DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION	6 Months Ended
Jun. 30, 2026
Organization, Consolidation and Presentation of Financial Statements [Abstract]
DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION	DESCRIPTION OF OPERATIONS AND BASIS OF PRESENTATION Description of operations — IP Strategy Holdings, Inc., formerly Heritage Distilling Holding Company, Inc. (the “Company”), is a Delaware corporation engaged in the businesses of: investing in, managing, and/or operating cryptocurrency activities, including ecosystem validator services; and investing in, managing, and/or operating businesses that are engaged in the production, sale, or distribution of alcoholic beverages. The Company is headquartered in Gig Harbor, Washington and has three wholly owned subsidiaries that are included in the condensed consolidated financial statements, Heritage Distilling Company, Inc, a Washington corporation (“HDC” or “Heritage Distilling Company”); Thinking Tree Spirits, Inc., an Oregon corporation (“Thinking Tree Spirits” or “TTS”), and IP Strategy, LLC, a Nevada limited liability company. On February 17, 2026, the Company filed a Third Amended and Restated Certificate of Incorporation, as subsequently amended, to change its name from Heritage Distilling Holding Company, Inc. to IP Strategy Holdings, Inc., effective as of February 18, 2026. The names of the Company’s wholly owned subsidiaries, Heritage Distilling Company, Thinking Tree Spirits, and IP Strategy, LLC, remained unchanged. HDC has operated since 2011 as a craft distillery initially making a variety of whiskeys, vodkas, gins and rums as well as Ready-to-Drink (“RTD”) beverages. HDC also operated distillery tasting rooms in Washington and Oregon. On October 23, 2025, in response to coming lease increases, recently-enacted state tax increases on small businesses and pending wage increases, the Company closed its five owned and operated tasting rooms in Washington and Oregon effective December 31, 2025, and transitioned its spirits production to third-party contract producers beginning in the first quarter of 2026 (the “Restructuring”) (See Note 14- Restructuring.) These actions, along with a significant reduction in headcount and overhead, are expected to result in significant reductions in net expenses with a resulting positive impact to net income. The elimination of in-house production and the eventual termination of leases associated with operations is also expected to greatly reduce unabsorbed overhead expense for every case of product sold, thereby greatly improving margins. The Company will continue to sell spirits through distributors and direct to consumers online, through its TBN sales channel, and to work with Native American tribes to license the Heritage Distilling Company brand and the Company’s products for production and sale by tribes in HDC-branded tasting rooms in or near their casino properties. IP Strategy LLC was formed in September 2025 as a subsidiary of the Company to accumulate and hold $DATA1 tokens, the native cryptocurrency of the DATA Network, and to house validator and related cryptocurrency operations. Under the digital currency treasury strategy adopted in 2025, the Company purchases and holds primarily $DATA tokens for long term investment purposes. Initial Public Offering — On November 25, 2024, the Company closed an initial public offering (“IPO”) of 4,218 shares of common stock at $1,600 per share. Concurrently, the Company also closed a private offering of 955 common warrants to purchase shares of common stock with an exercise price of $4 per share at $1,596 per warrant (the “Common Warrants”). (See Note 7 - Stockholders’ Equity.) Rebranding and Change in Ticker Symbol — In September 2025, the Company rebranded as “IP Strategy,” reflecting its evolution into a public-market vehicle focused on the accumulation of $DATA tokens. In connection with the rebranding, the Company’s Nasdaq ticker symbol was changed from “CASK” to “IPST” and the Company commenced trading under the new symbol at the market open on September 22, 2025. Registration of Common Stock — On January 24, 2025, the Company filed a Form S-1 Registration Statement under the Securities Act of 1933 to register up to a maximum of 12,500 shares of common stock and 167 shares of common stock issuable upon the exercise of the Commitment Warrants described below, of the up to $15,000,000 aggregate gross purchase price of shares of common stock (the “ELOC Shares”) that have been or may be issued by us to the equity line of credit investor (the “ELOC Investor”) pursuant to the Securities Purchase Agreement, dated as of January 23, 2025, between the Company and the Investor (the “ELOC Purchase Agreement”), establishing a committed equity facility (the “Facility” or “Equity Line of Credit”). The 167 shares of common stock issuable to the Investor upon the exercise of a stock purchase warrant with an exercise price of $0.001 per share (the “Commitment Warrants”) were issued pursuant to the ELOC Purchase Agreement that the Company and the ELOC Investor entered into in a letter agreement dated January 23, 2025 under which the ELOC Investor shall not be allowed to exercise the Commitment Warrants for a number of shares of common stock that would give it and its affiliates beneficial ownership of an amount of common stock greater than 1% of the total outstanding common stock after giving effect to such conversion. In February 2025, the ELOC Investor exercised the Commitment Warrants for $67. On June 13, 2025, the Company filed a Form S-1 Registration Statement under the Securities Act of 1933 to register the resale of up to a maximum of an additional 25,000 ELOC Shares, for an aggregate of 37,500 ELOC Shares available under the ELOC Purchase Agreement, which was approved by the shareholders on June 24, 2025. On December 22, 2025, the Company terminated the ELOC Purchase Agreement and the Equity Line of Credit. Private Placement of Common Stock (PIPE) — On August 15, 2025, the Company closed a private placement offering (the “PIPE Offering”) with certain institutional and accredited investors for a private placement of an aggregate of 925,947 pre-funded warrants (the “Pre-Funded Warrants”) to acquire shares of common stock. The purchase price for the Pre-Funded Warrants was the price of the Company’s common stock of $241.72 per share less $0.04, or $241.68 per Pre-Funded Warrant, for an aggregate purchase price of $223.8 million, before deducting placement agent fees and other offering expenses. In connection with the PIPE Offering, the Company announced its digital asset treasury reserve strategy, pursuant to which the Company plans to use $DATA tokens as its primary treasury reserve asset on an ongoing basis (See Note 6 -Intangible Digital Assets). As of June 30, 2026, the Company believed its then-current cash balances, coupled with anticipated cash flow from its spirits and crypto-related operating activities and the sale of tokens acquired as part of the PIPE Offering, if necessary, will be sufficient to meet its working capital requirements for at least one year from the date of the issuance of the accompanying condensed consolidated financial statements. Basis of Presentation — The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation process. Certain accounts relating to the prior year have been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income / (loss) or net assets as previously reported. Stock Splits — On September 18, 2025, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 1:5 to 1:20, without reducing the authorized number of shares of common or preferred stock or changing the par value per share of the