USBC, Inc. (USBC) - Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026. USBC, Inc. (formerly Know Labs, Inc.) is a technology company pivoting from legacy non-invasive sensor technology to financial-services network infrastructure, specifically focusing on a tokenized deposit program and a Bitcoin treasury strategy. The company completed a divestiture of its legacy sensor business (Particle, Inc.) on March 27, 2026. This is the company's first quarterly report following a fiscal year-end change from September 30 to December 31.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(25,554,769) | $(3,579,036) |
| Operating Expenses | $11,667,260 | $2,207,522 |
| Cash and Cash Equivalents | $2,035,047 | $443,913 |
| Working Capital | $(7,252,299) | N/A |
| Total Debt (Loan Payable) | $5,000,000 | $0 |
| Digital Assets (Non-Current) | $68,674,725 | $86,637,784 |
| Accumulated Deficit | $(216,100,430) | $(147,036,640) |
Material Changes vs. Prior Period
- Net Loss Expansion: Net loss increased by approximately $22.0 million year-over-year. This was primarily driven by a $20.0 million non-cash unrealized loss on the change in fair value of digital assets (Bitcoin) and a $2.2 million provision for credit losses.
- Operating Expenses: Total operating expenses surged to $11.7 million from $2.2 million. This increase is attributed to:
- Stock-Based Compensation: Increased to $3.9 million (from $0.6 million) due to significant option grants and repricing.
- SG&A Expenses: Rose to $11.4 million, largely due to $4.7 million in costs for the tokenized deposit program development, including $3.1 million in related-party service fees.
- Divestiture: The company divested its legacy sensor business (Particle, Inc.) for $1.00 cash plus assumption of liabilities, marking a strategic shift away from hardware R&D.
- Debt Financing: The company secured a $5.0 million loan under a Master Loan Agreement (MLA) collateralized by Bitcoin, compared to no such facility in the prior period.
Guidance, Outlook, and Risks
- Strategic Focus: Management is prioritizing the development of the USBC tokenized deposit program in partnership with Vast Bank and Uphold. Phase 1 internal testing began in March 2026.
- Liquidity: Management asserts no substantial doubt regarding the ability to continue as a going concern for the next 12 months, citing cash on hand ($2.0M) and unencumbered digital assets. However, the company expects to continue incurring operating losses and may require additional equity or debt financing.
- Bitcoin Treasury Strategy: The company holds Bitcoin as a strategic reserve and uses derivatives to generate yield. Volatility in Bitcoin prices significantly impacts reported earnings (e.g., the $20M loss this quarter).
- Risks:
- Market Volatility: Fluctuations in Bitcoin prices create material non-cash gains/losses.
- Regulatory Uncertainty: Evolving laws regarding digital assets and stablecoins could impact the business model.
- Collateral Risk: The $5M loan is secured by Bitcoin; a ~36% drop in Bitcoin value could trigger a margin call.
- Subsequent Event: On April 27, 2026, the company drew an additional $5.0 million under the MLA, bringing total outstanding principal to $10.0 million.
Investor Verification Checklist
- Bitcoin Valuation: Verify the fair value of the $68.7M digital asset holding and the specific impact of the $20M unrealized loss on the balance sheet.
- Related Party Transactions: Review the $3.1M in expenses paid to affiliated entities (Vast Holdings, Inc.) under the Affiliate Services Agreement and the terms of the $10.5M cap.
- Debt Covenants: Confirm the current Loan-to-Value (LTV) ratio of the Bitcoin-collateralized loan and the margin call thresholds (130% margin ratio).
- Stock Option Repricing: Assess the impact of the March 2026 repricing of 82M options from $1.10 to $0.37 on future dilution and compensation expenses.
- Going Concern: Evaluate the sufficiency of the $2.0M cash balance against the $11.7M quarterly burn rate and the reliance on future financing or asset monetization.