STOCK TITAN

I-ON Digital (IONI) posts Q1 profit but flags going-concern and control risks

Filing Impact
(Moderate)
Filing Sentiment
(Neutral)
Form Type
10-Q

Rhea-AI Filing Summary

I-ON Digital Corp. reported a sharp swing to profitability in Q1 2026 driven by one-time gains, while its core operations remained loss-making and liquidity constrained. Revenue was modest at $27,000 under a treasury lease with GGBR, and the company posted a loss from operations of $391,139.

Net income reached $4,149,246, mainly from a $4,064,680 gain on exchanging ION.au gold-backed digital assets for pmUSD and xPM tokens and a $440,619 gain on settling defaulted bridge loans with ION.au units, plus $274,711 of DeFi yield income. Cash was $193,012 against total assets of $22,923,406, heavily concentrated in intangible digital assets.

Management explicitly states that recurring operating losses, negative operating cash flow and a working capital deficiency raise substantial doubt about I-ON’s ability to continue as a going concern, despite the quarter’s accounting gains. The company also relies on related-party funding, carries $907,610 of convertible notes with a Level 3 derivative liability of $790,312, and discloses ongoing material weaknesses in internal control over financial reporting.

Positive

  • None.

Negative

  • Going-concern uncertainty: Management concludes that recurring operating losses, negative operating cash flows and a working capital deficiency raise substantial doubt about I-ON’s ability to continue as a going concern within one year.
  • Weak cash position and reliance on related parties: Cash of $193,012 is low relative to operations, while the company depends on related-party advances and new convertible debt for funding.
  • Convertible debt and dilution risk: Convertible notes with principal of $907,610 feature a variable 80% of market-price conversion, creating a Level 3 derivative liability of $790,312 and potential significant dilution.
  • Material weaknesses in controls: Disclosure controls and procedures were not effective as of March 31, 2026 due to previously identified material weaknesses in internal control over financial reporting, with remediation incomplete.

Insights

Profit is driven by one-time digital asset and debt gains, while going-concern and control issues persist.

I-ON Digital generated Q1 2026 net income of $4.15M on revenue of only $27k. The turnaround from a prior-year loss comes almost entirely from non-recurring items: a $4.06M gain on exchanging ION.au gold-backed assets for pmUSD and xPM, and a $440.6k gain on settling defaulted bridge loans with ION.au units.

Core operations remain weak, with an operating loss of $391k and negative operating cash flow of $391k. Liquidity is thin at $193k of cash, while the balance sheet is dominated by indefinite-lived digital intangibles of $22.39M. New convertible notes totaling $907.61k carry a variable-price conversion feature recorded as a Level 3 derivative liability of $790.31k, highlighting potential future dilution.

Management states that recurring operating losses, negative cash flows and a working capital deficit raise “substantial doubt” about the company’s ability to continue as a going concern within one year of issuance. The company also acknowledges material weaknesses in internal control over financial reporting as of March 31, 2026, with remediation still in progress. Overall, the filing is negative for the risk profile despite the headline profit.

Revenue $27,000 Three months ended March 31, 2026
Net income $4,149,246 Three months ended March 31, 2026
Loss from operations $391,139 Three months ended March 31, 2026
Operating cash flow $(391,217) Net cash used in operating activities, Q1 2026
Total assets $22,923,406 Balance sheet as of March 31, 2026
Indefinite-lived intangibles $22,385,136 Gold-backed digital assets as of March 31, 2026
Convertible notes principal $907,610 Crom Note plus Q1 2026 notes outstanding
Derivative liability $790,312 Embedded conversion features at March 31, 2026
going concern financial
"these factors, when considered in the aggregate, continue to raise substantial doubt about the Company’s ability to continue as a going concern"
A going concern is a business that is expected to continue its operations and meet its obligations for the foreseeable future, rather than shutting down or selling off assets. This assumption matters to investors because it indicates stability and ongoing profitability, making the business a more reliable investment. Think of it as believing a restaurant will stay open and serve customers, rather than closing down suddenly.
Master Treasury Lease and Custody Agreement financial
"The Company’s revenue during the three months ended March 31, 2026 consisted of fees earned by deploying assets under management under its Master Treasury Lease and Custody Agreement"
derivative liability financial
"Accordingly, the embedded conversion feature is accounted for as a derivative liability in accordance with ASC 815, Derivatives and Hedging."
A derivative liability is an obligation a company owes because of a derivatives contract—such as an option, future, swap, or forward—that has moved against it and now has negative value. Think of it like a settled bet that turned into a bill: if market moves go the other way, the company may have to pay cash or deliver assets. Investors care because these liabilities can create sudden losses, add leverage or counterparty risk, and change a company’s true financial exposure beyond its everyday operations.
indefinite-lived intangible assets financial
"Digital assets are accounted for as indefinite-lived intangible assets; therefore, they are not amortized, but are assessed for impairment annually"
Indefinite-lived intangible assets are non-physical items such as brand names, trademarks, or perpetual rights that a company expects to keep indefinitely and therefore does not amortize over time. They matter to investors because their value stays on the balance sheet until shown to be impaired, so sudden write-downs can sharply reduce reported earnings and book value; think of them like a family recipe that retains value until someone proves it no longer sells.
material weaknesses in internal control over financial reporting financial
"concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal control over financial reporting"
A material weakness in internal control over financial reporting is a significant flaw in a company’s processes that increases the likelihood its financial statements could be wrong or misleading. Think of it as a broken checkpoint in an airport security line: if it fails, errors or fraud can pass through undetected. Investors care because these weaknesses raise the risk that reported earnings, assets, or liabilities are inaccurate, which can affect valuation, trust, and investment decisions.
Level 3 fair value measurement financial
"The Company’s derivative liabilities are a Level 3 fair value measurement (see NOTE 10)."
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2026

 

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________________ to ______________________

 

Commission file number: 000-54995

 

I-ON DIGITAL CORP.

(Exact name of registrant as specified in its charter)

(formerly known as I-ON Communications Corp.)

 

Delaware   46-3031328

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1244 N. Stone Street, Unit 3, Chicago, IL 60610

(Address of principal executive offices, including zip code)

 

(866) 440-2278

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of May 19, 2026, I-ON Digital Corp. had 34,106,234 shares of common stock, par value $0.0001 per share, outstanding.

 

 

 

 

 

 

I-ON Digital Corp.

