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

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

The following management's discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our condensed unaudited interim financial statements and the notes presented herein included in this Form 10-Q. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties including, but not limited to, those set forth below under "Risk Factors" and elsewhere herein. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission.

Business Overview

House of Doge is committed to advancing the utility and adoption of Dogecoin by investing in the necessary infrastructure to integrate it into everyday commerce and through strategic cultural partnerships.

The Company is in the process of developing secure, scalable and efficient systems designed for real-world applications. These systems encompass digital payments, various financial products and real-world asset tokenization. It also provides consulting, educational resources and operational support to businesses seeking to incorporate Dogecoin into their operations.

Key Performance Indicators

The key performance indicators for House of Doge are revenue growth, operating income and net income.

The Company measures its success by revenue growth. Revenue growth will be dependent on the Company's ability to drive utility and institutional acceptance of Dogecoin.

The Company uses operating income to measure the profitability of its core business operations. Operating income helps to evaluate the Company's ability to cover operational expenses, make decisions on new opportunities and track progress on its strategic goals. This metric provides insights into efficiency and profitability, informing management on crucial business decisions.

Management believes that net income is also an important measure for determining the value created for shareholders and measure of how effectively the Company's business is running.

Organization

The Company was formed as a Delaware corporation in December 2021. In connection with completion of the Merger on June 30, 2026, the Company was renamed "House of Doge Inc.".

House of Doge (U.S.) Inc., formerly House of Doge Inc., is the surviving wholly-owned subsidiary following the merger with Merger Sub, that was completed in connection with the Merger. It is a Texas corporation that was incorporated on January 13, 2025 and one of the primary entities through which the Company's operations are conducted.

Dogecoin Ventures, Inc., a wholly owned indirect subsidiary of the Company is the entity through which most of its investments are made through. It is a Texas corporation that was incorporated on April 17, 2025.

House of Doge Canada Inc., a wholly owned indirect subsidiary of the Company is the entity which employs certain of the Canadian employees of the Company. It is an Ontario corporation that was incorporated on August 15, 2025.

The Official Dogecoin Treasury and Reserve Inc. a wholly owned indirect subsidiary of the Company doesn't currently carry on operations. It is a Texas corporation that was incorporated on January 13, 2025 as Doge Miner Inc. On March 14, 2025 its name was changed to The Official Dogecoin Reserve Inc. On July 30, 2025, its name was changed once more to The Official Dogecoin Treasury and Reserve Inc.

Brag House, Inc. ("BHI"), the Company's wholly owned indirect subsidiary and the entity through which Brag House operations are primarily conducted, was formed as a Delaware corporation in February 2018.

On June 11, 2021, Brag House, Ltd. ("BHL") was registered in the United Kingdom. Their principal offices are located at 7 - 9 Swallow Street, London W1B 4DE, United Kingdom.

On August 16, 2021, BHL acquired all of the 10,000,000 issued and outstanding BHI shares held by BHI shareholders on a one for 14.07 basis (rounded to the nearest whole number) in exchange for 140,700,000 ordinary shares of £0.0001 in BHL, making BHI a wholly owned subsidiary of BHL ("UK Reorganization").

Following the UK Reorganization, the board of directors of BHL determined that it was in the best interests of BHL and its shareholders that an initial public offering in the United States and concurrent listing on The Nasdaq Stock Market ("Nasdaq") be pursued. To effect that proposed initial public offering and listing on Nasdaq, in December 2021, the Company was formed. On February 8, 2022, the Company approved a reorganization, in which the shareholders of BHL would exchange their ordinary shares and preference shares of BHL for a proportionate number of common and preferred shares in the Company on a 21 to 1 basis ("U.S. Reorganization"). Immediately following the U.S. Reorganization, BHL became the wholly-owned subsidiary of the Company, and BHI became the indirect wholly-owned subsidiary of the Company.

We anticipate that BHL will be wound down and dissolved as soon as reasonably practicable.

