NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying audited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), as issued by the Financial Accounting Standards Board (“FASB”). References to the “ASC” refer to the Accounting Standards Codification established by FASB

Principals of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Farmhouse Washington, Farmhouse DTLA, Inc., and Farmhouse Treasury, LLC. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the consolidated financial statements. Significant estimates include, but are not limited to, convertible debt, valuation of deferred tax assets and any related valuation allowances, contingent assets and liabilities, and valuation of stock-based compensation awards. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation. Such reclassifications had no impact on previously reported net income or stockholders’ equity.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash deposits held in checking and savings accounts with financial institutions and other highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less at the time of purchase. The Company had no cash equivalents as of December 31, 2025 and 2024.

Accounts Receivable

Accounts receivable represents amounts due from customers in the ordinary course of business and are recorded at the invoiced amount. Accounts receivable do not bear interest and are presented net of an allowance for doubtful accounts. The Company evaluates the collectability of its accounts receivable and establishes an allowance based on a combination of factors, including historical collection trends and specific information about customer credit risk. When the Company becomes aware of a customer’s inability to meet its financial obligations, a specific allowance for doubtful accounts is recorded.

Debt and Convertible Instruments

The Company accounts for its debt and convertible debt instruments in accordance with ASC 470, Debt. Debt is recorded at the principal amount net of original issue discounts, premiums, and debt issuance costs, which are amortized to interest expense over the contractual term of the instrument using the effective interest method. Interest expense is recognized as incurred. The Company evaluates debt modifications and extinguishments in accordance with ASC 470-50.

Convertible debt instruments are evaluated under ASC 470 and ASC 815, Derivatives and Hedging, to determine whether embedded conversion features require separate accounting as derivative liabilities. In making this assessment, the Company considers whether conversion features are indexed to the Company’s own stock and qualify for the equity scope exception under ASC 815. Conversion features that do not qualify for the equity scope exception are bifurcated and recorded as derivative liabilities at fair value, with changes in fair value recognized in earnings. Conversion features that qualify for the equity scope exception are accounted for as part of the host debt instrument.

The Company performs this evaluation at issuance and reassesses the classification of conversion features upon the occurrence of events such as modifications to contractual terms or changes in circumstances that could impact the accounting conclusion.

Derivative Liabilities

The Company accounts for derivative liability in accordance with ASC 815 Derivatives and Hedging and ASC 820 Fair Value Measurement. Convertible notes that have all the characteristics of an embedded derivative are bifurcated and valued at fair value at inception, conversion and each reporting date and related gains and losses are recorded in earnings. The Company estimates the fair value of derivative using the Black-Scholes option-pricing model or a probability weighted expected value approach.

Fair Value of Financial Instruments

The Company follows ASC 820, Fair Value Measurement, in determining the fair value of financial assets and liabilities when applicable. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in fair value measurements are classified into three levels within the fair value hierarchy based on their observability.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses, convertible notes payable, notes payable, and amounts due to related parties. The carrying amounts of these instruments approximate fair value due to their short-term nature or standard market terms.

The Company applies the guidance in ASC 820 to account for derivative liabilities measured on a recurring basis. Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following 3 categories:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 

•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities. 

•Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 

The following tables present, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis as of December 31, 2025 and 2024:

December 31, 2025

December 31, 2024

Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles—Goodwill and Other. Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives and costs to renew or extend the term of an intangible asset is expensed as incurred.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When such indicators are present, the Company compares the carrying amount of the asset group to the estimated future undiscounted net cash flows expected to be generated from the use and eventual disposition of the asset group, excluding interest costs. If the sum of the undiscounted cash flows is less than the carrying amount, an impairment loss is recognized. No impairment loss was recognized during the years ended December 31, 2025 or 2024.

Leases

The Company accounts for leases in accordance with ASC 842, Leases. As of December 31, 2025 and 2024, the Company did not have any operating or financing leases requiring recognition on the balance sheet.

Digital Assets

The Company may hold certain digital assets for treasury and strategic purposes in accordance with its Treasury Policy. Digital assets are recorded as indefinite-lived intangible assets in

accordance with ASC 350, with crypto assets recorded in accordance with ASC 350-60, Intangibles – Goodwill and Other – Crypto Assets, and are initially recognized at cost or fair value at the measurement date, as applicable.

Digital assets acquired through non-cash consideration are measured at fair value as of the transaction measurement date, determined using observable quoted prices on the principal market for the specific digital asset, when available. The Company does not capitalize internally generated digital assets.

Subsequent to initial recognition, crypto assets are presented on the balance sheet at fair value, with changes in fair value recognized in earnings in the period in which they occur. Fair value measurements are classified within Level 1 of the fair value hierarchy when based on quoted prices in active markets.

