Annual Report for Fiscal Year Ending 06-30, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. The last day of our fiscal year is June 30. Our fiscal quarters end on September 30, December 31, March 31, and June 30. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this Annual Report on Form 10-K. See also "Cautionary Note Regarding Forward-Looking Statements" above.

Overview

We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused on Solana tokens and staking of those tokens. We continue to be a brand owner specializing in the development, manufacturing, and distribution of consumer products.

Our Solana Treasury Strategy

Early in 2025, we updated and modified our cash management and treasury strategy to include holding digital currency assets directly on our balance sheet. This was a shift from before when we held excess cash primarily in FDIC-insured interest-bearing accounts. The change to adopt this strategy results from our intention to obtain the highest yield on excess cash and benefit from potential price appreciation. Under our new approach, our treasury policy focuses primarily on Solana ("SOL"). The approach involves applying a public-market treasury model to an asset that is considered earlier in its lifecycle than, with respect to both development and usage, as well as institutional adoption, Bitcoin. Management will focus its resources to this digital asset strategy and a significant portion of the balance sheet will be allocated to holding Solana in the Company's digital asset treasury.

Key Factors Affecting Operating Results

Cyclicality and Seasonality

Our business is typically unaffected by seasonality.

Operating Segments

The Company's financial reporting is organized into a single segment that includes sales and distribution of branded products, following the sale of E-Core, Technology Inc. and its subsidiaries. Other sources of revenue and related costs are aggregated and viewed by management as immaterial or have similar economic characteristics, products, production, distribution processes, and regulatory environment as the other product sales or directly support the Company's single segment.

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Results of Operations

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the years ended June 30, 2026 and 2025, which are included herein.

		Years Ended June 30,
		2026				2025				Change
Revenue		$	7,568,822			$	14,826,336			$	(7,257,514	)
Digital asset revenue			17,429,206				985,009				16,444,197
Cost of revenue			2,630,320				4,943,305				(2,312,985	)
Sales and marketing expenses			2,898,473				4,001,094				(1,102,621	)
Distribution costs			2,627,626				4,691,964				(2,064,338	)
General and administrative expenses			26,398,877				11,935,582				14,463,295
Unrealized loss (gain) on digital assets			195,059,336				(105,474	)			195,164,810
Realized loss on digital asset revenue conversion to USD			4,931,791				-				4,931,791
Realized loss on sale of digital assets			6,773,418				-				6,773,418
Other operating expenses			24,524,352				2,844,626				21,679,726
Other expenses			(5,218,533	)			(1,184,457	)			4,034,076
Net loss		$	(246,064,698	)		$	(13,684,209	)		$	(232,380,489	)

Revenue declined by approximately $7.3 million, or 49.0%, for fiscal year ended June 30, 2026 compared with the fiscal year ended June 30, 2025, primarily due to the Company's shift away from legacy health, wellness and other consumer-product lines and the exit of certain manufacturing and distribution operations. Management's focus is on the digital asset strategy and resources are allocated accordingly. We do not expect significant increases to these revenue sources in future quarters.

Digital asset revenue increased by approximately $16.4 million, for fiscal year ended June 30, 2026 compared with the fiscal year ended June 30, 2025, as the Company began its investments in digital assets toward the end of fiscal year 2025. The Company earns staking revenue by delegating its digital assets to third-party validators on proof-of-stake blockchain networks. The digital asset revenue is expected to increase as the number of SOL tokens the Company has staked increases, the overall increase in the price of SOL and the Company's continued expansion of its digital asset strategy.

Cost of revenue decreased by approximately $2.3 million, or 46.8%, compared with the fiscal year ended June 30, 2025. The gross margin was approximately 65.2% and 66.7% for the fiscal year ended June 30, 2026 and June 30, 2025, respectively, when excluding digital asset revenue, which is a decrease of approximately 1.4%.

Sales and marketing expenses decreased by approximately $1.1 million, or 27.6%, as compared with the same period last year, primarily due to less marketing expenses being spent on the remaining products and several of the fixed sales and marketing expenses have been eliminated.

Distribution costs decreased by approximately $2.1 million, or 44.0%, as compared with the same period last year. The decrease in distribution costs was primarily related to the overall decline in revenue.