We effected a 1 for 5.1287 consolidation of our issued and outstanding Common Stock and Preferred Stock on June 14, 2024, (the "Original Reverse Split"). On October 11, 2024, we canceled the Original Reverse Split and filed an amendment to our certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1 for 2.43615 consolidation of our issued and outstanding Common Stock and Preferred Stock (the "Reverse Split"). Any future redemption of stock options or warrants for options or warrants that were granted prior to October 11, 2024 will also reflect the Reverse Split. The Company began the process to pay for the Fractional Shares, which total $85.81, to its shareholders that were affected by the Reverse Split. This Quarterly Report gives effect to the cancellation of the Original Reverse Split and the effectiveness of the Reverse Split. Except where otherwise indicated, all share and per share data in this Quarterly Report have been retroactively restated to reflect the Reverse Split.

On July 25, 2025, the Company filed a certificate of designation with the Secretary of State of the State of Delaware to designate 15,000 shares of the available 25,000,000 shares of Preferred Stock as Series B Preferred Stock. On July 30, 2025, the Company closed its PIPE Offering and issued all 15,000 shares of Series B Preferred Stock.

On October 9, 2025, Brag House Merger Sub, Inc. ("Merger Sub" or "BHMS"), a wholly owned subsidiary of the Company, was formed as a Delaware corporation.

Our principal executive offices are located at 261 NE 61st Street, Miami, FL 33137 and our telephone number is 214-216-8608. Our website address is www.houseofdoge.com. The investor relations portion of our website is available at https://www.houseofdoge.com/investors. The references to our website addresses do not constitute incorporation by reference of the information contained at or available through our websites, and you should not consider it to be a part of this Quarterly Report. We have included our website addresses in this Quarterly Report solely as inactive textual references.

Recent Developments

Reverse Stock Split

On May 29, 2026, the Company filed a certificate of amendment to its Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-8 reverse stock split of the Company's common stock, effective as of 5:00 a.m. Eastern Time on June 1, 2026. The common stock began trading on a post-split basis on the Nasdaq Capital Market at the open of trading on June 1, 2026. The reverse stock split was previously approved by stockholders at the Special Meeting held on April 7, 2026, which authorized the Board of Directors to determine the split ratio within a range of 1-for-5 to 1-for-50. As a result of the reverse stock split, every 8 shares of issued and outstanding common stock were automatically combined into one share, without any change in the number of authorized shares or par value. No fractional shares were issued; stockholders entitled to receive a fractional share received a cash payment in lieu thereof. Proportionate adjustments were made to outstanding equity awards and convertible securities. The new CUSIP number for the Company's common stock following the reverse stock split is 104813308. A copy of the Certificate of Amendment was filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed June 4, 2026 and is incorporated by reference herein.

Amendment to Yorkville Convertible Promissory Note

On June 1, 2026, the Company and YA II PN, Ltd. ("Yorkville") entered into Amendment No. 2 to Convertible Promissory Note, which amended the Promissory Note dated December 4, 2025, as previously amended. Pursuant to the amendment, the parties agreed to extend the maturity date of the Promissory Note from June 1, 2026 to July 31, 2026. As a condition to the effectiveness of the amendment, the Company agreed to (i) pay Yorkville $100,000 as consideration for the extension, (ii) pay Yorkville $200,000 toward the outstanding balance, and (iii) deposit 9,000,000 shares in CleanCore Solutions held by Dogecoin Ventures, Inc. with Revere Securities LLC, with instructions to direct any consideration received from sales or trades of such shares to Yorkville as payment under the Promissory Note. A copy of the amendment was filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 4, 2026 and is incorporated by reference herein.

Completion of the Merger

On June 30, 2026, the Company completed its previously announced merger pursuant to the Merger Agreement dated October 12, 2025, as amended, by and among the Company, Brag House Merger Sub, Inc. and House of Doge Inc., a Texas corporation ("HOD"). HOD merged with and into Merger Sub, with HOD surviving as a wholly owned subsidiary of the Company.

Since the Merger closed on the last day of the quarter, Brag House contributed no material post-acquisition revenue or net income or loss to the Company's results for the three months ended June 30, 2026.

In connection with the Merger, the Company's Board of Directors was reconstituted, with Lavell Juan Malloy II, Daniel Leibovich, DeLu Jackson, Scott Woller and Kevin Foster resigning as directors. Michael Galloro, Sarosh Mistry, Timothy Stebbing, Doug Wall, Stephen Ilott and Duncan Moir appointed as new directors. Marco Margiotta was appointed Chief Executive Officer and Charles Park was appointed Chief Financial Officer.