common stock, and to authorize the Company’s Board of Directors (the “Board”) to determine, at its discretion, the timing of the amendment and the specific ratio of the reverse stock split, without further approval or authorization of the Company’s stockholders. On October 16, 2025, the Board approved, and on November 5, 2025 the Company effected, a 1-for-20 reverse stock split. (The “November 2025 Stock Split”.) All share and per share numbers included in these financial statements as of and for all periods presented reflect the effect of that stock split unless otherwise noted. On April 10, 2026, the Company’s stockholders approved an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 1:3 to 1:20, without reducing the authorized number of shares of common or preferred stock or changing the par value per share of the common stock, and to authorize the Board to determine, at its discretion, the timing of the amendment and the specific ratio of the reverse stock split, without further approval or authorization of the Company’s stockholders. On April 17, 2026, the Board approved, and on April 23, 2026, the Company effected, a 1-for-20 reverse stock split (the “April 2026 Stock Split”). All share and per share numbers included in these financial statements as of and for all periods presented also reflect the effect of that stock split unless otherwise noted. All share and per share numbers presented in these financial statements have been rounded individually. As a result, totals may reflect the effect of differences between: aggregating the individually rounded component numbers; and the rounding of the total of the individual component numbers. In cases where rounding occurred, the amount of the rounding difference is not material and are considered to be insignificant. The aggregate effect of rounding down fractional shares and the respective payout of paid in capital is reported in the aggregate where significant, including the condensed consolidated statements of stockholders’ equity. Unaudited Interim Financial Information — The accompanying condensed consolidated balance sheet as of June 30, 2026, the condensed consolidated statement of operations and the condensed consolidated statements of stockholders’ deficit, for the three and six months ended June 30, 2026 and 2025, and the condensed consolidated statement of cash flows for the six months ended June 30, 2026 and 2025 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2026 and the results of its operations for the three and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 2026 and 2025. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2026 and 2025 are also unaudited. The results for the three and six months ended June 30, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period. The accompanying condensed consolidated balance sheet as of December 31, 2025 has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2025. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2025 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 14, 2026. Liquidity and Going Concern — The Company has experienced recurring operating losses, negative operating cash flows, and periods of negative working capital. These factors, along with the volatility in the market price of the Company’s digital token holdings, represent conditions that could impact the Company’s near-term liquidity if not managed appropriately. Management has evaluated the Company’s current operating plan, expected revenues, and cost structure and believes that, based on current projections, existing cash resources and anticipated cash flows from operations are sufficient to support ongoing operations and meet obligations as they come due for at least the next twelve months. These projections assume continued execution of the Company’s business plan and stabilization of key revenue drivers. A significant component of the Company’s liquidity is derived from its holdings of digital tokens, the value of which is subject to market conditions and price volatility. Accordingly, the Company’s liquidity position is, in part, dependent on the future market price of these tokens. To address liquidity requirements, the Company sells $DATA tokens it earns from its validator operations into the market. These sales provide a source of liquidity to fund the Company's operating expenses and other cash requirements. Of the tokens received in 2025 as part of the August 15, 2026 PIPE offering, 10 million have a long term restriction on sale under the technical parameters of the layer 1 protocol for a three year period from the date of receipt. The remaining tokens are contractually restricted from sale until August 17, 2027, except the Company has the ability to monetize up to 3 million $DATA tokens at any one time through a covered call program (the “Covered Call Program”), pursuant to which the Company receives premiums in exchange for granting counterparties the right to acquire specified quantities of $DATA tokens under the terms of individual covered call contracts for the use of such tokens. If $DATA tokens subject to a covered call contract are delivered or otherwise liquidated upon exercise or settlement of the applicable contract, the Company reserves it right to unstake an equivalent number of otherwise contractually restricted $DATA tokens and make those tokens available for subsequent covered call transactions. This replenishment mechanism permits the Company to maintain up to 3 million $DATA tokens available for participation in the Covered Call Program at any one time, subject to the applicable contractual restrictions and program requirements. The Covered Call Program provides the Company with a potential additional source of liquidity through the receipt of option premiums, but may result in the disposition of underlying $DATA tokens upon exercise or settlement of covered call contracts. The amount of premiums earned, the availability of counterparties and the Company's ability to continue operating the program depend on market conditions and the terms of individual transactions. There can be no assurance that the Covered Call Program will generate sufficient liquidity to satisfy the Company's operating requirements. Management will continue to evaluate its liquidity position, operating performance, and market conditions and may take additional actions, as necessary, to preserve liquidity and support the Company’s strategic objectives, including the disposition of digital assets for cash. Based on the foregoing, management believes the Company will continue as a going concern for at least the next twelve months from the date of issuance of the financial statements. Risks and Uncertainties Intangible Digital Assets and Cryptocurrency Risks The Company is subject to various risks including market risk, liquidity risk, and other risks related to concentration of its assets in a single asset class, $DATA tokens. Investing in $DATA tokens is currently highly speculative and volatile. The Company's substantial concentration in $DATA tokens exposes it to risks associated with changes in the tokens' market value, the viability and commercial adoption of the DATA protocol, and the decisions of third parties that develop, govern or operate the underlying blockchain infrastructure. The announced transition of the DATA Network to Sui introduces additional risks involving network migration, technology dependencies, tokenholder rights, governance, market liquidity and the elimination or modification of existing validator services. The Company may have limited ability to influence these developments notwithstanding the material effect they could have on the value of its assets