Note 5 DIGITAL ASSETS AND TOKEN ACTIVITIES

As a result of the Merger, the Company acquired digital assets consisting of BTC, USDT, and NILA Tokens on December 1, 2025. The Company holds digital assets primarily for liquidity and volatility mitigation purposes and is not a broker-dealer, exchange, or investment company.

Digital Asset Holdings

Activity During the Period (December 1, 2025, through December 31, 2025)

Realized Gains and Losses

During the period from December 1, 2025, through December 31, 2025, the Company sold 4,251,507 NILA Tokens for aggregate proceeds of 1,822,115 USDT (approximately $1,822,115). Realized gains and losses on the sale of digital assets are presented within “Realized gain (loss) on sale of digital assets” in the consolidated statement of operations.

Unrealized Gains and Losses

For the period from December 1, 2025, through December 31, 2025, the Company recognized unrealized gains (losses) on digital assets of $1,812,348, presented within “Unrealized gain (loss) on digital assets” in the consolidated statement of operations.

Custody and Risks

The Company is exposed to risks inherent in digital asset holdings, including price volatility, cybersecurity risks, regulatory uncertainty, and concentration risk. The Company does not insure its digital asset holdings against loss or theft. USDT is a stablecoin that seeks to maintain a 1:1 peg with the U.S. dollar. The Company is exposed to the risk that USDT could trade materially below its pegged value, that the USDT issuer (Tether Limited) may not maintain adequate reserves, or that regulatory actions could affect the redeemability or value of USDT.

NILA Tokens trade on a limited number of centralized cryptocurrency exchanges. The Company is exposed to liquidity risk, as there can be no assurance that the Company will be able to sell NILA Tokens at prices equal to or exceeding their carrying value. Daily trading volumes for NILA Tokens have historically been modest, and significant sales by the Company could adversely affect the trading price.

Cash Flow Statement Presentation

Proceeds from sales of digital assets are presented within investing activities in the consolidated statement of cash flows. Non-cash changes in the fair value of digital assets are reconciling items in the operating activities section.

FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31, 2025:

The warrant liability as of May 12, 2025 (IPO date), was valued utilizing the Black-Scholes options pricing model with the following inputs: $1.81 of stock price, 4.09% risk-free rate, 78.29% volatility, 0% dividend rate, and the expected term of 5 years. The warrant liability as of August 5, 2025, was valued utilizing the Black-Scholes options pricing model with the following inputs: $1.78 of stock price, 3.74% risk-free rate, 77.11% volatility, 0% dividend rate, and the expected term of 5 years. Upon issuance of the advisor warrants on August 5, 2025, the Advisor Warrants were reclassified to additional paid-in capital and will remain equity classified.

Level 2 Valuation — NILA Tokens

NILA Tokens are classified within Level 2 of the fair value hierarchy. The fair value of NILA Tokens is determined using quoted prices for the NILA/USDT trading pair on centralized cryptocurrency exchanges. Although NILA Tokens have observable pricing on exchanges including LBank, the limited number of trading venues (two exchanges as of December 31, 2025) and relatively modest daily trading volume (ranging from approximately $200,000 to $350,000 in 24-hour volume) indicate that the market does not meet the “active market” threshold required for Level 1 classification. Management considers the exchange-quoted prices to represent observable market inputs that are corroborated by transaction data, supporting Level 2 classification.

Level 3 Valuation — Derivative Liability

The derivative liability associated with the variable conversion feature of the PIPE convertible note is classified within Level 3 of the fair value hierarchy. The fair value is determined using a Monte Carlo simulation wherein a probability-weighted scenario analysis incorporating the Company’s stock price, expected volatility, remaining term of the note, and the contractual 20% discount to the minimum volume-weighted average price over a five-day lookback period is run. Changes in the fair value of the derivative liability are recognized in other income (expense) in the consolidated statements of operations.

Level 3 Roll forward — Derivative Liability

The change in fair value of derivative liability recognized in earnings during the year ended December 31, 2025, was $55,146 and is included in “Change in FV of derivative liability” in the consolidated statement of operations.

Level 3 Roll forward — Warrant Liabilities

The change in fair value of warrant liabilities recognized in earnings during the year ended December 31, 2025 (prior to reclassification) was $22,377 and is included in “Change in FV of warrant liability” in the consolidated statement of operations.