At closing, former HOD common shareholders and vested HOD RSU holders received 70,363,704 of the 75,902,985 shares of Common Stock then outstanding, or approximately 92.7%, in addition to 2.051823 shares of Series C Convertible Preferred Stock.

Name Change and Trading Symbol

On June 30, 2026, in connection with the closing of the Merger, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware, changing the Company's name from Brag House Holdings, Inc. to House of Doge Inc. The Common Stock began trading on the Nasdaq Stock Market under the new ticker symbol "HODO" as of July 1, 2026. A copy of the Certificate of Amendment was filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed July 7, 2026 and is incorporated by reference herein.

Director Resignation

On July 19, 2026, Stephen Ilott provided written notice of his resignation from the Board of Directors, effective immediately, due to personal reasons. At the time of his resignation, Mr. Ilott served as a member of the Audit Committee. Following Mr. Ilott's resignation, the Company continues to satisfy the applicable independence requirements of the Nasdaq Stock Market and Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

Short-Term Note

On July 28, 2026, Dogecoin Ventures, Inc., a wholly owned subsidiary of the Company, issued an unsecured subordinated short-term note with principal of $1,400,000. The note bore interest at 10.714% per annum and was scheduled to mature on July 27, 2027. On August 3, 2026, after the Company fully repaid the Yorkville senior convertible promissory note, Dogecoin Ventures settled the $1,400,000 principal through the transfer of 2,227,300 shares of CleanCore Solutions, Inc. common stock and paid $150,000 on August 12, 2026 to settle fees.

Subsequent to June 30, 2026, the Company also fully repaid $1,587,500 of principal under the Yorkville senior convertible promissory note and the approximately $0.7 million Revere Securities margin loan.

Change in Independent Registered Public Accounting Firm

On July 23, 2026, the Audit Committee of the Board of Directors recommended, and the Board approved, the dismissal of CBIZ CPAs P.C. ("CBIZ") as the Company's independent registered public accounting firm. CBIZ's audit report on the Company's consolidated financial statements for the fiscal year ended December 31, 2025 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except for an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern. There were no disagreements with CBIZ on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

On July 23, 2026, the Board of Directors approved the engagement of Davidson & Company LLP ("Davidson") as the Company's independent registered public accounting firm. During the Company's two most recent fiscal years and the subsequent interim period through the date of Davidson's engagement, neither the Company nor anyone acting on its behalf consulted with Davidson regarding the application of accounting principles, audit opinions, or any matter that was the subject of a disagreement or reportable event.

Emerging Growth Company Status

The Company is an "emerging growth company," as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Results of Operations

Three Months Ended June 30, 2026 as compared to the Three Months Ended June 30, 2025

Revenue

Revenue was $0.04 million for the three months ended June 30, 2026, compared with nil for the three months ended June 30, 2025. The current-period revenue was generated principally from exchange-traded product ("ETP") support services provided to 21Shares in connection with U.S. and European Dogecoin ETPs. These services include research, data, sales and marketing, and operational support, for which the Company is entitled to a share of sponsor and management fees under the applicable agreements. The year-over-year increase reflects the commencement of these arrangements after the prior-year comparative period.

Operating (Income) Expenses

Professional and legal expenses were $0.12 million for the three months ending June 30, 2026 compared to $0.07 million for the same period in 2025. The increase is primarily due to various legal costs associated with ongoing business operations.

Advertising and marketing expenses were $0.2 million for the three months ending June 30, 2026 compared to $2.1 million for the same period in 2025.The year over year decline can be attributed to lower sponsorship, advertising and public relations costs as the Company prioritized closing the Merger transaction in the current year.

General and administrative expenses decreased 57% from $3.8 million for the three months ending June 30, 2026 to $8.8 million in the three months ended June 30, 2025. The year over year decrease can be attributed to a $3.6 million reduction in share-based compensation, $2.2 million decrease in consulting fee and $0.09 million decline in travel and entertainment expenses. This was partially offset by year over year increases in salaries and benefits of $0.6 million and $0.03 million increase in technology development expenses year over year.