 

Table of Contents

 

Financial Statements (UNAUDITED)  
   
Condensed Consolidated Balance Sheets (UNAUDITED) 3
   
Condensed Consolidated Statements of Operations (UNAUDITED) 4
   
Condensed Consolidated Statements of Stockholders’ Equity (UNAUDITED) 5
   
Condensed Consolidated Statements of Cash Flows (UNAUDITED) 6
   
Notes to Condensed Consolidated Financial Statements (UNAUDITED) 7

 

2
 

 

Part 1 – Financial Information

 

Item 1. Financial Statements

I-ON Digital Corp.

 

Condensed Consolidated Balance Sheets

 

  

March 31,

2026

  

December 31,

2025

 
    (Unaudited)      
Assets          
           
Current assets          
Cash and cash equivalents  $193,012   $158,193 
Other receivable   153,798    27,137 
Prepaid expenses   85,340    106,285 
Total current assets   432,150    291,615 
           
Non-current assets:          
Intangible assets, net   22,491,256    18,022,219 
           
Total non-current assets   22,491,256    18,022,219 
           
Total Assets  $22,923,406   $18,313,834 
           
Liabilities and Stockholders’ Equity          
           
Current liabilities          
Accrued expenses  $274,000   $478,875 
Accrued interest   -    781,000 
Deferred revenue   -    460 
Due to related parties   1,937,388    2,088,652 
Convertible notes payable, net of discount   183,257    - 
Derivative liability   790,312    156,644 
Loans payable   -    550,000 
Other current liabilities   1,331,000    - 
Total current liabilities   4,515,957    4,055,631 
           
Total liabilities   4,515,957    4,055,631 
           
Commitments and contingencies   -    - 
           
Stockholders’ Equity          
Preferred stock - $0.0001 par value; 5,000,000 shares authorized          
Preferred stock Series A - $0.0001 par value; 6,000 shares designated; 5,403 shares issued and outstanding at March 31, 2026 and December 31, 2025   -    - 
Preferred stock Series E - $0.0001 par value; 100,000 shares authorized; 3,442 shares issued and outstanding at March 31, 2026 and December 31, 2025   -    - 
Preferred stock Series C - $0.0001 par value; 910,000 shares designated; 595,000 shares issued and outstanding at March 31, 2026 and December 31, 2025   59    59 
Common stock - $0.0001 par value; authorized 250,000,000 shares; 34,106,234 shares issued and outstanding at March 31, 2026 and December 31, 2025   3,411    3,411 
Additional paid-in-capital   22,545,239    22,545,239 
Accumulated deficit   (4,141,260)   (8,290,506)
Total stockholders’ equity   18,407,449    14,258,203 
           
Total Liabilities and Stockholders’ Equity  $22,923,406   $18,313,834 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3
 

 

I-ON Digital Corp.

 

Condensed Consolidated Statements of Operations (Unaudited)

 

  

Three Months Ended

March 31, 2026

  

Three Months Ended

March 31 2025

 
         
Revenue  $27,000   $- 
           
Operating expenses:          
Professional fees   222,324    172,914 
General and administrative expenses   195,815    175,495 
Total operating expenses   418,139    348,409 
           
Income (loss) from operations   (391,139)   (348,409)
           
Other income (expense):          
Yield income   274,711    - 
Interest expense   (42,120)   - 
Interest expense – debt discount   (183,257)   - 
Change in FV of derivative liabilities   (14,248)   - 
Gain on exchange of intangible assets   4,064,680    - 
Gain on settlement of debt   440,619    - 
Total other income (expense)   4,540,385    - 
           
Income (loss) before income taxes   4,149,246    (348,409)
           
Provision for income taxes   -    - 
           
Net income (loss)  $4,149,246   $(348,409)
           
Net income (loss) per share - basic  $0.12   $(0.01)
Net income (loss) per share - diluted  $0.04   $(0.01)
           
Weighted average number of shares outstanding -basic   34,106,234    31,106,234 
Weighted average number of shares outstanding - diluted   107,523,228    31,106,234 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4
 

 

I-ON Digital Corp.

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the Three Months Ended March 31, 2026 and 2025

 

   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Earnings   Equity 
       Preferred Stock   Additional       Total Company 
   Common Stock   Series A   Series C   Series E   Paid-in   Retained   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Earnings   Equity 
                                             
Balance at December 31, 2024   31,106,234   $3,111    5,403   $-    745,000   $74    -   $-   $21,186,274   $(5,406,514)  $15,782,945 
                                                        
Net loss   -    -    -    -    -    -    -    -    -    (348,409)   (348,409)
                                                        
Balance at March 31, 2025   31,106,234   $3,111    5,403   $-    745,000   $74    -   $-   $21,186,274   $(5,754,923)  $15,434,536 
                                                        
Balance at December 31, 2025   34,106,234   $3,411    5,403   $-    595,000   $59    3,442   $-   $22,545,239   $(8,290,506)  $14,258,203 
                                                        
Net income   -    -    -    -    -    -    -    -    -    4,149,246    4,149,246 
                                                        
Balance at March 31, 2026   34,106,234   $3,411    5,403   $-    595,000   $59    3,442   $-   $22,545,239   $(4,141,260)  $18,407,449 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5
 

 

I-ON Digital Corp.

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

  

Three Months

Ended March 31, 2026

  

Three Months

Ended March 31, 2025

 
         
Cash flows from operating activities:          
Net income (loss)  $4,149,246   $(348,409)
Adjustments to reconcile net income (loss) to net cash from operating activities:          
Amortization – intangible assets   36,262    34,095 
Amortization of debt discount   183,257    - 
Derivative recorded as loan fees in interest expense   42,120    - 
Change in fair market value of derivative liabilities   14,248    - 
Gain on exchange of intangible assets   (4,064,680)   - 
Gain on settlement of debt   (440,619)   - 
Changes in assets and liabilities          
Prepaid expenses   20,945    (4,251)
Other receivable   (126,661)   - 
Accrued expenses   (204,875)   14,067 
Deferred revenue – related party   (460)   - 
Due to related party   -    17,036 
Total net cash provided by (used in) operating activities   (391,217)   (287,462)
           
Cash flows from investing activities   -    - 
           
Cash flows from financing activities:          
Proceeds from convertible notes payable   577,300    - 
Repayment to related party   (297,006)   - 
Advances from related parties   145,742    206,787 
Total net cash provided by (used in) financing activities   426,036    206,787 
           
Net increase (decrease) in cash and cash equivalents   34,819    (80,675)
           
Cash and cash equivalents, beginning of period   158,193    270,095 
           
Cash and cash equivalents, end of period  $193,012   $189,420 
           
Supplemental disclosure of cash flow information:          
Continuing operations:          
Interest paid  $-   $- 
Taxes paid  $-   $- 
Non-cash financing activities:          
Settlement of bridge loans and accrued interest using ION.au units  $1,331,000   $- 
pmUSD Tokens received and held on behalf of third-party  $1,331,000   $- 
Debt discount recorded for derivative liability  $577,300   $- 
Debt discount recorded for original issuance discount and loan fees 

$

204,880  

$

- 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6
 

 

I-ON Digital Corp.

