Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements concerning: our plans, strategies and objectives for future operations; new products or developments; future economic conditions, performance or outlook; the outcome of contingencies; expected cash flows or capital expenditures; our beliefs or expectations; activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by their use of forward-looking terminology, such as "believes," "expects," "may," "should," "would," "will," "intends," "plans," "estimates," "anticipates," "projects" and similar words or expressions. You should not place undue reliance on these forward-looking statements, which reflect our management's opinions only as of the date of the filing of this Quarterly Report on Form 10-Q and are not guarantees of future performance or actual results.

Overview

The Company is an artificial intelligence and blockchain technology company that intends to utilize real world asset tokenization to create a virtual investment vehicle on the blockchain linked to tangible assets such as real estate, precious metals, art and collectibles. The Company intends to provide digital assets from El Salvador, tokenize assets and develop blockchain tools for entry to countries such as the United Arab Emirates.

Going Concern

At September 30, 2026, we had $15,754 in current assets, $1,148,306 in non-current assets and $1,164,060 in total assets. We had $50,732 in current liabilities, $44,000 in non-current liabilities and $94,732 in total liabilities, with a $587,127 accumulated deficit. Our current liquidity resources are not sufficient to fund the anticipated level of operations for at least the next 12 months from the date these consolidated financial statements were issued. As a result, there is substantial doubt regarding the Company's ability to continue as a going concern.

The ability to continue Universal Token's operations depends on its ability to generate and grow revenue and results of operations as well as our ability to access capital markets when necessary to accomplish strategic objectives. We expect to continue to incur losses for the immediate future and will need additional equity or debt financing until we can achieve profitability and positive cash flows from operating activities. Our future capital requirements for operations will depend on many factors, including the ability to generate revenues and obtain capital.

There is no assurance that we will ever be profitable or that debt or equity financing will be available to us. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern. There is no assurance we will be successful in any of these goals.

Results of Operations

For the Three months ended September 30, 2026 and 2025

Revenues

We did not recognize any revenues during the three months ended September 30, 2026 and 2025.

Operating Expenses

Operating expenses were $15,547 during the three months ended September 30, 2026, compared to $32,475 during the three months ended September 30, 2025. Operating expenses consisted of $11,518 and $18,301 in professional fees and $4,029 and $14,174 in general and administrative expenses during the three months ended September 30, 2026 and 2025, respectively. The $6,783 decrease in professional fees is the result of decreased in consulting, audit and legal fees from decreased operations and development activity. General and administrative expenses decreased $10,145 during the three months ended September 30, 2026 compared to the comparable 2025 period, also from decreased operations and development activity.

Other Income and Expenses

Total other expenses were $0 and $32 during the three months ended September 30, 2026 and 2025, respectively.

Net Income (Loss)

As a result of the above, we recognized net losses of $15,547 and $32,507 for the three months ended September 30, 2026 and 2025, respectively.

For the Nine months ended September 30, 2026 and 2025

Revenues

We did not recognize any revenues during the nine months ended September 30, 2026 and 2025.

Operating Expenses

Operating expenses were $51,908 during the nine months ended September 30, 2026, compared to $347,054 during the nine months ended September 30, 2025. Operating expenses consisted of $37,507 and $299,721 in professional fees and $14,401 and $47,333 in general and administrative expenses during the nine months ended September 30, 2026 and 2025, respectively. The $262,214 decrease in professional fees is the result of decreased in consulting, audit and legal fees from decreased operations and development activity. General and administrative expenses decreased $32,932 during the nine months ended September 30, 2026 compared to the comparable 2025 period, also from decreased operations and development activity.

Other Income and Expenses

Total other expenses were $0 and $1,005 during the nine months ended September 30, 2026 and 2025, respectively.

Net Loss

As a result of the above, we recognized net losses of $51,908 and $348,059 for the nine months ended September 30, 2026 and 2025, respectively.

We anticipate losses from operations will increase during the next twelve months due to anticipated increased payroll expenses as we add necessary staff to continue planned operations and increases in legal and accounting expenses associated with maintaining a reporting company. We expect that we will continue to have net losses from operations for several years until revenues become sufficient to offset operating expenses.

Liquidity and Capital Resources of the Company

Total Assets

Total assets consisted of $15,754 and $12,930 of current assets and $1,148,306 and $1,138,306 in non-current assets as of September 30, 2026 and December 31, 2025, respectively.