Amortization of intangible assets was $0.4 million for the three months ending June 30, 2026 remained the same as the same period in the prior year. The balance is primarily a result of amortization of a minimum royalty payment under an exclusive trademark and licensing agreement.

Change in fair value of digital assets was nil for the three months ending June 30, 2026 compared to a loss $0.2 million for the same period in the prior year. The losses are related to the Company's prior-period digital asset holdings and the remeasurement. The Company had no digital asset holdings during the three months ending June 30, 2026.

Change in fair value of equity guarantee liability was nil for the three months ending June 30, 2026 compared to loss of $0.3 million for the same period in the prior year. On June 25, 2025, the Company settled the equity guarantee by issuing additional common shares. As a result, there was no balance to remeasure in the current period.

Change in fair value of investments was a gain of $9.8 million for the three months ending June 30, 2026 compared to nil for the same period in the prior year. The gain was primarily due to an increase in the Company CleanCore Solutions equity/warrant holdings during the current period.

The Company recorded an impairment of assets charge of $1.0 million for the three months ending June 30, 2026 compared to a nil balance for both for the same period in the prior year. The current period charges relate to the impairment of its investment in LBK at June 30, 2026.

Other Expenses

Finance expense for the three months ending June 30, 2026 was $0.4 million compared to $0.3 million for the same period in the prior year. The current period's balance consists of $0.3 million accretion expense on the related to the Company's trademark and licensing agreement with the balance mainly related to interest expense on short-term debt.

Financial Condition, Liquidity and Capital Resources

At June 30, 2026, the Company had total assets of $32.4 million and total liabilities of $23.9 million, compared with $21.8 million and $18.7 million, respectively, at March 31, 2026. Total investments increased by approximately $14.2 million to $24.8 million, principally because of fair-value appreciation in the CleanCore investment portfolio and the acquisition-date recognition of additional CleanCore shares in the Merger. Accounts payable and accrued liabilities increased by approximately $6.4 million to $8.9 million, principally reflecting acquisition-date Brag House balances and higher legal, transaction, consulting, audit, marketing, payroll and other vendor obligations. A $2.8 million warrant derivative liability was also recognized at the Merger date. Short-term debt and related party debt decreased $3.6 million to $5. 7 million, primarily because short-term debt between HOD and Brag House were eliminated upon consolidation, partially offset by the acquisition-date recognition of Yorkville and senior secured convertible notes and current-period borrowings. Cash was $0.7 million at June 30, 2026 and $2.8 million at March 31, 2026. Current assets were $3.5 million and current liabilities were $19.8 million at June 30, 2026, resulting in a working-capital deficit of $16.3 million, compared with a working-capital deficit of $7.3 million at March 31, 2026.

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2026 and March 31, 2026, the Company had an accumulated deficit of $39.8 million and $43.4 million, respectively. For the three months ended June 30, 2026, the Company recognized net income of $3.998 million, compared with a net loss of $12.1 million for the three months ended June 30, 2025. Net cash used in operating activities for the three months ending June 30, 2026 was $1.6 million and $4.0 million for the same period in the prior year. The improvement in net results was driven principally by a non-cash fair-value gain on investments. The non-cash gains did not eliminate the Company's working-capital deficit. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company expects to continue incurring operating losses and negative operating cash flows as it executes its business strategy. The Company is dependent on obtaining additional working capital, selectively monetizing investments, managing or reducing operating expenditures and increasing revenue and profitability. Management monitors liquidity through cash-flow forecasts and evaluates debt and equity financing and strategic alternatives. There can be no assurance that additional financing will be available when needed or on acceptable terms, that investments can be monetized at recorded values, or that management's plans will be successful.

Subsequent to June 30, 2026, the Company fully repaid the Yorkville senior convertible promissory note and the Revere Securities margin loan. Dogecoin Ventures also obtained a $1.4 million unsecured subordinated short-term note and settled its principal on August 3, 2026 through the transfer of 2,227,300 CleanCore common shares. These actions reduced certain near-term debt maturities but did not provide committed liquidity for the full going-concern assessment period. The Company continues to evaluate additional equity issuances, credit facilities and other financing or strategic alternatives.