and its financial condition. On June 25, 2026, the Story Foundation announced its rebranding as The DATA Foundation, the Story Network was renamed the DATA Network, and the network's native $IP token was renamed $DATA. The announced rebranding contemplated a one-for-one transition from $IP to $DATA without changing the aggregate token supply. The subsequent token migration and the October 2026 announcement of a further migration to Sui should be distinguished from the June rebranding. The ultimate integration with Sui (described further below) remains subject to implementation and the publication of detailed holder transition procedures. The transition represents a strategic shift from the network's prior emphasis on the registration and licensing of intellectual property, including music, media and other creative assets, toward infrastructure supporting the sourcing, provenance, verification, processing and licensing of data for artificial intelligence applications. The DATA Foundation's strategy is supported by the DATA Network, Trace and Poseidon. Trace serves as the public audit layer for data registered on the DATA Network. Data contributions generate verifiable on-chain receipts containing information intended to establish provenance, consent, applicable licensing or policy terms and related transaction information. Trace records the receipt and associated verification information rather than storing the underlying data itself, allowing the underlying data and contributor identity to remain private. Poseidon serves as a data-processing layer designed to clean and normalize raw data, validate authenticity and licensing, score records for quality and relevance, and prepare data for use by artificial intelligence developers. In connection with the June 25, 2026 transition, The DATA Foundation also announced a strategic relationship with KLED.ai (“KLED”), an opt-in marketplace through which individuals contribute data for potential licensing to artificial intelligence developers and other purchasers. KLED announced that it was onboarding more than 1.5 billion user-contributed records to the DATA Network. Under the integration, KLED generates an anonymized receipt when data is uploaded to its platform and submits audit information to Trace, including content hashes, consent documentation, payment records and timestamps. KLED also announced support for USDC payments on the DATA Network in addition to other stablecoin and fiat payment options. On October 9, 2026, the previously announced one-for-one migration of $IP tokens to $DATA tokens was implemented, with no announced change to the aggregate token supply. On October 12, 2026, the Sui Foundation and DATA Foundation announced a strategic transaction pursuant to which the Sui Foundation would invest $30 million in the DATA Network and become its largest institutional holder. The DATA Network is expected to migrate from its existing independent blockchain to a protocol operating natively on the Sui blockchain, and the independent DATA blockchain is expected to be retired following completion of the migration. The announcement stated that existing $DATA tokens would migrate on a one-for-one basis, that holder economics and governance rights would be at least equivalent to those previously applicable, and that existing locked and vesting positions would carry over unchanged. However, detailed migration procedures, implementation dates and the mechanisms by which such rights and restrictions will be preserved have not yet been published. The retirement of the independent DATA blockchain is expected to eliminate the need for the existing network validator services, including those provided by the Company, resulting in the termination of the Company's current validator-related activities and associated revenue opportunities. Although the DATA Foundation has indicated that opportunities may exist for participation in a sequencer or similar infrastructure role under the new architecture, no definitive arrangement, compensation structure, qualification criteria, implementation schedule or economic benefit to the Company has been established. There can be no assurance that the Company will obtain such a role or that any replacement revenue would equal or exceed any revenue or other economic benefits previously received or expected from its validator activities. The DATA Foundation has positioned the DATA Network, Trace, Poseidon and applications such as KLED as components of an integrated infrastructure through which data may be sourced, verified, processed and licensed for artificial intelligence applications. The commercial adoption, utilization and financial impact of these initiatives remain subject to development, execution and market-adoption risks, and reported registration volumes, contributor counts, data volumes and other operating metrics may not be indicative of future network activity, revenue or financial performance. Reported data registrations, protocol receipts, contributor counts and data volumes are measures of network activity and should not be interpreted as evidence of completed commercial licensing transactions, paying customers, recurring revenue, profitability or demand for $DATA tokens. The volume of records uploaded to KLED may substantially exceed the number of records registered through Trace, and neither metric necessarily represents unique records or completed transactions generating economic value for the DATA protocol. The migration to Sui could also change the fees, token utility and economic incentives associated with network activity. Accordingly, increases in reported usage may not result in increased demand for $DATA tokens or appreciation in their market value. Unless otherwise indicated, references to $DATA tokens in these financial statements include the tokens previously designated as $IP tokens, reflecting the June 25, 2026 announcement of the rebranding and the subsequent implementation of the one-for-one token migration. This change in terminology does not, by itself, indicate a change in the number of tokens held by the Company or the accounting treatment of those holdings. The fair value of digital assets included in the Company's condensed consolidated balance sheets at June 30, 2026 and December 31, 2025, calculated by reference to the principal market price in accordance with U.S. GAAP, relates primarily to the value of the $DATA tokens held by the Company and fluctuations in the price of $DATA tokens could materially and adversely affect an investment in shares of the Company’s common stock. The price of $DATA tokens has a limited history. During such history, $DATA token prices have been volatile and subject to influence by many factors, including the levels of liquidity. If digital asset markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the price of $DATA tokens, including, but not limited to, global $DATA token supply and demand, theft of $DATA tokens from global trading platforms or vaults, failure of a custodian holding the Company’s $DATA tokens, competition from other forms of digital currency or payment services, global or regional political, economic or financial conditions, and other unforeseen events and situations. As of June 30, 2026, the fair value of intangible digital assets on the condensed consolidated balance sheet was $12,817,725 using the then closing price per $DATA token of $0.2955. The $DATA tokens held by the Company are assets of the Company, and the Company’s stockholders have no specific rights to any specific $DATA token(s). In the event of the insolvency of the Company, its assets may be inadequate to satisfy a claim by its creditors or stockholders.

