Note 3 – Summary of Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Commission and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading. The Company recommends that the unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, all adjustments that are necessary for a fair presentation of the Company’s financial position for the periods presented have been reflected. All adjustments are of a normal, recurring nature, unless otherwise stated. The interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2025 consolidated balance sheet included herein was derived from the audited consolidated financial statements but does not include all disclosures including notes required by GAAP for complete financial statements.

The accompanying unaudited condensed consolidated financial statements consolidate the operations of all controlled subsidiaries; all intercompany activity is eliminated. The unaudited condensed consolidated financial statements for the three months ended March 31, 2026 and 2025 include the balance sheet and income statement activity for CapForce International, the Company’s wholly-owned subsidiary. The unaudited condensed consolidated financial statements for the three months ended March 31, 2026 also include the activity of iCapX, the wholly-owned subsidiary of SIE which was acquired in December 2025, and CapForce Singapore, which was established in December 2025, both of which are wholly-owned subsidiaries of the Company.

Use of Estimates

In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the accompanying unaudited condensed consolidated financial statements, estimates are used for, but not limited to, liquidity assumptions, revenue recognition, stock-based compensation, allowances for credit losses and inventory obsolescence, discount rates used to discount unpaid lease payments to present values, deferred tax assets and liabilities and related valuation allowance, the estimated useful lives of long-lived assets, and the recoverability of long-lived assets. Actual results could differ from those estimates.

Segment Reporting

The Company’s chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The CODM is assisted in his responsibilities of making decisions regarding resource allocation and performance assessment by the leadership team.

The Company views its operations and manages its business as one operating segment. Following the Company’s repositioning, the Company offers listing sponsorship and consultancy services to international companies seeking to list their securities on securities exchanges and the Company is developing a digital investment banking platform to support cross-border securities trading, advanced computational model-enabled investment banking advisory, asset management services, and fintech-enabled capital table management. Segment profit or loss is measured as the Company’s net income (loss) as reported on the Company’s statement of operations. The Company monitors its cash and cash equivalents, as reported on the Company’s balance sheets, to determine funding for its activities.

The CODM assesses Company performance through the achievement of revenue goals, integration objectives and cost optimization initiatives. In addition to the Company’s Statement of Operations, the CODM is regularly provided with budgeted and forecasted expense information which is used to determine the Company’s liquidity needs and cash allocation.

Foreign Currency

iCapX and CapForce Singapore are located in Malaysia and Singapore, respectively, and each use a currency other than the United States dollar as its functional currency. As a result, all assets and liabilities of these entities are translated into United States dollars based on exchange rates at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during the reporting period. Translation adjustments are reported in accumulated other comprehensive income (loss), a component of stockholders’ equity. Foreign currency transaction gains and losses, excluding gains and losses on intercompany balances where there is no current intent to settle such amounts in the foreseeable future, are included in the determination of net income (loss). Unless otherwise noted, all references to “$” or “dollar” refer to the United States dollar.

Fair Value of Financial Instruments

Financial instruments classified as current assets and liabilities (including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses) are carried at cost, which approximates fair value, because of the short-term maturities of those instruments.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. The Company has cash and cash equivalents deposited in financial institutions in which the balances occasionally exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000. The Company also holds a portion of its cash and cash equivalents in accounts with foreign financial institutions that are not federally insured. While the Company has not experienced any losses related to its cash concentrations, the Company may be subject to risks relating to its cash held in U.S. financial institutions in excess of the FDIC limit or in financial institutions that are not FDIC-insured.

At March 31, 2026 and December 31, 2025, the Company had funds totaling $302,262 which are required as collateral for letters of credit benefiting a landlord and information technology vendor. These funds are reflected in other noncurrent assets on the accompanying unaudited condensed consolidated balance sheets.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

Accounts Receivable and Credit Concentration

The Company’s accounts receivable result from revenues earned but not yet collected from customers. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30 to 90 days and are stated at amounts due from customers. The Company evaluates if an allowance is necessary by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the customer’s current ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for credit losses was $0 as of March 31, 2026 and December 31, 2025.