		June 30, 2026				June 30, 2025
Cash Flows Used In Operating Activities		$	(1,580,880	)		$	(4,009,824	)
Cash Flows Used In Investing Activities			(2,753,266	)			(4,913,686	)
Cash Flows Provided By Financing Activities			2,150,057				12,450,000
Net Increase (Decrease) in Cash and Cash Equivalents		$	(2,184,089	)		$	3,526,490

Cash Flows Used In Operating Activities

For the three months ended June 30, 2026, net cash used in operating activities was $1.6 million, compared with $4.0 million for the three months ended June 30, 2025. Current-period net income of $3.98 million included a $9.8 million non-cash gain from changes in the fair value of investments that was deducted in reconciling net income to operating cash flows. Other non-cash adjustments included $1.7 million of share-based compensation, $1.0 million of impairment expense, $0.4 million of amortization and $0.4 million of finance expense. Operating cash flows benefited from a $0.6 million increase in accounts payable and accrued liabilities and a $0.06 million decrease in accounts receivable, partially and $0.2 million decrease in prepaid expenses and other current assets and $0.6 million of cash payments on the license contract liability. The year-over-year reduction in cash used in operations also reflects lower operating expenditures, partially offset by the lower amount of non-cash share-based compensation and the absence of $1.5 million of common stock issued for services in the prior-year period.

For the three months ended June 30, 2025, net cash used in operating activities was $4.6 million, primarily reflecting the Company's net loss of $12.1 million, partially offset by significant non-cash share-based compensation of $5.2 million, common stock issued for services of $1.5 million, amortization of intangible assets of $0.4 million, finance expense of $0.3 million, and other non-cash fair value adjustments. Cash used in operating activities also reflected changes in working capital, including decreases in prepaid expenses and other current assets.

Cash Flows Used In Investment Activities

For the three months ended June 30, 2026, net cash used in investing activities was $2.7 million, compared to $4.9 million for the three months ended June 30, 2025. Cash used in investing activities during the 2026 period primarily consisted of $2.5 million used to purchase investments, partially offset by $0.4 million of proceeds received from the sale of investments and $0.6 million of license liability payments. During the comparable prior-year period, investing activities primarily consisted of $2.4 million used to purchase investments and $1.9 million used to acquire digital assets. The decrease in cash used in investing activities compared to the prior-year period was primarily attributable to the absence of digital asset purchases during the 2026 period and proceeds received from the sale of investments.

Cash Flows Provided By Financing Activities

For the three months ended June 30, 2026, net cash provided by financing activities was $2.1 million, compared with $12.5 million for the three months ended June 30, 2025. Current-period financing cash flows consisted of $3.5 million of proceeds from short-term debt and related party debt, $0.05 million of cash acquired in the reverse recapitalization, partially offset by $1.4 million short-term debt repayments. Prior-year financing cash flows consisted of $12.5 million of proceeds from the issuance of common stock. The decrease reflects the absence of equity financing transactions comparable to those completed in the prior-year period and the Company's greater reliance on short-term borrowings during the current period.

Off-Balance Sheet Arrangements

The Company did not have any off-balance-sheet arrangement that has or is reasonably likely to have a current or future material effect on its financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, cash requirements or capital resources.

Material Cash Requirements and Commitments

At June 30, 2026, the Company's material cash requirements included accounts payable and accrued liabilities of $8.9 million, short-term debt with a carrying amount of $5.1 million and related-party debt with a carrying value of $0.6 million, and fixed minimum royalty payments under its trademark license. Remaining undiscounted fixed minimum royalty payments were $8.6 million, including $2.4 million payable within twelve months, $4.8 million payable in years two and three, and $1.4 million payable in years four and five. The Company fulfilled its $1.5 million commitment to purchase TDOG shares through April 2026 market purchases having a total cash settlement of approximately $1.48 million; no additional TDOG purchase obligation remained at June 30, 2026. The timing and ability to satisfy these requirements depend on available cash, investment monetization, operating cash flows and access to additional financing. See Notes 3, 5, 6, 7, 8,10 and 15 to the unaudited interim condensed consolidated financial statements for additional information.