Description of operations — IP Strategy Holdings, Inc., formerly Heritage Distilling Holding Company, Inc. (the “Company”), is a Delaware corporation engaged in the businesses of: investing in, managing, and/or operating cryptocurrency activities, including ecosystem validator services; and investing in, managing, and/or operating businesses that are engaged in the production, sale, or distribution of alcoholic beverages. The Company is headquartered in Gig Harbor, Washington and has three wholly owned subsidiaries that are included in the condensed consolidated financial statements, Heritage Distilling Company, Inc, a Washington corporation (“HDC” or “Heritage Distilling Company”); Thinking Tree Spirits, Inc., an Oregon corporation (“Thinking Tree Spirits” or “TTS”), and IP Strategy, LLC, a Nevada limited liability company.

On February 17, 2026, the Company filed a Third Amended and Restated Certificate of Incorporation, as subsequently amended, to change its name from Heritage Distilling Holding Company, Inc. to IP Strategy Holdings, Inc., effective as of February 18, 2026. The names of the Company’s wholly owned subsidiaries, Heritage Distilling Company, Thinking Tree Spirits, and IP Strategy, LLC, remained unchanged.

HDC has operated since 2011 as a craft distillery initially making a variety of whiskeys, vodkas, gins and rums as well as Ready-to-Drink (“RTD”) beverages. HDC also operated distillery tasting rooms in Washington and Oregon. On October 23, 2025, in response to coming lease increases, recently-enacted state tax increases on small businesses and pending wage increases, the Company closed its five owned and operated tasting rooms in Washington and Oregon effective December 31, 2025, and transitioned its spirits production to third-party contract producers beginning in the first quarter of 2026 (the “Restructuring”) (See Note 14- Restructuring.) These actions, along with a significant reduction in headcount and overhead, are expected to result in significant reductions in net expenses with a resulting positive impact to net income. The elimination of in-house production and the eventual termination of leases associated with operations is also expected to greatly reduce unabsorbed overhead expense for every case of product sold, thereby greatly improving margins. The Company will continue to sell spirits through distributors and direct to consumers online, through its TBN sales channel, and to work with Native American tribes to license the Heritage Distilling Company brand and the Company’s products for production and sale by tribes in HDC-branded tasting rooms in or near their casino properties.