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

As of March 31, 2026

 

NOTE 1: Organization and Operations

 

I-ON Digital Corp. (the “Company”) is engaged in providing digital-based enterprise solutions, including the digitization and custody of digital tokens and other asset-based digital securities on the block chain. 

 

On December 15, 2023, the Company consummated its previously announced transaction contemplated by that certain Contribution and Exchange Agreement, dated as of October 30, 2023 (the “Contribution and Exchange Agreement”), by and between the Company and Orebits Acquisition Group, a Wyoming limited liability company (“OAG”), pursuant to which the Company acquired 910,000 shares of outstanding common stock of Orebits Corp. (“Orebits”), representing the 100% controlling interest in Orebits, in exchange for 910,000 shares of Series C Convertible Preferred Stock of the Company (“Series C Preferred Stock” and such transaction, the “Transaction”). As part of the Contribution and Exchange Agreement, upon and by virtue of the consummation of the Transaction, OAG transferred all its right, title and interest in and to approximately 9,700 Orebits.AU gold-backed digital assets to the Company, which at the time of consummation of the Transaction, had an estimated value of $17.6 million. The Transaction was accounted for as an acquisition of assets. 

 

NOTE 2. Summary of Significant Accounting Policies

 

The summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

In the opinion of management, these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended March 31, 2026 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2026 or for any future period.

 

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2025.

 

Basis of Consolidation

 

The consolidated financial statements include the accounts of I-On Digital Corp. and its wholly owned subsidiary Orebits Corp, (collectively, the Company). All significant intercompany transactions and balances have been eliminated in consolidation. Subsidiaries are entities over which the Company has control, typically through a majority voting interest. The Company consolidates entities in which it holds a controlling financial interest, as defined by Accounting Standards Codification (ASC) 810, Consolidation.

 

7
 

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern.

 

For the quarter ended March 31, 2026, the Company reported net income of $4,149,246, primarily attributable to a gain recorded on the exchange of intangible assets. However, the Company has experienced recurring losses from operations, negative operating cash flows, and reported a working capital deficiency as of March 31, 2026. The net income recognized during the current period is non-recurring in nature and does not reflect an improvement in the Company’s underlying operating performance. Accordingly, these factors, when considered in the aggregate, continue to raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

As of March 31, 2026, the Company continues to invest in the development of the ION Digital Hybrid Blockchain Platform and believes such investments will support future revenue growth through fee-based digitization activities involving both closely held and third-party gold claims. During 2025, the Company entered into multiple revenue-generating commercial agreements, which contributed to increased revenues; however, such revenues have not yet been sufficient to achieve sustained profitability from operations.

 

The Company’s business strategy has evolved since new management assumed control in January 2023, including a focus on technology development and strategic acquisitions. Management intends to pursue additional capital raising activities, including potential private placements, to support ongoing operations and growth initiatives. There can be no assurance that the Company will be successful in obtaining additional financing on acceptable terms, or at all. In addition, the Company continues to rely on funding from related parties to support its operations. Management expects that such support will continue; however, there can be no assurance that it will be available when needed.

 

Use of Estimates in the Preparation of Financial Statements

 

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could materially differ from these estimates.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606 for contracts with customers. The core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled. The Company applies the following five-step model: (i) identification of the contract with a customer; (ii) identification of performance obligations; (iii) determination of the transaction price; (iv) allocation of the transaction price to performance obligations; and (v) recognition of revenue when or as performance obligations are satisfied.

 

The Company’s revenue during the three months ended March 31, 2026 consisted of fees earned by deploying assets under management under its Master Treasury Lease and Custody Agreement (“MTLCA”) with GGBR Inc. (“GGBR”). Under the MTLCA arrangement, the Company, performing in its role as the Lessor under the MTLCA, enables GGBR’s minting, issuance, and management of gold-backed digital tokens (“Goldfish Tokens”) by providing its ION.au Gold-backed Digital Assets (“ION.au”) as collateral to back the Goldfish Tokens. Under the MTLCA the Company’s single performance obligation is to provide vault access to the ION.au, however, the Company earns royalties on GGBR’s sales of Goldfish Tokens, therefore revenue is recognized when Goldfish Tokens are sold by GGBR, at the point at which the Company is entitled to receive consideration.

 

Consideration received in advance of Goldfish Token sales is recorded as a contract liability and recognized as revenue when the Company is entitled to receive consideration. For the three months ended March 31, 2026, the Company recognized $27,000 in revenue under the MTLCA, and as of March 31, 2026 and December 31, 2025, under the MTLCA the Company recorded no receivables and deferred revenue of $0 and $460, respectively.

 

Cash and Cash Equivalents

 

The Company considers all money market funds and highly liquid financial investments with maturities of three months or less when acquired to be cash equivalents. As of March 31, 2026 and December 31, 2025 there were no cash equivalents.

 

Intangible Assets

 

Intangible assets represent non-physical assets that lack a physical substance but have value. These assets are typically long-term in nature and can include items such as patents, trademarks, copyrights, digital assets, and software. When the Company acquires an intangible asset, it is recorded either at cost, fair value, or at historical cost. The fair value is used if the asset is acquired from an entity not under common control in a business combination, and the historical cost is used if the asset is acquired from an entity under common control. Intangible assets with a finite life are amortized using the straight-line method over their estimated useful lives.

 

The estimated useful lives of the respective asset categories are as follows:

  

Development costs 3 years
Intangible assets excluding development costs 10 years
Other intangible assets – core technology platforms 3 to 5 years

 

The Company follows ASC 350-30-35 and recognizes costs incurred to renew or extend the term of a recognized intangible asset as an expense in the period in which they are incurred. These costs are not capitalized but are instead treated as operating expenses, ensuring that the financial statements accurately reflect the current period’s operational activities.

 

Digital assets are accounted for as indefinite-lived intangible assets; therefore, they are not amortized, but are assessed for impairment annually, or upon a triggering event that indicates it is more likely than not that the indefinite-lived intangible asset is impaired. 