Critical Accounting Estimates

The Company prepares our consolidated financial statements in accordance with U.S. GAAP, which require our management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

The Company considers an accounting estimate to be critical if (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Share-Based Compensation and Warrant Valuations

The Company measures equity-classified share-based awards at grant-date fair value and remeasures liability-classified awards and warrant derivatives at each required measurement date. Depending on the instrument's terms, the Company uses Black-Scholes of option-pricing, back-solve and conversion options, present value of future payments binomial lattice or Monte Carlo models. These measurements require estimates and assumptions that can materially affect share-based compensation expense, derivative balances and changes in fair value recognized in earnings.

Key assumptions used in these models include expected volatility, expected term, risk-free interest rate, expected dividend yield and, for lattice models, assumptions about exercise behavior and future stock-price changes. Because the Company has limited operating history and trading data, expected volatility is based on the Company's available trading history and, when appropriate, the historical volatility of comparable publicly traded companies. Risk-free interest rates are based on U.S. Treasury yields with maturities consistent with expected terms, and expected dividend yields are zero because the Company has not historically paid dividends.

The Company uses the "simplified method" to estimate the expected term for stock options that have exercise prices issued at-the-money, consistent with SEC Staff Accounting Bulletin Topic 14. For stock options with exercise prices that are out-of-the-money, the Company uses a Binomial Lattice model, which incorporates assumptions about future exercise behavior and potential changes in stock price over the life of the award. As an alternate option, the Company used the exercise patterns of comparable companies to determine and establish a reasonable estimate for the expected term for stock options.

Because these valuation assumptions involve significant judgment, changes in expected volatility, expected term, exercise behavior or the Company's stock price could materially affect the fair values of share-based awards and warrants and the related compensation expense or fair-value changes recognized in earnings. Management reviews these assumptions at each required measurement date.

Investment and Other Fair Value Measurements

At June 30, 2026, recurring fair-value assets totaled $23.3 million, including $1.6 million of Level 3 assets. Level 3 assets consisted of McQueen convertible debentures. The Company uses discounted-cash-flow, option-pricing and probability-weighted models, as applicable. Significant unobservable inputs include discount rates, expected volatility, discounts for lack of marketability, equity values, conversion assumptions and scenario probabilities. During the three months ended June 30, 2026, the Company recognized a $9.8 million net fair-value gain on investments, principally attributable to the CleanCore portfolio. The Company also recognized a $0.5 million impairment of its LBK Triestina Holdings LLC equity-method investment based on a nonrecurring Level 3 measurement. Changes in the selected techniques or assumptions could materially affect investment balances, earnings and other comprehensive income.

Yorkville Convertible Note and Yorkville Warrant

On December 4, 2025, the legal parent and Yorkville entered into the Yorkville Convertible Note and Yorkville Warrant. Because HOD is the accounting acquirer, the consolidated entity first recognized the instruments on the June 30, 2026 acquisition date. The Company elected the fair value option under ASC 825, Financial Instruments, for the Yorkville Convertible Note and the senior secured convertible notes, and accounts for the Yorkville Warrant as a derivative liability under ASC 815, Derivatives and Hedging. At June 30, 2026, the Yorkville Convertible Note, senior secured convertible notes and Yorkville Warrant had Level 3 fair values of $1.6 million, and $2.7 million, respectively. The convertible notes are valued using probability-weighted expected return models, and the Yorkville Warrant is valued using a Monte Carlo simulation. Because the instruments were initially recognized by the consolidated entity on the last day of the quarter, no post-acquisition change in their fair values was recognized during the three months ended June 30, 2026.

Key assumptions used in these models include the Company's common-stock price, conversion prices and timing, expected volatility, instrument-specific credit risk and discount rates, expected term, risk-free interest rate, default assumptions and probabilities assigned to cash settlement, conversion, redemption, change-of-control and event-of-default scenarios. Expected volatility is based on the Company's available trading history and, when appropriate, the historical volatility of comparable publicly traded companies. Risk-free interest rates are based on U.S. Treasury yields with maturities consistent with the instruments' expected terms, and expected dividend yields are zero because the Company has not historically paid dividends.

Because these valuation assumptions involve significant judgment, changes in the Company's stock price, expected volatility, discount rates, credit risk, conversion outcomes or scenario probabilities could materially affect the fair values of the convertible notes and Yorkville Warrant and the related gains or losses recognized in future periods. Management reviews these assumptions at each required measurement date.

For a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the notes to the unaudited interim condensed consolidated financial statements in this report.