At March 31, 2026, the Company had accounts receivable from two customers that individually represented 79% and 20% of total accounts receivable, respectively. At December 31, 2025, the Company had accounts receivable from two customers that individually represented 80% and 19% of total accounts receivable, respectively. The Company did not earn revenues during the three months ended March 31, 2026 or 2025.

Investments in Equity Securities

The Company currently has a single investment in equity securities issued by a privately held entity. In the fourth quarter of 2024, CapForce International performed part of its listing sponsorship and consulting services and completed the first performance obligation, pursuant to the agreement with its client, generating proceeds of $5.0 million in the client’s equity. During the second quarter of 2025, CapForce International completed the second performance obligation within the engagement agreement, earning proceeds of $4.0 million in the client’s equity. During the fourth quarter of 2025, CapForce International completed the remaining performance obligations within the engagement agreement, earning proceeds of $26.0 million in the client’s equity and $0.2 million in cash consideration. The $26.0 million in the client’s equity consists of $12.0 million attributable to the original 2.1% interest previously assigned to CapForce International by AEI Capital and $14.0 million attributable to the separate 1.4% interest assigned to CapForce International by iCapX. The $200,000 of aggregate cash consideration consists of $120,000 attributable to the original assignment by AEI Capital and $80,000 attributable to the assignment by iCapX (see Note 5). The Company has elected to account for this investment using the measurement alternative as the investment does not have a readily determinable fair value. Pursuant to this alternative, the investment is carried at its estimated fair value calculated as its cost minus any impairment. The Company will adjust the investment to fair value only when it identifies observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company will evaluate the investment at each reporting period to determine whether the investment is impaired.

Inventory

Inventory is entirely comprised of the remaining Unyvero system instruments and components and is valued using the first in, first out cost method and stated at the lower of cost or net realizable value. The inventory of approximately $1.2 million at both March 31, 2026 and December 31, 2025 is fully reserved given the uncertainty surrounding the net realizable value and future demand for the Company’s products.

Long-Lived Assets

Property and Equipment

Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimation of undiscounted cash flows is performed at the lowest possible level for which the Company can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment was identified in any of the periods presented.

Leases

The Company determines if an arrangement is a lease at inception. For leases where the Company is the lessee, right-of-use (“ROU”) assets represent the Company’s right to use the underlying asset for the term of the lease and the lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date of the underlying lease arrangement to determine the present value of lease payments. The ROU asset also includes any prepaid lease payments and any lease incentives received. The lease term to calculate the ROU asset and related lease liability includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company’s lease agreements generally do not contain any material variable lease payments, residual value guarantees or restrictive covenants.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while expense for financing leases is recognized as depreciation expense and interest expense using the effective interest method of recognition. The Company has made certain accounting policy elections whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12 months or less) and (ii) combines lease and non-lease elements of our operating leases.

ROU assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimation of undiscounted cash flows is performed at the lowest possible level for which the Company can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment was identified in any of the periods presented.

Intangible Assets

Intangible assets represent costs incurred related to the Company’s proprietary platform during the application development stage that are capitalized as finite-lived intangible assets. These costs include external direct costs for infrastructure and services, as well as personnel and related costs for consultants directly involved in the development effort. Once the project is substantially complete and available for use, capitalized costs will be amortized on a straight-line basis over the asset’s estimated useful life.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. No impairment was identified in any of the periods presented.

Revenue Recognition

The Company derives revenues primarily from offering listing sponsorship and consultancy services to international companies seeking to list their securities on securities exchanges.

The Company analyzes its contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers, (ii) identification of distinct performance obligations in the contract, (iii) determination of contract transaction price, (iv) allocation of contract transaction price to the performance obligations, and (v) determination of revenue recognition based on timing of satisfaction of the performance obligations. The Company recognizes revenues upon the satisfaction of its performance obligations (upon transfer of control of promised goods or services to our customers) in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.

The Company defers incremental costs of obtaining a customer contract and amortizes the deferred costs over the period that the goods and services are transferred to the customer. The Company had no material incremental costs to obtain customer contracts in any period presented.

Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of services being provided.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs primarily consist of fees to develop, expand and innovate the Company’s digital investment banking platform, salaries and related expenses for personnel, and fees paid to consultants and outside service providers.