 

8
 

 

Impairment Analysis for Long-lived Assets and Intangible Assets

 

The Company’s long-lived assets and other assets (consisting of property and equipment and purchased intangible assets) are reviewed for impairment in accordance with the guidance of the FASB ASC 360, Property, Plant, and Equipment, FASB ASC 350, Intangibles, and FASB ASC 205 Presentation of Financial Statements. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable or is less than fair value. If recoverability of an asset to be held and used is in question it is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations can involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including undiscounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Whenever the exchange-traded price of digital assets declines below its carrying value, the Company has determined that impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value. Once an intangible asset is impaired, the loss is not reversed if the fair value subsequently increases. 

 

Earnings Per Share

 

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share computations. Basic earnings (loss) per share are computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similarly to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potential common shares had been issued and if such shares were dilutive, using the variable share method. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. The Company had the following common stock equivalents:

  

  

March 31,

2026

  

March 31,

2025

 
Series A preferred stock convertible into 10,000 shares of common stock each   54,030,000    54,030,000 
Series E preferred stock convertible into 500 shares of common stock each   1,721,000    - 
Series C preferred stock convertible into 20 shares of common stock each   11,900,000    14,900,000 
Convertible notes payable   5,765,994    - 
Total common stock equivalents   73,416,994    68,930,000 

 

For the three months ended March 31, 2025, all potentially dilutive securities were excluded from the computation of diluted loss per share because their inclusion would have been anti-dilutive.

 

The following table sets forth the computation of diluted weighted-average common shares for the three months ended March 31, 2026:

 

      
Weighted-average common shares outstanding – basic   34,106,234 
Incremental shares from common stock equivalents   73,416,994 
Weighted-average common shares outstanding – diluted   107,523,228 

 

Fair Value Measurements

 

The Company follows FASB ASC Topic 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

 

9
 

 

ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available.

 

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

 

The following describes the hierarchy of inputs used to measure fair value and the primary valuation methodologies used by the Company for financial instruments measured at fair value on a recurring basis.

 

The three levels of inputs are as follows:

 

  Level 1 Quoted prices in active markets for identical assets or liabilities that the Company has an ability to access as of the measurement date.
     
  Level 2 Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities.
     
  Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying values of the Company’s financial instruments, which includes cash, prepaid expense, and accrued expenses approximate their fair value due to their short maturities. The carrying amount of our debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to us. The Company’s derivative liabilities are a Level 3 fair value measurement (see NOTE 10).

 

Income Taxes

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due and deferred taxes. Deferred taxes are recognized for the differences between the basis of assets and liabilities for financial statement and income tax purposes.

 

The Company follows FASB ASC 740, Income Taxes, which require the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

FASB ASC 740-10-25 provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize additional liabilities for uncertain tax positions pursuant to FASB ASC 740-10-25 for the three months ended March 31, 2026 and 2025.

 

Contingencies

 

Accounting guidance requires that the Company record an estimated loss from a loss contingency when information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as legal matters requires significant judgment. Many of these legal matters can take years to resolve. Generally, as the time period increases over which the uncertainties are resolved, the likelihood of changes to the estimate of the ultimate outcome increases.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are cash arising from its normal business activities. The Company has its cash in high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit of $250,000. As of March 31, 2026 and December 31, 2025, cash balances in excess of the FDIC limits were $0.

 

The Company currently does not provide for or issue extensions of credit to its clients, vendors or employees. If the Company’s board of directors elected to make a change in current policy, management, pursuant to policy and procedure implementation of the same, would establish methodologies for monitoring and assessing corresponding risks, inclusive of the potential for concentrations and the related adequacy of loss reserves going forward.

 

10
 

 

Segment Reporting

 

The Company operates as a single operating and reportable segment, a resource management expertise and services provider. Our Chief Executive Officer is our Chief Operating Decision Maker, (CODM) who evaluates performance and makes operating decisions about allocating resources (see NOTE 5).

 

Advertising

 

Costs associated with advertising and marketing expenses are expensed as incurred. The Company incurred $0 and $36,900 in advertising and marketing costs during the three months ended March 31, 2026 and 2025, respectively.

 

Employee Stock Based Compensation

 

The Company accounts for its share-based compensation plan in accordance with FASB ASC 718, Stock Compensation, which establishes a fair value method of accounting for stock-based compensation. The Company records stock compensation expense based on the grant-date fair value of the stock options or other equity-based compensation issued to employees and consultants, net of estimated forfeitures. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis.

 

For purposes of determining the variables used in the calculation of stock-based compensation, the Company performs an analysis of current market data and historical data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted any fluctuations in these calculations could have a material effect on the results presented in our consolidated statements of operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.

 

Recently Issued Accounting Pronouncements

 

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Disaggregation of Income Statement Expenses. The update requires public business entities to disclose, in tabular form, certain natural expense categories—such as employee compensation, depreciation, amortization, and inventory or transaction-related costs—within relevant income statement captions.

 

The Company will adopt ASU 2024-03 at its effective date for annual periods beginning after December 15, 2026. Early adoption has not been elected. The Company is currently evaluating the impact of this standard on its future financial statement disclosures and does not expect it to have a material effect on the recognition or measurement of amounts reported in the consolidated financial statements. Upon adoption, the Company expects the enhanced expense disaggregation disclosures to provide greater transparency and comparability for investors and other financial statement users.

 

The Company has reviewed all the recent accounting pronouncements issued through the date of these financial statements and has determined that there have been no standards that had, or will have, a material impact on its consolidated financial statements.

 

NOTE 3. Treasury Lease and Custody Agreement

 

In July 2025, the Company entered into a Master Treasury Lease and Custody Agreement with GGBR Inc. Under the agreement, GGBR agreed to lease, from the Company, up to 1,000,000 ION.au Gold-backed Digital Assets in connection with GGBR’s further issuance of tokenized digital assets. The purpose of the arrangement is to support GGBR’s digital treasury operations and independently operated and proprietary tokenization platform. The Company’s fulfillment capacity may be derived from closely held ION.au residing on the Company’s balance sheet and/or from third-party-owned ION.au assets controlled under management agreements.

 

Pursuant to the terms of the MTLCA, the Company retains ownership and/or management control of the underlying ION.au Gold-backed Digital Asset throughout the term of the lease. As a result, GGBR does not record the leased gold-backed digital asset as an asset on its own balance sheet. GGBR is responsible for managing the minting, issuance, and redemption of Goldfish Tokens, and pays the Company in exchange for the use of the ION.au’s which is equal to a percentage of the total Goldfish Token sales.