IP Strategy LLC was formed in September 2025 as a subsidiary of the Company to accumulate and hold $DATA1 tokens, the native cryptocurrency of the DATA Network, and to house validator and related cryptocurrency operations. Under the digital currency treasury strategy adopted in 2025, the Company purchases and holds primarily $DATA tokens for long term investment purposes.

Initial Public Offering — On November 25, 2024, the Company closed an initial public offering (“IPO”) of 4,218 shares of common stock at $1,600 per share. Concurrently, the Company also closed a private offering of 955 common warrants to purchase shares of common stock with an exercise price of $4 per share at $1,596 per warrant (the “Common Warrants”). (See Note 7 - Stockholders’ Equity.)

Rebranding and Change in Ticker Symbol — In September 2025, the Company rebranded as “IP Strategy,” reflecting its evolution into a public-market vehicle focused on the accumulation of $DATA tokens. In connection with the rebranding, the Company’s Nasdaq ticker symbol was changed from “CASK” to “IPST” and the Company commenced trading under the new symbol at the market open on September 22, 2025.

Registration of Common Stock — On January 24, 2025, the Company filed a Form S-1 Registration Statement under the Securities Act of 1933 to register up to a maximum of 12,500 shares of common stock and 167 shares of common stock issuable upon the exercise of the Commitment Warrants described below, of the up to $15,000,000 aggregate gross purchase price of shares of common stock (the “ELOC Shares”) that have been or may be issued by us to the equity line of credit investor (the “ELOC Investor”) pursuant to the Securities Purchase Agreement, dated as of January 23, 2025, between the Company and the Investor (the “ELOC Purchase Agreement”), establishing a committed equity facility (the “Facility” or “Equity Line of Credit”). The 167 shares of common stock issuable to the Investor upon the

exercise of a stock purchase warrant with an exercise price of $0.001 per share (the “Commitment Warrants”) were issued pursuant to the ELOC Purchase Agreement that the Company and the ELOC Investor entered into in a letter agreement dated January 23, 2025 under which the ELOC Investor shall not be allowed to exercise the Commitment Warrants for a number of shares of common stock that would give it and its affiliates beneficial ownership of an amount of common stock greater than 1% of the total outstanding common stock after giving effect to such conversion. In February 2025, the ELOC Investor exercised the Commitment Warrants for $67.