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General and administrative expenses increased approximately $14.5 million, or 121.2%, as compared with the same period last year. The increase is mainly a result of expenses in connection with the change in the business strategy to hold digital assets as parts of its treasury. The increase was primarily due to the $4.0 million increase in public company expenses, $7.0 million increase in compensation to employees, $1.5 million increase in digital asset treasury fees, $1.2 million increase in legal fees, and $1.1 million increase in travel related expenses.

Unrealized loss on digital assets increased by approximately $195.2 million as the Company began its investments in digital assets toward the end of fiscal year 2025. The changes mainly result from the price changes on SOL over the recorded cost of SOL during the fiscal year ended June 30, 2026. There was a minimal amount of digital asset activity during the fiscal year ended June 30, 2025.

Realized loss on digital asset revenue conversion to USD increased by approximately $4.9 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no staking revenue converted into USD in the prior year. The losses were a result of the price changes on SOL from the period the digital assets were recorded as staking revenue and the price the staking revenue was converted into USD during the fiscal year ended June 30, 2026. The digital assets sales are recorded on a first in first out basis.

Realized loss on sale of digital assets increased by approximately $6.8 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no digital assets sold in the prior year.

Other operating expenses increased by approximately $21.7 million as compared with the same period last year. The increase was primarily due to increased stock compensation of approximately $19.5 million.

Other expense increased by approximately $4.0 million as compared with the same period last year. The increase was primarily due to increased debt used in the purchase of SOL for the digital asset treasury.

The Company had a net loss of approximately $246.1 million compared to a net loss of approximately $13.7 million in the prior year. The increase in the net losses primarily related to the above-mentioned changes.

Liquidity, Capital Resources and Cash Requirements

Working Capital

		June 30,
		2026				2025
Current assets		$	116,766,265			$	56,778,043
Current liabilities			71,130,418				32,563,906
Working capital		$	45,635,847			$	24,214,137

Cash Flows

		Year Ended June 30,
		2026				2025
Cash flows used in operating activities		$	(20,956,207	)		$	(8,423,042	)
Cash flows used in investing activities			(30,623,761	)			(99,293,083	)
Cash flows provided by financing activities			54,383,404				110,029,860
Net change in cash during the period		$	2,803,436			$	2,313,735

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On June 30, 2026, the Company had cash of approximately $5.8 million, an increase of approximately $2.8 million from June 30, 2025. The primary changes resulted from financing obtained to implement and grow the Company's digital asset strategy.

Net cash flows used in operating activities was approximately $21.0 million for the fiscal year ended June 30, 2026, as compared to net cash flows used in operating activities of approximately $8.4 million for the fiscal year ended June 30, 2025. The approximately $246.1 million dollar net loss from operations was offset by approximately $195.1 million in unrealized loss on digital assets, digital asset revenue conversion to USD of approximately $13.2 million, realized loss on sale of digital assets of approximately $6.8 million, loan amortization costs of approximately $3.7 million, the impairment of assets from the manufacturing shutdown of approximately $1.4 million, impairment on acquired intangible assets of approximately $0.8 million, and stock-based compensation expense of approximately $21.9 million, which was partially offset by approximately $10.3 million gain on the extinguishment of debt. The changes in assets and liabilities provided approximately $4.5 million. Various costs were incurred in connection with beginning, implementing, and growing the Company's digital asset strategy and are expected to continue.

Net cash flows used in investing activities was approximately $30.6 million for the fiscal year ended June 30, 2026, as compared to net cash flows used in investing activities of approximately $99.3 million for the fiscal year ended June 30, 2025. The primary use of funds was on the acquisitions of SOL for the digital assets treasury during the fiscal year ended June 30, 2026 and 2025.

Net cash flows provided by financing activities was approximately $54.4 million for the fiscal year ended June 30, 2026, as compared to net cash flows provided by financing activities of approximately $110.0 million for the fiscal year ended June 30, 2025. The primary driver of the change was the financing obtained from a capital raise occurring in each of July 2025 and November 2025 for purposes of executing the Company's digital asset strategy during the fiscal year ended June 30, 2026. This capital raise was offset by the expenses incurred for the capital raise and the expenses incurred for the convertible note obtained in a swap transaction for SOL. Other notable drivers include the exercise of warrants that provided cash of approximately $0.1 million and cash used for common stock repurchases of approximately $2.8 million.