 

In accordance with the MTLCA consideration is paid to the Company in cash and in-kind, however, Goldfish Tokens earned by the Company are immediately loaned back to GGBR to be used in a liquidity pool managed and controlled by GGBR. Accordingly, while Goldfish Tokens were earned for the quarter ended March 31, 2025, they were not recorded as intangible assets on the books and instead were recorded as an other receivable on the balance sheet, as they are to be returned to the Company when certain events occur in the future. As of March 31, 2026 and December 31, 2025 the other receivable recorded for Goldfish Tokens to be returned by GBBR was $28,637 and $27,137, respectively.

 

11
 

 

NOTE 4. Yield Income

 

The Company entered into a Master Participation Agreement with Regnum Aurum Acquisition Corp. (“RAAC”) in September 2025, pursuant to which the Company deploys tokenized gold-backed assets to support the issuance of stablecoins and related decentralized finance (“DeFi”) yield-generating activities. Under this arrangement, the Company participates in the deployment of capital within the ecosystem and is entitled to a contractually defined share of the net yield generated.

 

For the three months ended March 31, 2026, the Company recognized yield income of $274,711 under this agreement. Of this amount, the Company received cash proceeds of $149,550, and the remaining $125,161 was retained within the RAAC ecosystem and is recorded as “other receivable” in the accompanying consolidated balance sheet as of March 31, 2026.

 

The Company presents yield income as other income in the consolidated statements of operations, as such income is not derived from contracts with customers and therefore is not within the scope of ASC 606, Revenue from Contracts with Customers. The Company recognizes this other income as it is earned based on its contractual participation in the underlying yield-generating activities. Significant judgment is required in determining the appropriate presentation and timing of recognition for such income.

 

NOTE 5. Segment Reporting

 

The Company operates as a single operating and reportable segment, providing resource management expertise and services. Our Chief Executive Officer, who serves as our Chief Operating Decision Maker, evaluates the Company’s financial performance and makes resource allocation decisions considering our one geographical area and on a consolidated basis. Accordingly, the CODM considers the revenue, operating expenses, and other income (expenses) of our single operating segment as reported on the statement of operations and considers our current and total assets as recorded on the balance sheet. There are no additional expense or asset information that are supplemental to those disclosed in these consolidated financial statements that are regularly provided to the CODM.

 

NOTE 6. Prepayments

 

Prepaid expenses consist primarily of advance payments for regulatory filing services, OTC Markets listing fees, and professional services. These costs are recognized as expense on a straight-line basis over the respective service periods.

 

EDGAR Filing Services

 

In August 2024, the Company renewed its agreement with M2 for EDGAR filing services for the period from August 19, 2024 through August 18, 2025, for an annual fee of $7,015. The Company recognized $1,754 of expense during the three months ended March 31, 2025.

 

In October 2025, the Company paid $7,580 for EDGAR filing services covering the period from August 19, 2025 through August 18, 2026. The Company recognized $1,895 of expense during the three months ended March 31, 2026, and recorded the remaining $2,840 and $4,735 as prepaid expenses as of March 31, 2026 and December 31, 2025, respectively.

 

OTC Markets Fees

 

In October 2024, the Company paid an annual OTC Markets fee of $10,080 covering the period from November 2024 through October 2025. The Company recognized $2,520 of expense during the three months ended March 31, 2025.

 

In March 2025, the Company paid an additional annual OTC Markets fee of $9,300 for a separate category of services covering the period from March 2025 through February 2026. The Company recognized $775 and $1,550 of expense during the three months ended March 31, 2025 and 2026, respectively.

 

In March 2026, the Company paid a semi-annual OTC Markets fee of $9,000 covering the period from March 2026 through August 2026. The Company recognized $1,500 of expense during the three months ended March 31, 2026, and recorded the remaining $7,500 as prepaid expenses as of March 31, 2026.

 

12
 

 

Professional Services Retainer

 

During 2025, the Company paid a $25,000 retainer for professional services related to its anticipated uplisting activities, which was recorded as a prepaid professional fee. During the three months ended March 31, 2026, the related services were performed, and the $25,000 retainer was fully recognized as professional fees expense. As of March 31, 2026, no prepaid professional fees related to this retainer remained outstanding. 

 

Token Deposit

 

In 2025, the Company paid a $75,000 deposit for the purchase of digital tokens. As of March 31, 2026, this amount was recorded as a prepaid asset, as the underlying tokens had not yet been delivered. Upon delivery, the deposit will be reclassified to the appropriate asset category in accordance with the Company’s accounting policy for digital assets.

 

 Prepaid Expense Balance

 

As of March 31, 2026 and December 31, 2025, prepaid expenses were $85,340 and $106,285, respectively.

 

NOTE 7. Intangible Assets

 

As of March 31, 2026, the net book value of the Company’s intangible assets was $22,491,256, consisting of internal-use software and indefinite-lived intangible assets.

 

Internal-use Software

 

In January 2023, the Company entered into a service agreement with Nodalium, Inc. (“Nodalium”) to provide workflow automation for KYC and AML onboarding of gold reserves. The consideration for this project was $80,000. During the three months ended March 31, 2026, the Company recognized amortization expense of $6,667, and the remaining carrying value of the asset was $6,666 as of March 31, 2026.

 

In March 2023, the Company entered into an agreement with Instruxi Limited to build a technology stack for the tokenization of precious metal, mineral, and/or commodity asset rights for unextracted deposits. The Company paid $329,142 for this software. During the three months ended March 31, 2026, the Company recognized amortization expense of $27,428, and the remaining carrying value of the asset was $82,287 as of March 31, 2026.

 

In August 2025, the Company engaged Instruxi Limited to upgrade and modify its existing technology platform. As of March 31, 2026, the Company had capitalized $19,334 for upgrades related to the project. During the three months ended March 31, 2026, the Company recognized amortization expense of $2,167, and the remaining carrying value of the asset was $17,167 as of March 31, 2026.

 

Total amortization expense for intangible assets was $36,262 for the three months ended March 31, 2026.

 

The Company expects to record future amortization of $95,453, $8,667, and $2,000 for the years ending December 31, 2026, 2027, and 2028, respectively.

 

Indefinite-lived Intangible Assets

 

The Company’s indefinite-lived intangible assets consist of Orebits AU Certificates, also referred to as ION.au, pmUSD, and xPM, which are gold-backed digital assets. These assets have been determined to have an indefinite life and, accordingly, are not amortized but are evaluated for impairment in accordance with the Company’s accounting policy.