On June 13, 2025, the Company filed a Form S-1 Registration Statement under the Securities Act of 1933 to register the resale of up to a maximum of an additional 25,000 ELOC Shares, for an aggregate of 37,500 ELOC Shares available under the ELOC Purchase Agreement, which was approved by the shareholders on June 24, 2025.

Private Placement of Common Stock (PIPE) — On August 15, 2025, the Company closed a private placement offering (the “PIPE Offering”) with certain institutional and accredited investors for a private placement of an aggregate of 925,947 pre-funded warrants (the “Pre-Funded Warrants”) to acquire shares of common stock. The purchase price for the Pre-Funded Warrants was the price of the Company’s common stock of $241.72 per share less $0.04, or $241.68 per Pre-Funded Warrant, for an aggregate purchase price of $223.8 million, before deducting placement agent fees and other offering expenses. In connection with the PIPE Offering, the Company announced its digital asset treasury reserve strategy, pursuant to which the Company plans to use $DATA tokens as its primary treasury reserve asset on an ongoing basis (See Note 6 -Intangible Digital Assets). As of June 30, 2026, the Company believed its then-current cash balances, coupled with anticipated cash flow from its spirits and crypto-related operating activities and the sale of tokens acquired as part of the PIPE Offering, if necessary, will be sufficient to meet its working capital requirements for at least one year from the date of the issuance of the accompanying condensed consolidated financial statements.

Basis of Presentation — The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the Company’s wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation process. Certain accounts relating to the prior year have been reclassified to conform to the current period’s presentation. These reclassifications had no effect on the net income / (loss) or net assets as previously reported.

Stock Splits — On September 18, 2025, the Company’s stockholders approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 1:5 to 1:20, without reducing the authorized number of shares of common or preferred stock or changing the par value per share of the common stock, and to authorize the Company’s Board of Directors (the “Board”) to determine, at its discretion, the timing of the amendment and the specific ratio of the reverse stock split, without further approval or authorization of the Company’s stockholders. On October 16, 2025, the Board approved, and on November 5, 2025 the Company effected, a 1-for-20 reverse stock split. (The “November 2025 Stock Split”.) All share and per share numbers included in these financial statements as of and for all periods presented reflect the effect of that stock split unless otherwise noted.

On April 10, 2026, the Company’s stockholders approved an amendment to the Company’s Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock at a reverse stock split ratio ranging from 1:3 to 1:20, without reducing the authorized number of shares of common or preferred stock or changing the par value per share of the common stock, and to authorize the Board to determine, at its discretion, the timing of the amendment and the specific ratio of the reverse stock split, without further approval or authorization of the Company’s stockholders. On April 17, 2026, the Board approved, and on April 23, 2026, the Company effected, a 1-for-20 reverse stock split (the “April 2026 Stock Split”). All share and per share numbers included in these financial statements as of and for all periods presented also reflect the effect of that stock split unless otherwise noted.

All share and per share numbers presented in these financial statements have been rounded individually. As a result, totals may reflect the effect of differences between: aggregating the individually rounded component numbers; and the rounding of the total of the individual component numbers. In cases where rounding occurred, the amount of the rounding difference is not material and are considered to be insignificant. The aggregate effect of rounding down fractional shares

Unaudited Interim Financial Information — The accompanying condensed consolidated balance sheet as of June 30, 2026, the condensed consolidated statement of operations and the condensed consolidated statements of stockholders’ deficit, for the three and six months ended June 30, 2026 and 2025, and the condensed consolidated statement of cash flows for the six months ended June 30, 2026 and 2025 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2026 and the results of its operations for the three and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 2026 and 2025. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2026 and 2025 are also unaudited. The results for the three and six months ended June 30, 2026 are not necessarily indicative of results to be expected for the year ending December 31, 2026, any other interim periods, or any future year or period.

The accompanying condensed consolidated balance sheet as of December 31, 2025 has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2025. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements for the year ended December 31, 2025 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on April 14, 2026.

Liquidity and Going Concern — The Company has experienced recurring operating losses, negative operating cash flows, and periods of negative working capital. These factors, along with the volatility in the market price of the Company’s digital token holdings, represent conditions that could impact the Company’s near-term liquidity if not managed appropriately.