Liquidity of SOL Management

The Company purchases Locked Solana that cannot be purchased or sold on the normal market exchanges and is purchased and sold through negotiations directly with the owner of the Locked Solana or their agent. The Locked Solana is unlocked through a schedule that will continue through January of 2028 and once unlocked is the same as any other liquid Solana in the Company's treasury. Since this Locked Solana could create significant delays if the Company needed liquidity, management monitors the overall percentage of the digital assets that are locked or do not have the normal liquidity as other digital assets.

As of June 30, 2026, the Company held 849,124 tokens subject to lock up restrictions. The following table summarizes the unlocking schedule of these Solana tokens:

June 30, 2027			573,114
June 30, 2028			276,010
Total			849,124

The Company's Staking Program involves the temporary loss of the ability to transfer, assign a new validator or otherwise dispose of the SOL. Under normal conditions, the Company will regain complete control over its unstaked SOL within two days of initiating the unstaking. However, there can be no guarantee that such process will result in the Company regaining complete control of its SOL in time to satisfy its current obligations. We maintain a certain amount of liquid SOL in the treasury and a certain amount of cash to ensure that the Company is able to satisfy its current obligations.

We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these consolidated financial statements and meet all of our debt obligations.

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Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Critical Accounting Policies and Estimates

Preparation of financial statements requires the application of accounting policies, judgments, assumptions and estimates that can significantly affect the reported results of operations, cash flows or the amounts of assets and liabilities recognized in the financial statements. Judgments made include those related to accounting for revenue recognition and realizability of deferred tax assets.

Management discusses these policies, estimates and assumptions with senior members of management on a regular basis and provides periodic updates on management decisions to the Audit Committee. Management believes the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods.

For further information, see Note 2, Significant Accounting Policies, to the Consolidated Financial Statements.

Revenue Recognition - In accordance with ASC No. 606, Revenue from Contracts with Customers, the Company recognizes revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. In general, the Company generates revenue from product sales, either directly to customers or to distributors. In determining whether a contract exists, we evaluate the terms of the agreement, the relationship with the customer or distributor and their ability to pay.

The Company recognizes revenue from sales of our products, including sales to our distributors, at a point in time, generally upon shipment or delivery to the customer or distributor, depending upon the terms of the sales order. Control is considered transferred when title and risk of loss pass, when the customer becomes obligated to pay and, where applicable, when the customer has accepted the products or upon expiration of the acceptance period. For sales to distributors, payment is due on our standard commercial terms and is not contingent upon the distributors' resale of the products.

Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with inbound freight are generally included in cost of revenue.

Our business is subject to contingencies related to customer orders, including:

Right of Return:

A large portion of our revenue comes from the sale of consumable products, which are sold in high-volume and low quantities, and are generally maintained at stock levels of less than ninety days in our facility. Customer returns have historically represented a very small percentage of sales on an annual basis. Other product sales relate to some pet products, including small mechanical devices.

Warranties:

The Company does not accept sales returns from wholesale customers, as the products are pre-approved prior to production and shipment. E-Commerce product returns must be completed within 45 days of the date of purchase. The Company accrues an allowance for refunds, returned deposits and discounts given by customer services post shipment of the product based on historical experience and management's estimate of future expenses, including replacement, freight charges and other fulfilment expenses.

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Staking Revenue:

The recognition of staking revenue from delegated digital assets represents a critical accounting estimate due to the complexity and evolving nature of blockchain protocols and regulatory guidance. As a delegator, the Company earns staking rewards by participating in proof-of-stake networks through third-party validators, without directly operating the nodes. Revenue is recognized when control of the staking rewards is obtained, typically upon receipt into the company's wallet, and measured at fair value using quoted market prices at the time of receipt. Management must assess the reliability of validator performance, the timing and frequency of reward distributions, and potential slashing risks that could impact future earnings. Additionally, the company evaluates whether staking rewards meet the criteria for revenue recognition under applicable accounting standards, including considerations of principal versus agent relationships. Changes in protocol rules, validator reliability, or regulatory developments may materially affect the timing and amount of staking revenue recognized.

Income taxes - The assessment of the realizability of deferred tax assets is a critical accounting estimate that requires significant judgment and evaluation of both positive and negative evidence. Deferred tax assets arise primarily from temporary differences, net operating losses, and tax credit carryforwards, and their recoverability depends on the company's ability to generate sufficient future taxable income. Management must consider all available information, including historical earnings, projected future income, tax planning strategies, and the expiration dates of carryforwards. If it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is recorded to reduce the asset to the amount expected to be recoverable. Changes in assumptions or actual results that differ from expectations may result in significant adjustments to the valuation allowance and income tax expense.

