NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries, OpCo and GEAR. All material intercompany balances and transactions have been eliminated in consolidation. Noncontrolling interests represent the portion of the equity and results of GEAR not attributable to the Company and are presented separately within stockholders’ equity and in the condensed consolidated statements of operations.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and 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. Actual results could differ from these estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

Cash and Cash Equivalents – The Company considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. As of June 30, 2026 and December 31, 2025, the Company held $15,492,446 and $1,402 of cash and cash equivalents, respectively.

Crypto Assets – The Company’s crypto assets consist of Dogecoin and Litecoin received as consideration from its crypto asset mining operations and are accounted for in accordance with Accounting Standards Codification (“ASC”) 350-60, Crypto Assets. Crypto assets meet the criteria in ASC 350-60 for measurement at fair value, and accordingly are measured at fair value as of each reporting date, with changes in fair value recognized in the condensed consolidated statements of operations. Fair value is determined using the quoted closing price of the respective crypto asset in the Company’s principal market as of the reporting date and is classified as a Level 1 measurement under ASC 820, Fair Value Measurement.

Revenue Recognition – The Company recognizes revenue from crypto asset mining from the provision of transaction verification services within crypto asset networks, commonly termed “cryptocurrency mining.” As consideration for these services, the Company receives crypto assets from each specific network in which it participates (“coins”). In accordance with ASC 606, mining proceeds are recognized as revenue when the mining activity is complete and the associated crypto assets are added to the blockchain, as the Company has transferred control of the validated transactions to the network. Revenue from crypto asset mining is measured based on the fair value of the coins received. Fair value is determined using the quoted price of the respective crypto asset in the Company’s principal market at the time of recognition and is classified as a Level 1 measurement under ASC 820, Fair Value Measurement. The coins are recorded on the condensed consolidated balance sheets as crypto assets at their fair value and re-measured at each reporting date. Revaluation gains and losses are included in the condensed consolidated statements of operations.

Cost of Revenues – Cost of revenues include the direct costs associated with cryptocurrency mining operations, including electricity and power usage, hosting fees, depreciation of mining equipment, mining pool fees, and other costs directly attributable to the generation of cryptocurrency rewards.

Employee and Non-Employee Share-Based Compensation – The Company applies ASC 718-10, Share-Based Payment, which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including employee stock options, restricted stock units (“RSUs”), and other equity awards issued to employees and non-employees based on estimated fair values.

ASC 718-10 requires companies to estimate the fair value of equity-based option awards on the date of grant using an option-pricing model. The fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in the Company’s unaudited condensed consolidated statements of operations. The Company recognizes share-based award forfeitures as they occur.

The Company estimates the fair value of granted option equity awards using a Black-Scholes option pricing model or, for awards containing market-based vesting conditions, a Monte Carlo simulation model. The option-pricing model requires a number of assumptions, of which the most significant are share price, exercise price, expected volatility, the risk-free interest rate, and the expected term. For awards with market-based vesting conditions, a Monte Carlo simulation is used to estimate fair value by simulating potential future share-price paths to determine the probability and timing of the vesting condition being satisfied. Expected volatility is estimated based on volatility of the Company. The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of the Company. The fair value of restricted stock units is determined based on the fair value of the Company’s common stock on the grant date.

Property and Equipment – Property and equipment are stated at cost, less accumulated depreciation. The mining equipment contributed by BSG Series CM LLC in the common control transfer described in Note 4 was recorded at the Transferor’s carrying amount as of the date of transfer, determined in accordance with U.S. GAAP, which represents its cost basis for purposes of subsequent depreciation.

Goodwill and Intangible Assets – In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is not amortized and is tested for impairment annually and upon the occurrence of a triggering event. Finite-lived intangible assets are amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. During the six months ended June 30, 2026, the Company identified a triggering event requiring an interim goodwill impairment test; see Note 4 for further discussion.

Investments – The Company classifies its investments in accordance with ASC 321, Investments – Equity Securities. Investments in equity securities with readily determinable fair values are measured at fair value, with unrealized gains and losses recognized in net income. For equity securities without readily determinable fair values, the Company applies the measurement alternative, recording these investments at cost, adjusted for impairments or observable price changes from transactions involving similar securities.

Fair Value Measurements – The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The carrying amounts of the Company’s financial instruments, such as cash, accounts payable and other current liabilities approximate fair values due to the short-term nature of these instruments.

Earnings Per Share – The Company follows ASC 260 when reporting Earnings Per Share (“EPS”) resulting in the presentation of basic and diluted earnings per share. Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per common share is computed by dividing net income by the weighted average number of common shares outstanding, plus the effect of potentially dilutive securities, if any, using the treasury stock method. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.

Recently Adopted Accounting Pronouncements:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other segment items on an interim and annual basis, and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance for the annual reporting period ended December 31, 2024. There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in Note 18, Segment Reporting in the Notes to Financial Statements.

In December 2023, the FASB also issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which requires public entities to measure in-scope cryptocurrency assets at fair value in the statement of financial position, and to recognize gains and losses from changes in the fair value of cryptocurrency in net income each reporting period. ASU 2023-08 will also require entities to provide certain interim and annual disclosures with respect to their cryptocurrency holdings. The standard is effective for our interim and annual periods beginning January 1, 2025, with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period in which the Company adopts the guidance. The Company adopted ASU 2023-08 on January 1, 2025. Because the Company did not acquire cryptocurrency assets until the 2nd quarter of 2025, there was no cumulative-effect adjustment upon adoption; however, the guidance changed the Company’s accounting for such assets on a prospective basis.

Recent Accounting Pronouncements Not Yet Adopted:

The following standards have been issued by the Financial Accounting Standards Board (“FASB”) but have not yet been adopted by the Company. The Company is evaluating each standard’s applicability to its operations and the potential impact, if any, on its consolidated financial statements.

ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses – In November 2024, the FASB issued ASU 2024-03, which requires public business entities to disclose, in a tabular presentation within the notes to the financial statements, disaggregated information about specified categories of expense - purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion - included within each relevant expense caption presented on the face of the income statement. The amendments also require disclosure of the total amount of selling expenses and, in annual reporting periods, the entity’s definition of selling expenses. Amounts not separately disaggregated must be described qualitatively. The effective date was subsequently clarified by ASU 2025-01. The amendments are applicable to all public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027, and the Company expects to adopt beginning with its annual period ending December 31, 2027 and its interim periods commencing in the first quarter of 2028.

ASU 2025-04 – Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer – In May 2025, the FASB issued ASU 2025-04, which clarifies the accounting for share-based payment awards granted by an entity as consideration payable to a customer in conjunction with the sale of goods or services. The amendments revise the definition of “performance condition” to explicitly address vesting conditions based on a customer’s volume or monetary amount of purchases, eliminate the policy election to account for forfeitures as they occur for service conditions, and clarify that the variable consideration constraint under Topic 606 does not apply to share-based consideration payable to a customer measured under Topic 718. The ASU is applicable for smaller reporting entities for fiscal years beginning after December 15, 2026 and should be adopted, if applicable, beginning the first quarter of 2027.