Management has evaluated the Company’s current operating plan, expected revenues, and cost structure and believes that, based on current projections, existing cash resources and anticipated cash flows from operations are sufficient to support ongoing operations and meet obligations as they come due for at least the next twelve months. These projections assume continued execution of the Company’s business plan and stabilization of key revenue drivers.

A significant component of the Company’s liquidity is derived from its holdings of digital tokens, the value of which is subject to market conditions and price volatility. Accordingly, the Company’s liquidity position is, in part, dependent on the future market price of these tokens.

To address liquidity requirements, the Company sells $DATA tokens it earns from its validator operations into the market. These sales provide a source of liquidity to fund the Company's operating expenses and other cash requirements. Of the tokens received in 2025 as part of the August 15, 2026 PIPE offering, 10 million have a long term restriction on sale under the technical parameters of the layer 1 protocol for a three year period from the date of receipt. The remaining tokens are contractually restricted from sale until August 17, 2027, except the Company has the ability to monetize up to 3 million $DATA tokens at any one time through a covered call program (the “Covered Call Program”), pursuant to which the Company receives premiums in exchange for granting counterparties the right to acquire specified quantities of $DATA tokens under the terms of individual covered call contracts for the use of such tokens.

If $DATA tokens subject to a covered call contract are delivered or otherwise liquidated upon exercise or settlement of the applicable contract, the Company reserves it right to unstake an equivalent number of otherwise contractually restricted $DATA tokens and make those tokens available for subsequent covered call transactions. This replenishment mechanism permits the Company to maintain up to 3 million $DATA tokens available for participation in the Covered Call Program at any one time, subject to the applicable contractual restrictions and program requirements. The Covered Call Program provides the Company with a potential additional source of liquidity through the receipt of option premiums, but may result in the disposition of underlying $DATA tokens upon exercise or settlement of covered call contracts. The amount of premiums earned, the availability of counterparties and the Company's ability to continue operating the program depend on market conditions and the terms of individual transactions. There can be no assurance that the Covered Call Program will generate sufficient liquidity to satisfy the Company's operating requirements.

Management will continue to evaluate its liquidity position, operating performance, and market conditions and may take additional actions, as necessary, to preserve liquidity and support the Company’s strategic objectives, including the disposition of digital assets for cash. Based on the foregoing, management believes the Company will continue as a going concern for at least the next twelve months from the date of issuance of the financial statements.

The Company is subject to various risks including market risk, liquidity risk, and other risks related to concentration of its assets in a single asset class, $DATA tokens. Investing in $DATA tokens is currently highly speculative and volatile. The Company's substantial concentration in $DATA tokens exposes it to risks associated with changes in the tokens' market value, the viability and commercial adoption of the DATA protocol, and the decisions of third parties that develop, govern or operate the underlying blockchain infrastructure. The announced transition of the DATA Network to Sui introduces additional risks involving network migration, technology dependencies, tokenholder rights, governance, market liquidity and the elimination or modification of existing validator services. The Company may have limited ability to influence these developments notwithstanding the material effect they could have on the value of its assets and its financial condition.

On June 25, 2026, the Story Foundation announced its rebranding as The DATA Foundation, the Story Network was renamed the DATA Network, and the network's native $IP token was renamed $DATA. The announced rebranding contemplated a one-for-one transition from $IP to $DATA without changing the aggregate token supply. The subsequent token migration and the October 2026 announcement of a further migration to Sui should be distinguished from the June rebranding. The ultimate integration with Sui (described further below) remains subject to implementation and the publication of detailed holder transition procedures. The transition represents a strategic shift from the network's prior emphasis on the registration and licensing of intellectual property, including music, media and other creative assets, toward infrastructure supporting the sourcing, provenance, verification, processing and licensing of data for artificial intelligence applications.

The DATA Foundation's strategy is supported by the DATA Network, Trace and Poseidon. Trace serves as the public audit layer for data registered on the DATA Network. Data contributions generate verifiable on-chain receipts containing information intended to establish provenance, consent, applicable licensing or policy terms and related transaction information. Trace records the receipt and associated verification information rather than storing the underlying data itself, allowing the underlying data and contributor identity to remain private. Poseidon serves as a data-processing layer designed to clean and normalize raw data, validate authenticity and licensing, score records for quality and relevance, and prepare data for use by artificial intelligence developers.