Current Assets

Current assets as of September 30, 2026 totaled $15,754, consisting of $558 in cash and other current assets assets of $15,196. Current assets as of December 31, 2025 totaled $12,930, consisting of $1,842 in cash and other current assets assets of $11,088.

Non-Current Assets

Non-current assets as of September 30, 2026 and December 31, 2025 totaled $1,148,306 and $1,138,306, respectively, consisting of $1,143,500 and $1,133,500 in software development costs and $4,806 and $4,806 in intangible assets, respectively.

Total Liabilities

Total liabilities consisted of $50,732 and $30,000 of current liabilities and $44,000 and $0 in non-current liabilities as of September 30, 2026 and December 31, 2025, respectively.

Current Liabilities

Total current liabilities as of September 30, 2026 and December 31, 2025 totaled $50,732 and $30,000 and consisted of accounts payable and accrued expenses totaling $2,799 and $30,000, respectively, and advances payable, related party totaling $47,933 and $0, respectively.

Non- Current Liabilities

Non-current liabilities as of September 30, 2026 and December 31, 2025 consisted of related party loans totaling $44,000 and $0, respectively.

Net Cash Used in Operating Activities

During the nine months ended September 30, 2026, our operating activities used net cash of $35,284. Uses of cash during the nine months ended September 30, 2026 are mainly due to the $51,908 net loss, partially offset by $16,624 in net changes in operating assets and liabilities.

During the nine months ended September 30, 2025, our operating activities used net cash of $366,070. Uses of cash during the nine months ended September 30, 2025 are mainly due to the $348,059 in net loss as well as $18,402 in net changes in operating assets and liabilities. Uses are partially offset by $391 in non-cash currency translation.

Net Cash Used in Investing Activities

During the nine months ended September 30, 2026 and 2025, we used $10,000 and $585,000 in cash investing activities, respectively, all from software development costs.

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2026, we received $44,000 in related party loans.

During the nine months ended September 30, 2025, we received $1,054,000 from the sale of common stock and repaid $162,726 in related party loans.

At September 30, 2026 and December 31, 2025, we had working capital deficits of $34,978 and $17,070, respectively.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements of any kind as of September 30, 2026.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We continuously evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

We believe the following critical accounting policies are important to the portrayal of our financial condition and results of operations and require our management's subjective or complex judgment because of the sensitivity of the methods, assumptions and estimates used in the preparation of our financial statements.

Revenue Recognition Policy

Universal Token recognizes revenue in accordance with the provisions of Accounting Series Codification ("ASC") 606, Revenue From Contracts With Customers ("ASC 606"), which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. ASC 606 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue based on the allocation of the transaction price to each performance obligation as each performance obligation in a contract is satisfied.

The Company intends to provide digital assets from El Salvador for sale, tokenize assets for sale and develop blockchain tools for sale that will provide entry to the market for countries such as Tunisia and United Arab Emirates. During 2026, the Company plans to enter into agreements in connection with its blockchain products in Indonesia and the United Arab Emirates. Revenue recognition for the sale of digital and tokenized assets will be based on the allocation of the transaction price to each performance obligation as each performance obligation in a contract is satisfied, title or access to digital assets are transferred and amounts are due are collected or collectible.

Accounts Receivable

Trade accounts receivable are recorded at invoiced amounts. Universal Token does not provide any unusual contractual trade terms, sales incentive programs or discounts. Allowances for doubtful accounts are established for estimated losses resulting from the inability of customers to make required payments. Allowances are determined based on a review of specific customer accounts where collection is doubtful, as well as an assessment of the collectability of total receivables. Receivables are written off against the allowance when it is determined that the amounts will not be recovered.

Software Development Costs

In accordance with ASC 350-40, Internal Use Software, Universal Token capitalizes certain internal use software development costs associated with creating and enhancing internally developed software related to its platforms. Software development activities generally consist of three stages (i) the research and planning stage, (ii) the application and development stage, and (iii) the post-implementation stage. Costs incurred in the planning and post- implementation stages of software development, or other maintenance and development expenses that do not meet the qualification for capitalization are expensed as incurred. Costs incurred in the application and infrastructure development stage, including significant enhancements and upgrades, are capitalized. Capitalized costs include personnel and related employee benefits expenses for employees or consultants who are directly associated with and who devote time to software projects, and external direct costs of materials obtained in developing the software. Software development costs, when placed in service, are amortized on a straight-line basis over their estimated useful life upon initial release of the software or additional features.

Income Tax

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.