NOTE 11. INCOME TAXES

The Company was a partnership for the period beginning on June 12, 2025 and ending June 30, 2025, and as such no income taxes or deferred taxes were recognized. Accordingly, comparative tables have not been included. As a result of the Business Combination, the Company is treated as a corporation for U.S. federal and state income tax purposes. Prior to the Business Combination, the Company was treated as a partnership for U.S. federal income tax purposes and therefore was not subject to U.S. federal and state income taxes.

The Company recorded $183.5 million of income tax expense for the year ended June 30, 2026. The effective tax rate differs from the statutory tax rate of 21% for the year ended June 30, 2026, primarily due to non-deductible transaction-related items associated with executing the BCA, the Company’s change in tax status from a partnership to a corporation as a result of the Business Combination, and the associated HYPE contribution. The tax effects of

The Company initially recognized a deferred tax liability and a corresponding deferred tax expense of $37.0 million in connection with the receipt of HYPE from certain investors at the Closing and the change in tax status from a partnership to a corporation as a result of the Business Combination. Subsequently, the Company recognized additional deferred tax expense and deferred tax liability as a result of the net appreciation of the HYPE tokens above the cumulative cost basis of both the HYPE tokens received at Closing and any subsequent purchases. As of June 30, 2026, the Company's deferred tax liability and corresponding provision for income taxes for the year ended June 30, 2026 was $183.5 million, primarily related to the difference between the fair value of the HYPE tokens and their tax basis.

As of June 30, 2026, the Company has provided for U.S. Income taxes on unremitted earnings of its Cayman subsidiary that are not deemed permanently reinvested and subject to future taxation under the Subpart F regime. The cumulative undistributed earnings of this subsidiary was $303.4 million, with a federal deferred tax liability recorded of $63.7 million.

As of June 30, 2026, the Company had $117.1 million, $26.7 million and $15.1 million of federal, state and foreign net operating losses, respectively. The federal net operating losses will begin to expire in 2031, the state net operating losses will begin to expire in 2039 and the foreign net operating losses begin to expire in 2027.

As of June 30, 2026, the Company has federal and state research and development tax credit carryforwards of $2.8 million available to reduce future tax liabilities which will begin to expire in 2035 and 2032, respectively.

Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carryforwards may be subject to annual limitations, against taxable income in future periods, which could substantially limit the eventual utilization of such carryforwards. The Company has not yet completed a Section 382 analysis as of the reporting date to determine possible limitations, however any impact of such limitations would not have a material impact to the financial statements due to the valuation allowance maintained.

Realization of the deferred tax assets related to the Company’s net operating loss and tax credit carryforwards are contingent on future taxable income and based upon uncertainty of the both the timing and ability to realize taxable income as well as the statutory limitations provided in the Internal Revenue Code, management has concluded that the deferred tax assets related to the Company’s net operating loss and tax credit carryforwards do not meet the more-likely-than-not threshold for realizability. Accordingly, a full valuation allowance continues to be recorded against these deferred tax assets as of June 30, 2026.

There were no cash payments for income taxes made during the year ended June 30, 2026.