non-accredited holders or those not verified are either non-US Persons who purchased pursuant to Regulation S, or were given unicoin rights for free, and thus were not sold unicoin rights.

As of March 31, 2025 and December 31, 2024, the Company has issued rights to acquire 7.2 billion and 7.1 billion unicoins, respectively. As of March 31, 2025 and December 31, 2024, the outstanding financing obligation related to unicoin rights was $111,001 thousand and $109,911 thousand, respectively. The obligation to settle this liability through the exchange of a fixed number of unicoins, when and if all contingencies are resolved and unicoins are launched, represents an embedded feature that may result in additional charges to the Company’s condensed consolidated statements of operations and comprehensive loss upon settlement. Although the Company intends to do so, if it is unable to launch the unicoin, there can be no assurance that the Company can generate sufficient funds through operations, or through financing transactions on terms acceptable to the Company in order to settle the unicoin rights financing obligation. Due to the currently undetermined rights of unicoin holders, the significant nature of required regulatory approvals and the likely registration required prior to unicoins achieving liquidity (all of which have aspects whose success is outside of the Company’s control), management initially concluded that the value of the embedded feature is de minimis and will likely remain de minimis until the unicoin is probable of regulatory approval and launch. Accordingly, the embedded feature was initially valued at $0 and is not expected to fluctuate until the unicoin is launched or probable of launch. The expected fair value measurement of the embedded feature was based on significant inputs not observable in the market and represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined using a variety of information, including estimated future cash flows.

During the three months ended March 31, 2025 and 2024, the Company paid operating expenses to employees and service providers by issuing unicoin rights with a fair value of $79 thousand and $415 thousand, respectively.

The following table summarizes the components of the unicoin rights financing obligation recorded on the Company’s condensed consolidated balance sheet as of March 31, 2025 and December 31, 2024:

Sales to Investors

As of March 31, 2025 and December 31, 2024, the unicoin rights financing obligation associated with sales to Investors amounted to $44,658 thousand and $43,552 thousand, respectively. The cumulative amounts were received from completed cash and non-cash sales of unicoin rights in the Company’s various financing rounds at prices ranging from $0.01 to $0.75. Although there are no stated legal rights requiring the Company to return amounts received from investors, management believes the holders of unicoin rights have a reasonable right to either 1) receive the number of unicoins specified in their unicoin rights agreement upon the future launch of the unicoin or 2) a refund of the amount invested in anticipation of the future and launch of unicoins. Therefore, all amounts received from sales to Investors have been recorded as a unicoin rights financing obligation.

Dividend Issued to Shareholders

The Company declared and issued a non-cash dividend of unicoin rights, on a pro-rata basis, to all shareholders of record as of the dividend declaration date of February 10, 2022. This non-cash dividend was the initial issuance of unicoin rights, prior to finalizing any plan to market and sell rights in connection with any of the Company’s financing rounds, and at the time of the pro-rata distribution, management and the Board had not yet ascribed a value to such rights. As a result, the Company has ascribed de minimis value to all unicoin rights issued to shareholders on February 10, 2022. As of March 31, 2025 and December 31, 2024, the unicoin rights financing obligation associated non-cash dividend of unicoin rights amounted to $73 thousand, respectively.

Discretionary Payments to Employees, Contractors and Directors

The Company has issued unicoin rights to certain employees, Board members and external contractors/consultants as discretionary awards. These unicoin rights were issued on a discretionary basis and do not indicate that employees, Board members or contractors/consultants are being rewarded with a specific value attributable to past or future services rendered by such individuals. The unicoin rights were also not issued as a replacement for, or in lieu of, cash or equity awards due under any type of pre-determined bonus or other incentive plan that quantifies a value that the holders are entitled to as a result of their services or performance. The Company believes that, because of the nature of these discretionary awards (i.e., nothing of specific value was exchanged to the Company in return), together with the legal disclaimer of any obligation to launch the unicoin within the terms of the unicoin rights agreement, on a per unicoin right basis, the amount that holders would be entitled to if the unicoin is not ultimately launched is de minimis in relation to the actual fair value per unicoin right. As of March 31, 2025 and December 31, 2024, the unicoin rights financing obligation associated with discretionary payments to employees, contractors and directors amounted to $52 thousand and $52 thousand, respectively.

Issued to Service Providers, Influencers and Employees

The Company has issued unicoin rights in exchange for services from advertising agencies, marketing firms and other vendors. Also, the Company has issued unicoin rights as part of the compensation package negotiated with certain employees. The related contracts for these third-party providers and employees specify the value provided, as negotiated by these parties, and the number of unicoin rights accepted as compensation for the dollar value of those services.

