NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), as issued by the Financial Accounting Standards Board (“FASB”) and the rules of the U.S. Securities and Exchange Commission (“SEC”) applicable to interim financial reporting. Accordingly, they do not include all disclosures required for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2025.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of results that may be expected for the full year.

Principals of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Farmhouse Washington, Farmhouse DTLA, Inc., and Farmhouse Treasury, LLC. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the consolidated financial statements. Significant estimates include, but are not limited to, convertible debt, valuation of deferred tax assets and any related valuation allowances, contingent assets and liabilities, and valuation of stock-based compensation awards. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held in checking and savings accounts with financial institutions and other highly liquid investments that are readily convertible to known amounts of cash with original maturities of six months or less at the time of purchase. The Company had no cash equivalents as of June 30, 2026 or December 31, 2025.

Digital Assets

The Company may hold certain digital assets for treasury and strategic purposes in accordance with its Treasury Policy. Digital assets are recorded as indefinite-lived intangible assets in accordance with ASC 350, with crypto assets recorded in accordance with ASC 350-60, Intangibles – Goodwill and Other – Crypto Assets, and are initially recognized at cost or fair value at the measurement date, as applicable.

Digital assets acquired through non-cash consideration are measured at fair value as of the transaction measurement date, determined using observable quoted prices on the principal market for the specific digital asset, when available. The Company does not capitalize internally generated digital assets.

Subsequent to initial recognition, crypto assets are presented on the balance sheet at fair value, with changes in fair value recognized in earnings in the period in which they occur. Fair value measurements are classified within Level 1 of the fair value hierarchy when based on quoted prices in active markets.

Digital assets are subject to ongoing monitoring in accordance with the Company’s Treasury Policy, including custody, liquidity, and risk management considerations. The Company does not use digital assets as hedging instruments and does not engage in digital asset trading activities outside of its treasury strategy.

Derivative Liabilities

The Company accounts for derivative liability in accordance with ASC 815, Derivatives and Hedging, and ASC 820, Fair Value Measurement. Convertible notes that have all the characteristics of an embedded derivative are bifurcated and valued at fair value at inception, conversion and each reporting date and related gains and losses are recorded in earnings. The Company estimates the fair value of derivative using the Black-Scholes option-pricing model or a probability weighted expected value approach.

Fair Value of Financial Instruments

The Company follows ASC 820 in determining the fair value of financial assets and liabilities when applicable. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in fair value measurements are classified into six levels within the fair value hierarchy based on their observability.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses, convertible notes payable, notes payable, and amounts due to related parties. The carrying amounts of these instruments approximate fair value due to their short-term nature or standard market terms.

The Company applies the guidance in ASC 820 to account for digital assets, investments and derivative liabilities measured on a recurring basis. Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following 3 categories:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities. 

•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 

The following tables present, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025:

June 30. 2026

December 31, 2025

Revenue Recognition

The Company recognizes revenue in accordance with U.S. GAAP when control of the promised goods or services is transferred to customers in an amount that reflects the consideration it expects to receive. There were no revenues for the six months ended June 30, 2026 and 2025.

Related Party Transactions

The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures. Related party transactions, balances, and relationships are identified separately in the consolidated financial statements and related notes. Transactions with related parties are conducted on terms equivalent to those that prevail in arm’s length transactions, unless otherwise disclosed. Management evaluates all related party transactions for proper accounting, disclosure, and potential conflicts of interest. See Note 10.

Net Loss per Common Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share reflects potential dilution from securities that could be converted into common stock, unless such inclusion would be anti-dilutive. At June 30, 2026, all potentially dilutive securities were anti-dilutive due to the net loss reported. In November 2025 and May 2026, the Company issued a convertible note that if converted on June 30, 2026 would have converted to 15,581,375 shares. There were other convertible notes outstanding as of June 30, 2026, however certain events that triggered, or allowed for, conversion had not yet occurred and the conversion price that the convertible notes would convert at if an event occurred was unknown; therefore, as of that date, the Company had no other potentially dilutive securities. At June 30, 2025, there were no events that allowed for conversion of the Company’s outstanding convertible notes and the conversion rate at which the convertible notes could be converted was not determinable, therefore there were no potentially dilutive securities at that date.

Recently Issued Accounting Pronouncements

There have been no material changes to recently issued accounting pronouncements as disclosed in the Company’s Report on Form 10-K.