 

As of December 31, 2025, the carrying value of the Company’s indefinite-lived intangible assets was $17,879,837. During the three months ended March 31, 2026, the Company used 489.50 units of ION.au, with a carrying value of $890,381, to settle bridge loan obligations totaling $1,331,000, including principal and interest, resulting in a gain on the settlement of debt of $440,619 (see NOTE 9).

 

During the three months ended March 31, 2026, the Company received 1,331,000 units of pmUSD from a third party that had a fair value of $1,331,000 and which are required to be returned to the third party under the related arrangement; therefore, the Company recorded a corresponding liability within other current liabilities on the condensed consolidated balance sheets.

 

During the three months ended March 31, 2026, the Company exchanged 2,719 units of ION.au, with a historical carrying value of $4,945,750, for 9,000,000 units of pmUSD with a fair value of $8,968,500 and 1,000,000 units of xPM with a fair value of $41,930. The transaction was accounted for as an exchange of intangible assets, and the Company recognized a gain on exchange of intangible assets of $4,064,680, representing the excess of the fair value of the assets received over the carrying value of the ION.au surrendered.

 

As of March 31, 2026, the carrying value of the Company’s indefinite-lived intangible assets was $22,385,136. No impairment was recognized during the three months ended March 31, 2026.

 

13
 

 

NOTE 8. Related-Party Transactions

 

The Company has entered transactions with related parties in the normal course of business.

 

Advances from Related Party

 

Through an entity controlled by Carlos Montoya, the Company’s Chief Executive Officer and controlling stockholder, Mr. Montoya currently pays substantially all operating expenses and certain capital. During the three months ended March 31, 2026, the related party advanced $5,662 to the Company, and the Company repaid $100,000 of outstanding advances. These advances are unsecured, non-interest bearing, payable on demand, and there are no formal written agreements governing such arrangements.

 

As of March 31, 2026 and December 31, 2025, the balance due to this related party was $1,703,833 and $1,798,171, respectively.

 

Oktane Media LLC

 

The Company processes payroll and related expenses on behalf of Oktane Media LLC (“Oktane”), an entity owned by the Company’s Chief Marketing Officer, and is reimbursed by Oktane for such payments. During the three months ended March 31, 2026, the Company paid $197,006 on behalf of Oktane for payroll, payroll taxes, employee benefits and for other amounts owed, and Oktane reimbursed the Company $140,080 for such costs.

 

As of March 31, 2026 and December 31, 2025, the Company owed Oktane $34,655 and $91,581, respectively.

 

Orebits Acquisition Group LLC (“OAG”)

 

Orebits Acquisition Group LLC is an entity owned and controlled by the Company’s Chief Executive Officer.

 

As of December 31, 2025, the Company had received $198,900 in advances from Orebits Acquisition Group LLC. These advances are unsecured, non-interest bearing, payable on demand, and there are no formal written agreements governing such arrangements. There were no transactions with OAG during the three months ended March 31, 2026. As of March 31, 2026 and December 31, 2025, the balance due to OAG was $198,900.

 

As of March 31, 2026 and December 31, 2025, the balances of Due to related parties were $1,937,388 and $2,088,652, respectively.

 

NOTE 9. Loans Payable

 

In November 2023, the Company issued promissory notes in the aggregate principal amount of $550,000, with a maturity date at the earlier of one year or 30 days following the closing of a planned registered security token offering. The promissory notes carried an effective (bonus) interest rate equal to 100% of the note principal. Accordingly, the Company recognized interest expense of $550,000 over the term of the promissory notes. In addition, the Company issued 550,000 warrants to purchase shares of common stock to the holders of the promissory notes as additional consideration (see Note 10). The fair value of the warrants of $87,970 was recorded as a debt discount with a corresponding increase to additional paid-in capital at issuance.

 

Effective November 1, 2024, the promissory notes were amended to extend the maturity date to July 1, 2025. In connection with the amendment, the Company incurred an additional financing cost equal to 10% of the total amount due at the time of amendment, or $110,000, which was recognized as a loss on debt modification during the year ended December 31, 2024. The Company also pledged 489 Orebits AU Certificates (ION.au) as collateral for the notes (see Note 7). In addition, the obligation to issue registered tokens was assigned to a related party, and the Company was released from such obligation by the note holders.

 

14
 

 

During the year ended December 31, 2025, the notes matured and remained unpaid, resulting in a default. The Company incurred an additional penalty of 10% on the outstanding balance, or $121,000, which was recognized as interest expense. As of December 31, 2025, the outstanding balance consisted of principal of $550,000 and accrued interest of $781,000, for a total of $1,331,000, all of which was in default.

 

Settlement of Loans Payable

 

During the three months ended March 31, 2026, the Company fully settled all outstanding promissory notes and related accrued interest. The total amount settled was $1,331,000, consisting of principal of $550,000 and accrued interest of $781,000.

 

The Company satisfied this obligation through the transfer of 489.50 units of ION.au, which had a carrying value of $890,381 at the time of settlement. As a result, the Company recognized a gain on settlement of debt $440,619, representing the difference between the carrying value of the liability extinguished and the carrying value of the assets transferred.

 

NOTE 10. Convertible Promissory Notes and Embedded Derivative Liabilities

 

On December 31, 2025, the Company issued a convertible promissory note (the “Crom Note”) to Crom Structured Opportunities Fund I, LP with a principal amount of $183,370 and received net cash proceeds of $153,400 after original issue discount and fees of $29,970 that were captured as a debt discount. The Crom Note matures twelve months from the issuance date and includes a one-time interest charge of 8%, which is earned at issuance, therefore the note principal and the debt discount increased an additional $14,670. The Crom Note may not be prepaid by the Company prior to maturity.

 

During the three months ended March 31, 2026, the Company issued four additional convertible promissory notes (the “Q1 2026 Notes”) with a total principal amount of $724,240 and received aggregate cash proceeds of $577,300 after original issue discounts and fees of $146,940 that were captured as a debt discount. The Q1 2026 Notes mature twelve months from the issuance dates and include a one-time interest charge of 8%, which is earned at issuance, therefore the Q1 2026 Notes principal and debt discount increased an additional $57,940. The Q1 2026 Notes may not be prepaid by the Company prior to maturity.

 

The Crom Note and the Q1 2026 Notes are convertible, at the holder’s option, into shares of the Company’s common stock at a conversion price equal to 80% of the lowest closing market price of the Company’s common stock during the ten trading days immediately preceding the conversion date. The Company is required to reserve a specified number of shares for potential conversion and is subject to penalties if shares are not timely delivered upon conversion.