Stock-Based Compensation

Stock-based compensation expense is recognized at fair value. For stock options, the fair value of stock-based compensation to employees and directors is estimated on the date of grant using the Black-Scholes model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the award. For all time-vesting awards granted, expense is amortized using the straight-line attribution method. The Company accounts for forfeitures as they occur.

Option valuation models, including the Black-Scholes model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred income tax assets to the amount expected to be realized.

Tax benefits are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially, and subsequently, measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority, assuming full knowledge of the position and all relevant facts.

The Company had federal net operating loss (“NOL”) carryforwards of approximately $288.1 million at December 31, 2025. NOLs created prior to 2018 began expiring in 2022 while those created 2018 and after do not expire. Despite the existence of federal NOLs, the Company may have state tax requirements. Also, use of the NOL carryforwards may be subject to an annual limitation as provided by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). To date, the Company has not performed a formal study to determine if any of its remaining NOL and credit attributes might be further limited due to the ownership change rules of Section 382 or Section 383 of the Code. The Company will continue to monitor this matter going forward. There can be no assurance that the NOL carryforwards will ever be fully utilized.

Net Income (Loss) Per Share

In periods of net loss, basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The Company’s Series D and E convertible preferred stock contain non-forfeitable rights to dividends, and are therefore considered to be participating securities in the periods in which each are outstanding; in periods of net income, the calculation of basic earnings per share excludes from the numerator net income attributable to the preferred stock and excludes the impact of those shares from the denominator.

In periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all potential dilutive common shares is anti-dilutive. In periods of net income, diluted earnings per share is computed using the more dilutive of the “two class method” or the “treasury method.” Dilutive earnings per share under the “two class method” is calculated by dividing net income available to common stockholders as adjusted for the participating impacts of the preferred stock, by the weighted-average number of shares outstanding plus the dilutive impact of all other potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method. Dilutive earnings per share under the “treasury stock method” is calculated by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the dilutive impact of all potential dilutive common shares, consisting primarily of common shares underlying common stock options and stock purchase warrants using the treasury stock method, and preferred stock using the if-converted method.

The number of anti-dilutive shares consisting of common shares underlying (i) common stock options, (ii) restricted stock units, (iii) preferred stock and (iv) stock purchase warrants, which have been excluded from the computation of diluted income (loss) per share because their effect was anti-dilutive, was 1.2 million and 1.3 million shares, respectively, as of March 31, 2026 and 2025. None of the potentially dilutive securities had a dilutive impact during the three months ended March 31, 2026 and 2025 due to the Company’s net loss.

Recently Adopted Accounting Pronouncements

In 2025, the Company adopted ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The adoption of ASU No. 2023-09 did not affect recognition or measurement in the Company’s unaudited condensed consolidated financial statements.

In 2026, the Company adopted ASU No. 2025-05: Financial Instruments-Credit Losses which amends topic 326. Specifically, the ASU provides a practical expedient whereby an entity can assume that current conditions as of the balance sheet date will not change for the remaining life of the asset (e.g., the account receivable). The adoption of ASU No. 2025-05 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In September 2025, the FASB issued ASU No. 2025-06, which amends the guidance on ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software. Specifically, the ASU modernized the recognition and disclosure framework for internal-use software costs, removing the previous “development stage” model and introducing a more judgment-based approach. The guidance is effective for the Company’s fiscal year ending December 31, 2028 and can be adopted early. The Company is in the process of evaluating the effects of this guidance on its unaudited condensed consolidated financial statements.

In September 2025, the FASB issued ASU No. 2025-07, which, among other things, provides scope clarification for share-based non-cash consideration from a customer in a revenue contract. Specifically, the ASU clarifies that share-based payments from customers in exchange for the transfer of goods or services should be accounted for as non-cash consideration within the scope of ASC 606 as opposed to as a derivative pursuant to ASC 815 or as an equity security pursuant to ASC 321. This guidance is effective for the Company’s fiscal year ending December 31, 2027 and can be adopted early. The Company is in the process of evaluating the effects of this guidance on its unaudited condensed consolidated financial statements.

The Company has evaluated all other issued and unadopted ASUs and believes the adoption of these standards will not have a material impact on its results of operations, financial position or cash flows.