Similar to investors, service providers exchanged a specified, negotiated value relating to services provided to the Company in exchange for unicoin rights and have the right to receive either 1) the negotiated number of unicoins upon launch, or 2) payment of cash equivalent to the value of services provided. In addition, from time to time the Company engages Influencers to promote unicoins and/or the Unicorn Hunters show in exchange for unicoin rights. The form of Influencer engagement may include promoting Unicoin in a social media post, making brief reference in a speech, posting about Unicoin on a website or any other media form.

These contracts do not specify the value of services rendered by the Influencer nor the specific format of engagement required. Because an “engagement” can represent something as simple as brief mention in a speaking engagement, or posting on a social media account, etc. management determined there is very little effort involved by the Influencer in order to perform services in a manner consistent with the contractual terms. As of March 31, 2025, and December 31, 2024, the unicoin rights financing obligation associated with unicoin rights issued to service providers, influencers and employees amounted to $37,124 thousand and $37,049 thousand, respectively.

Five-Year Deferred Payment Plan

In August 2022 the Company began offering a five-year deferred payment plan (the “deferred payment plan”) to investors in its ongoing unicoin rights offering. The deferred payment plan permits investors to purchase unicoin rights immediately and pay for such unicoin rights in five equal annual installments, with the first installment due one year after the date of purchase. Purchases through the deferred payment plan requires that investors provide collateral to the Company having a value of at least 20% of the total purchase price of the purchased unicoin rights. Collateral can be in the form of Company common stock owned by the investor, unicoin rights already owned by the investor, cash, digital assets or other assets with a demonstrable value, at the Company’s discretion, if such assets can be transferred to the Company or a valid lien on such assets can be secured. Pursuant to the terms of the installment payment plan, both the pledged collateral and the unicoin rights being purchased under the installment plan will be forfeited to the Company if the investor fails to make any of the five annual installment payments.

The following table summarizes the pledged collateral pursuant to the deferred payment plan as of March 31, 2025 and December 31, 2024:

The fair value of the collateral received by the Company is determined as follows:

Ten-Year Prepaid Plan

In November 2022 the Company began offering a ten-year prepaid plan (the “prepaid plan”) to investors in its ongoing unicoin rights offering. Under the prepaid plan, the investor remits a cash or digital asset deposit (the “principal”) for a period of up to ten years. After the first year (the “maturity date”), the investor can either withdraw the principal or apply it towards the purchase of unicoins at 20 cents per unit. Amounts recorded within the unicoin rights financing obligation were as follows:

After five years following the deposit (the “interest vesting date”), a portion of these proceeds are entitled to earn cumulative (i.e., non-compounded) interest of 50%, which can either be withdrawn or applied to the purchase of unicoins. The remaining proceeds did not include a contractual interest rate. Proceeds subject to contractual interest are as follows:

Accrued interest under the prepaid plan has been calculated using the straight-line method, which approximates the effective interest method. The financing obligation did not include present value adjustments to account for lower than market interest rate, in relation to those transactions with no contractual interest, as such adjustments would have been immaterial.

ITSQuest Contingent Divestiture Amendment

The Company has issued 22 million unicoin rights with a fair value of $2,570 thousand, in consideration for various amendments to the Share Exchange Agreement (the “Amended SEA”) to delay the date of the trigger event to, most recently, December 31, 2025. The trigger event provides that the Company would divest itself of the acquired ITSQuest equity by returning the same to the founders of ITSQuest, and such founders shall be entitled to retain the shares of the Company received pursuant to the original and amended SEA upon any of the following two scenarios:

Asset Swap Agreement and Related Commission 

The Company records assets on the condensed consolidated balance sheets for the fair value (as determined by a third-party specialist) of land and mining rights received in exchange of unicoin rights. The Company recorded investments in land and mining rights assets, and the respective unicoin rights financing obligation from asset swap agreements as of March 31, 2025, as follows:

Unicoin Rights Issued to Related Parties

The unicoin rights issuances discussed above include a total of 1,155 million unicoin rights, and the respective unicoin rights financing obligation of $2,701 thousand, which represent the cumulative amounts issued to related parties as of March 31, 2025 and December 31, 2024. The composition of these is summarized in the following table:

Other Matters

As of March 31, 2025 and December 31, 2024, the Company had $39 thousand and $35 thousand, respectively, of cash deposits pursuant to completion of the due diligence process required before issuance of unicoin right certificates. This amount is included in other current liabilities on the condensed consolidated balance sheet and in proceeds from sales of unicoin rights on the condensed consolidated statements of cash flows.

Transaction Loss on Repurchase of Unicoin Rights

During the three months ended March 31, 2025 and 2024, the Company recorded a transaction gain/(loss) on repurchase of unicoin rights amounting to $7 thousand and $(163) thousand (of which $64 thousand were non-cash), respectively.