In connection with the June 25, 2026 transition, The DATA Foundation also announced a strategic relationship with KLED.ai (“KLED”), an opt-in marketplace through which individuals contribute data for potential licensing to artificial intelligence developers and other purchasers. KLED announced that it was onboarding more than 1.5 billion user-contributed records to the DATA Network. Under the integration, KLED generates an anonymized receipt when data is uploaded to its platform and submits audit information to Trace, including content hashes, consent documentation, payment records and timestamps. KLED also announced support for USDC payments on the DATA Network in addition to other stablecoin and fiat payment options.

On October 9, 2026, the previously announced one-for-one migration of $IP tokens to $DATA tokens was implemented, with no announced change to the aggregate token supply. On October 12, 2026, the Sui Foundation and DATA Foundation announced a strategic transaction pursuant to which the Sui Foundation would invest $30 million in the DATA Network and become its largest institutional holder. The DATA Network is expected to migrate from its existing independent blockchain to a protocol operating natively on the Sui blockchain, and the independent DATA blockchain is expected to be retired following completion of the migration. The announcement stated that existing $DATA tokens would migrate on a one-for-one basis, that holder economics and governance rights would be at least equivalent to those previously applicable, and that existing locked and vesting positions would carry over unchanged. However, detailed migration procedures, implementation dates and the mechanisms by which such rights and restrictions will be preserved have not yet been published.

The retirement of the independent DATA blockchain is expected to eliminate the need for the existing network validator services, including those provided by the Company, resulting in the termination of the Company's current validator-related activities and associated revenue opportunities. Although the DATA Foundation has indicated that opportunities may exist for participation in a sequencer or similar infrastructure role under the new architecture, no definitive arrangement, compensation structure, qualification criteria, implementation schedule or economic benefit to the Company has been established. There can be no assurance that the Company will obtain such a role or that any replacement revenue would equal or exceed any revenue or other economic benefits previously received or expected from its validator activities.

The DATA Foundation has positioned the DATA Network, Trace, Poseidon and applications such as KLED as components of an integrated infrastructure through which data may be sourced, verified, processed and licensed for artificial intelligence applications. The commercial adoption, utilization and financial impact of these initiatives remain subject to development, execution and market-adoption risks, and reported registration volumes, contributor counts, data volumes and other operating metrics may not be indicative of future network activity, revenue or financial performance.

Reported data registrations, protocol receipts, contributor counts and data volumes are measures of network activity and should not be interpreted as evidence of completed commercial licensing transactions, paying customers, recurring revenue, profitability or demand for $DATA tokens. The volume of records uploaded to KLED may substantially exceed the number of records registered through Trace, and neither metric necessarily represents unique records or completed transactions generating economic value for the DATA protocol. The migration to Sui could also change the fees, token utility and economic incentives associated with network activity. Accordingly, increases in reported usage may not result in increased demand for $DATA tokens or appreciation in their market value.

Unless otherwise indicated, references to $DATA tokens in these financial statements include the tokens previously designated as $IP tokens, reflecting the June 25, 2026 announcement of the rebranding and the subsequent implementation of the one-for-one token migration. This change in terminology does not, by itself, indicate a change in the number of tokens held by the Company or the accounting treatment of those holdings.

The fair value of digital assets included in the Company's condensed consolidated balance sheets at June 30, 2026 and December 31, 2025, calculated by reference to the principal market price in accordance with U.S. GAAP, relates primarily to the value of the $DATA tokens held by the Company and fluctuations in the price of $DATA tokens could materially and adversely affect an investment in shares of the Company’s common stock. The price of $DATA tokens has a limited history. During such history, $DATA token prices have been volatile and subject to influence by many factors, including the levels of liquidity. If digital asset markets continue to experience significant price fluctuations, the Company may experience losses. Several factors may affect the price of $DATA tokens, including, but not limited to, global $DATA token supply and demand, theft of $DATA tokens from global trading platforms or vaults, failure of a custodian holding the Company’s $DATA tokens, competition from other forms of digital currency or payment services, global or regional political, economic or financial conditions, and other unforeseen events and situations.

As of June 30, 2026, the fair value of intangible digital assets on the condensed consolidated balance sheet was $12,817,725 using the then closing price per $DATA token of $0.2955. The $DATA tokens held by the Company are assets of the Company, and the Company’s stockholders have no specific rights to any specific $DATA token(s). In the event of the insolvency of the Company, its assets may be inadequate to satisfy a claim by its creditors or stockholders.