 

Because the conversion price is variable and based on the market price of the Company’s common stock, the embedded conversion feature is not considered indexed to the Company’s own stock. Accordingly, the embedded conversion feature is accounted for as a derivative liability in accordance with ASC 815, Derivatives and Hedging. The derivative liability is measured at fair value at issuance and remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.

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On December 31, 2025, at issuance of the Crom Note, the Company recorded a derivative liability of $156,644, of which $153,400 was recorded as a debt discount and $3,244 was recorded as loan fees in interest expense on the statement of operations. During the three months ended March 31, 2026, when the Q1 2026 Notes were issued, the Company recorded a derivative liability of $619,451, of which $577,300 was recorded as a debt discount and $42,120 was recorded as interest expense on the statement of operations.

 

The debt discount recorded for all notes, which includes the original issue discount, issuance costs, one-time interest, and the derivative allocation, is amortized to interest expense over the term of each note using the effective interest method. For the three months ended March 31, 2026, the Company recognized $183,257 of interest expense related to the amortization of the debt discount and recorded a $14,248 loss for the change in the fair value of the derivative liability.

 

The fair value of the embedded derivative is classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs, including assumptions related to expected volatility and conversion timing. The fair value of the derivative liability was determined using the Black-Scholes pricing model, which uses inputs that are sensitive to changes in the market price and volatility of the Company’s common stock. Conversion of the Note may result in significant dilution to existing shareholders.

 

The following assumptions were used in the Black-Scholes model during the three months ended March 31, 2026:

 

Expected Term  0.750.99 Years 
Volatility  155% - 163%
Expected Dividend Yield   0%
Risk-free interest rate   3.47% - 3.68%

 

The following table summarizes the change in the derivative liabilities during the three months ended March 31, 2026:

 

      
Derivative liability balance at December 31, 2025  $156,644 
Addition of new derivatives recognized as debt discounts   577,300 
Addition of new derivatives recognized as loan fees   42,120 
Gain (loss) on change in valuation of derivative liability   14,248 
Derivative liability balance at March 31, 2026  $790,312 

 

NOTE 11. Stockholders’ Equity

 

Series A Preferred Stock

 

In September 2022, the Company established the Series A Preferred Stock. The authorized number of shares of Series A Preferred Stock is six thousand (6,000). Each share has a par value of $0.0001. Each share of Series A Preferred Stock is convertible into Ten Thousand (10,000) shares of Common Stock and were entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of one hundred (100) votes per share of Series A Preferred Stock, which was changed with an amendment on August 22, 2024 to ten thousand (10,000) votes per share of Series A Preferred Stock.

 

During the three months ended March 31, 2026 and 2025 there were no shares of Series A Preferred Stock issued.

 

As of March 31, 2026 and December 31, 2025, there were 5,403 shares of Series A Preferred Stock issued and outstanding.

 

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Series B Preferred Stock

 

In September 2022, the Company established the Series B Preferred Stock. The authorized number of shares of Series B Preferred Stock is six thousand (6,000) with a par value of $0.0001. Each share of Series B Preferred Stock is convertible into one thousand (1,000) shares of Common Stock and is entitled to vote on matters as to which holders of the Common Stock shall be entitled to vote at a rate of one thousand (1,000) votes per share of Series B Preferred Stock.

 

During the three months ended March 31, 2026 and 2025 there were no shares of Series B Preferred Stock issued.

 

As of March 31, 2026 and December 31, 2025, there were no shares issued and outstanding.

 

Series C Preferred Stock

 

In December 2023, the Company established the Series C Preferred Stock with 910,000 authorized shares and a par value of $0.0001 per share. Each share is convertible into 20 shares of Common Stock. Initially, each share carried one vote per share; however, in February 2025, the Company amended the Certificate of Designation to provide voting rights of 20 votes per share.

 

During the three months ended March 31, 2026 and 2025 there were no shares of Series C Preferred Stock issued.

 

As of March 31, 2026 and December 31, 2025, there were 595,000 shares of Series C Preferred Stock issued and outstanding.

 

Series E Preferred Stock

 

On January 5, 2025, the Company established the Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into 500 shares of Common Stock and votes on an as-converted basis, with 500 votes per share.

 

During the three months ended March 31, 2026 and 2025 there were no shares of Series E Preferred Stock issued.

 

As of March 31, 2026 and December 31, 2025, there were 3,442 shares of Series E Preferred Stock issued and outstanding.

 

Common Stock

 

The Company is authorized to issue 250,000,000 shares of common stock with a par value of $0.0001 per share.

 

During the three months ended March 31, 2026 and 2025 there were no shares of Common Stock issued.

 

As of March 31, 2026 and December 31, 2025, there were 34,106,234 shares of common stock issued and outstanding.

 

NOTE 12. Subsequent Events   

 

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were available to be issued and determined that there were no material subsequent events requiring recognition or disclosure in the accompanying consolidated financial statements. 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. Words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” and similar expressions are intended to identify forward-looking statements.

 

These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results may differ materially. The Company undertakes no obligation to update any forward-looking statements except as required by law.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2026 and 2025 have been prepared in accordance with U.S. GAAP and applicable SEC rules for interim financial reporting. In the opinion of management, all normal and recurring adjustments necessary for a fair presentation have been included.

 

The results for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the full year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

 

Business Overview

 

I-ON is a leading-edge developer and provider of asset-digitization and securitization solutions engineered to provide a secure, fast, transparent, and institutional-grade digital asset ecosystem. We specialize in digitizing documentary evidence of ownership into secure, asset-backed digital certificates, thus bringing liquidity and recognized value to a diverse array of asset classes. Our cutting-edge technology includes a hybrid blockchain architecture that incorporates state-of-the-art smart contracts and sophisticated workflow management, inclusive of AI technologies. This system enables the digitization of ownership instruments records for recoverable gold, precious metals, and mineral reserves, transforming them into digital certificates that facilitate value transfer through innovative asset-backed financial instruments.

 

In 2023 and 2024, I-ON continued to expand its market presence and plans for future product offerings. During this period, we notably acquired Orebits’ gold digitization patent and patent-pending portfolio, trademarks, brand marks, and core intellectual property (see Note 1 of the Notes to Financial Statements). This acquisition has allowed us to enhance our capabilities and broaden our plans for future service offerings, particularly through a new Digital Asset Platform (DAP) designed as a “digital front-end” for banks, broker-dealers, and other financial intermediaries. This platform supports the receipt, management, and reporting of digital assets, reinforcing our commitment to innovation in the banking, financial technology, and mineral asset industries.