Convertible debt - The accounting for the Company's convertible debt instruments requires significant judgment because the instruments include nonstandard settlement terms involving SOL and fixed-price conversion features. The Company accounts for convertible debt as a single unit of account unless an embedded feature requires bifurcation from the debt host and separate accounting as a derivative liability under ASC 815, Derivatives and Hedging, or other applicable accounting guidance requires separate recognition. In evaluating these instruments, management assesses the contractual terms to determine whether the obligation to deliver SOL upon nonconversion represents an embedded feature requiring separate accounting, including whether the feature is clearly and closely related to the debt host and whether it meets the definition of a derivative. This assessment includes judgment regarding whether the applicable quantity of SOL is readily convertible to cash, taking into account the contractual settlement quantity, market liquidity, potential price impact, and restrictions that may limit the prompt transfer or sale of SOL. Management also evaluates whether the fixed-price conversion feature qualifies for the scope exception for contracts involving the Company's own equity, including whether the feature is indexed to the Company's own stock and would be classified in stockholders' equity if it were a freestanding instrument. Changes in the contractual terms of the notes, the availability or transferability of SOL, market conditions, or the facts and circumstances supporting management's judgments could affect the accounting for these instruments, including whether a separate derivative liability and related fair value remeasurement would be required. See Note 2, Significant Accounting Policies, and Note 10, Short-Term Treasury Debt, Cygnet Subsidiary Notes Payable, Promissory Notes, and Convertible Notes, to the Consolidated Financial Statements for further information.

Recent Accounting Pronouncements

Refer to Note 2, Significant Accounting Policies, to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of this date of this Annual Report on Form 10-K.

Reverse Stock Split

On September 18, 2024, we filed a Certificate of Change with the Nevada Secretary of State to effect a reverse stock split of our common stock at a rate of 1-for-20 (the "Reverse Stock Split"), which became effective as of October 3, 2024 (the "Effective Date"). The Reverse Stock Split was approved by the board of directors in accordance with Nevada law. The Reverse Stock Split did not have any impact on the par value of common stock.

On the Effective Date, every twenty shares of common stock issued and outstanding were automatically combined into one share of common stock, without any change in the par value per share. As the per-share par value did not change, we reclassified $19,860 from common stock to Additional Paid-in-Capital on the Effective Date. The exercise prices and the number of shares issuable upon exercise of outstanding stock options, equity awards and warrants, and the number of shares available for future issuance under the equity incentive plans were adjusted in accordance with their respective terms. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder's percentage interest in our common stock. We did not issue any fractional shares in connection with the Reverse Stock Split. Instead, fractional shares were initially rounded up to the next largest whole number, resulting in the issuance of 8 shares on October 3, 2024 the Effective Date and an additional issuance of 38 shares on October 8, 2024. On October 10, 2024, the transfer agent received additional requests to issue a total of 202,183 shares of common stock for round up of fractional shares. These shares were issued on October 23, 2024 and on October 30, 2024 we were notified that the shares were returned to the Company's transfer agent. Although the Company did receive the common stock back after issuance, the potential dilution remains a risk, and is the subject of a complaint filed by the Company in the United States District Court for the District of Nevada with the purpose of eliminating any said risk. The Reverse Stock Split did not modify the relative rights or preferences of the common stock.

Unless otherwise indicated, all issued and outstanding shares of common stock and all outstanding securities entitling their holders to purchase shares of our common stock or acquire shares of our common stock, including stock options, restricted stock units, and warrants per share data, share prices and exercise prices, as required by the terms of those securities, have been adjusted retroactively to reflect the Reverse Stock Split.

On October 17, 2024, Company received written notice (the "Compliance Notice") from The Nasdaq Stock Market LLC ("Nasdaq") informing the Company that it had regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires that companies listed on the Nasdaq Stock Market maintain a minimum bid price of $1.00 per share. Nasdaq notified the Company in the Compliance Notice that, from October 3, 2024 to October 16, 2024, the closing bid price of the Company's common stock had been $1.00 per share or greater and, accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.