Digital assets are subject to ongoing monitoring in accordance with the Company’s Treasury Policy, including custody, liquidity, and risk management considerations. The Company does not use digital assets as hedging instruments and does not engage in digital asset trading activities outside of its treasury strategy.

Revenue Recognition

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers, which outlines a five-step framework: identify the contract with a customer; identify the performance obligation(s) in the contract; determine the transaction price; allocate the transaction price to the performance obligation(s); and recognize revenue when (or as) the performance obligation(s) are satisfied. Revenue is recognized in an amount that reflects the consideration the Company expects to receive in exchange for goods or services, when control of the promised goods or services is transferred to customers.

The Company generated revenues of $623 and $4,154 for the years ended December 31, 2025 and 2024, respectively. Revenues were generated from license fees in connection with NFT art license agreements, whereby licensees are granted a limited right to use the Company’s NFTs for the purpose of creating, marketing, and selling branded cannabis and hemp products and accessories. The Company’s performance obligation is met upon granting the licensee access to the NFTs. Revenue is recognized as the licensee sells products, based on a percentage of their gross sales. Fees are due the month after sales occur. One licensee accounted for 100% and 90% of license revenues for each of the years ended December 31, 2025 and 2024, respectively.

The corresponding costs of revenues associated with license revenues were $125 and $1,875 for the years ended December 31, 2025 and 2024, respectively.

Stock-Based Compensation

The Company accounts for stock-based awards in accordance with ASC 718, Compensation – Stock Compensation. Compensation costs related to stock options, restricted stock units, and other equity awards are measured based on the fair value of the awards at the grant date and recognized as expense over the requisite service period, typically the vesting period. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Forfeitures are accounted for as they occur.

Commitments and Contingencies

The Company accounts for contingencies in accordance with ASC 450, Contingencies. Liabilities are recognized when it is probable that a liability has been incurred and the amount can be reasonably estimated. Disclosures are made for material loss contingencies that are reasonably possible or where the amount of loss cannot be estimated. Remote contingencies are generally not disclosed unless related to guarantees.

Segment Reporting

In accordance with ASC 280, Segment Reporting, the Company operates in a single reportable segment. The Chief Financial Officer is the Chief Operating Decision Maker (“CODM”). The CODM reviews financial performance based on consolidated operating results shown in the statement of operations, including revenue, gross profit, and net loss. No disaggregated operating results are regularly reviewed below the consolidated level, and no discrete segment-level information is maintained. Additionally, the CODM considers our current and total assets as consolidated and recorded on the balance sheet, there is no additional asset information provided that are supplemental to those presented.  To date the Company has generated all revenues from third parties located in the United States and all of the Company’s assets are located in the United States.

Related Party Transactions

The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures. Related party transactions, balances, and relationships are identified separately in the consolidated financial statements and related notes. Transactions with related parties are conducted on terms equivalent to those that prevail in arm’s length transactions, unless otherwise disclosed. Management evaluates all related party transactions for proper accounting, disclosure, and potential conflicts of interest. See Note 8.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion will not be realized. The Company evaluates its tax positions to determine whether it is more likely than not that a tax position will be sustained upon examination. Changes in tax laws and rates are reflected in the period of enactment. See Note 11.

Net Income (Loss) per Common Share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, using the treasury stock method, but only to the extent that such inclusion would not be anti-dilutive. Potentially dilutive securities include convertible notes, stock options, warrants, and restricted stock awards. In periods where the Company reports a net loss, all potentially dilutive securities are considered anti-dilutive and are therefore excluded from the computation of diluted net loss per share. During 2025, the Company issued a convertible note that if converted on December 31, 2025 would have converted to 378,890 shares. There are other convertible notes outstanding as of December 31, 2025 and 2024, however certain events that triggered, or allowed for, conversion had not yet occurred and the conversion price that the shares would convert at if an event occurred is unknown; therefore as of those dates, the Company had no other potentially dilutive securities.

Business Combinations

The Company accounts for business combinations using the acquisition method in accordance with ASC 805, Business Combinations. Under this method, the Company allocates the fair value of the purchase consideration to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. Any excess of the purchase price over the net assets acquired is recorded as goodwill. Acquisition-related costs are expensed

as incurred, and contingent consideration, if any, is measured at fair value on the acquisition date and remeasured at each reporting date until settled.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable as of December 31, 2025. The Company places its cash with high credit quality financial institutions.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires incremental disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures. The amendments only impact disclosures and are not expected to have an impact on the Company’s financial condition and results of operations.

The Company considers all new pronouncements and management has determined that there have been no recently adopted or issued accounting standards that had or will have a material impact on its financial statements.