 

The Real World Asset tokenization market is rapidly evolving, with gold digitization and asset-backed securities emerging as a standout segments. I-ON’s ability to unlock the liquidity of reserves still in the ground, enhance transparency, and offer fractional ownership of a time-tested store of value has positioned the company at the forefront of this movement by combining next-generation blockchain technology, robust compliance frameworks, and through its strategic technology partnerships with Instruxi Ltd, Chainlink, Fireblocks and other leading “web 3” technology providers, allowing to expand its service offering and enhance its gold digitization patents. I-ON’s technological edge has deepened its presence in the rapidly evolving RWA tokenization, asset digitization, and asset-backed digital assets marketplace.

 

Building on evolving capacity and momentum, I-ON expanded its Digital Asset Platform to serve banks and financial intermediaries with advanced tools for asset management, transaction processing, and digital securities reporting. The platform can now deliver faster, more secure blockchain-powered transactions, while also enabling the monetization of in-ground gold without physical extraction—supporting broader sustainable finance initiatives. Strategic partnerships and a regulatory-focused mindset continue to drive innovation, allowing I-ON to meet institutional standards while setting new benchmarks in digital asset infrastructure. These advancements are expected to fuel revenue growth and position I-ON as a long-term leader in the digitization and tokenization of real-world assets.

 

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Results of Operations

 

Revenue

 

For the three months ended March 31, 2026, the Company generated total revenue of $27,000, compared to $0 for the same period in 2025. The revenue recognized in 2026 consisted of revenue under a Master Treasury Lease and Custody Agreement (“MTLCA”) with GGBR Inc. (“GGBR”). Under the agreement, the Company enables GGBR’s minting, issuance, and management of gold-backed digital tokens (“Goldfish Tokens”) by providing its ION.au Gold-backed Digital Assets (“ION.au”) as collateral to back the Goldfish Tokens. The purpose of the arrangement is to support the Company’s digital treasury operations and tokenization platform and resulted in $27,000 worth of revenue during the three months ended March 31, 2026. The reason of the significant change in revenue was the MTLCA commenced in July 2025, so no revenue was recognized under this arrangement in the same period of prior year.

 

Operating Expenses

 

Operating expenses for the three months ended March 31, 2026 were $418,139, compared to $348,409 for the same period in 2025. Operating expenses consisted primarily of professional fees and general and administrative expenses. The increase in operating expenses was primarily due to higher professional fees associated with regulatory, legal, and development activities, as well as increased general and administrative expenses to support the Company’s expanding operations.

 

Income (Loss) from Operations

 

The Company reported a loss from operations of $391,139 for the three months ended March 31, 2026, compared to a loss of $348,409 for the same period in 2025. The change in operating results was primarily driven by the recognition of revenue offset by an increase in operating expenses in the current period.

 

 Other Income (Expense)

 

For the three months ended March 31, 2026, the Company recognized other income consisting of yield income of $274,711, a gain on exchange of intangible assets of $4,064,680, a gain on settlement of debt of $440,619, a gain of $14,248 related to the change in fair value of derivative liabilities, and interest expense of $225,377 (including amortization of debt discount of $183,257). The yield income was recognized in connection with the Master Participation Agreement with RAAC. The gain on exchange of intangible assets was recognized in connection with the exchange of the Company’s ION.au gold-backed digital assets for pmUSD and xPM digital tokens. The gain on extinguishment of debt was due to the settlement of promissory notes using ION.au gold-backed digital assets and the interest expense and gain related to the change in fair value of derivative liabilities was due to new notes entered into during the period and subsequent valuation changes. No comparable amounts were recorded in the prior year period.

 

Net Income (Loss)

 

The Company reported net income of $4,149,246 for the three months ended March 31, 2026, compared to a net loss of $348,409 for the same period in 2025. The net income recognized in the current period was primarily attributable to non-recurring gains and does not reflect sustained operating profitability.

 

Liquidity and Capital Resources

 

Cash Position

 

As of March 31, 2026, the Company had cash and cash equivalents of $193,012, compared to $158,193 as of December 31, 2025.

 

Operating Activities

 

Net cash used in operating activities was $391,217 for the three months ended March 31, 2026, compared to $287,462 for the prior year period. The increase in cash used in operating activities was primarily attributable to changes in working capital accounts, including increases in other receivables and reductions in accounts payable and accrued expenses. The Company also recognized significant non-cash items during the current period, including a gain on exchange of intangible assets of $4,064,680, a gain on settlement of debt of $440,619, offset by the amortization of debt discount of $183,257, and amortization expense of $36,262. In addition, changes in deferred revenue also impacted operating cash flows during the period.

 

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Investing Activities

 

The Company did not have any investing activities during the three months ended March 31, 2026 and 2025.

 

Financing Activities

 

Net cash provided by financing activities was $426,036 for the three months ended March 31, 2026 compared to $206,787 in the prior year period. For the three months ended March 31, 2026, the net cash provided was attributable to proceeds from convertible notes payable of $577,300 and advances from related parties of $145,742 offset by, repayments to related parties of $297,006. For the three months ended March 31, 2025, the net cash provided was due to advances from related parties of $206,787.

 

Liquidity Outlook

 

Although the Company reported net income for the current period, it continues to incur operating losses and negative cash flows from operations. The Company remains dependent on related party support and external financing to fund its operations. Management intends to pursue additional capital raising activities; however, there can be no assurance that such financing will be available on acceptable terms or at all.

 

 Critical Accounting Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts. Significant estimates include the valuation and impairment of digital assets, recognition and classification of digital asset yield income, fair value measurement of derivative liabilities, and the assessment of the Company’s ability to continue as a going concern.

 

Disclosure Controls and Procedures

 

As required by Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our principal executive officer and principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of March 31, 2026, the last day of the period covered by this Quarterly Report.

 

Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal control over financial reporting that were previously identified and disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. Management continues to implement remediation efforts to address these material weaknesses; however, such efforts have not yet been completed.

 

Limitations on Effectiveness of Controls

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our system of internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system are met.

 

The design of our control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures or instances of fraud, if any, have been detected. These limitations include the possibility of human error, faulty judgment, breakdowns in processes, circumvention of controls by collusion, and management override of controls. In addition, the design of any control system is based in part on assumptions about the likelihood of future events, and there can be no assurance that any control system will succeed in achieving its objectives under all future conditions.

 

Changes in Internal Control over Financial Reporting

 

 There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

20
 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

N/A

 

Item 2. Unregistered Sales of Equity Securities

 

None

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Rule 10b-5(1) Trading Plans. During the three months ended March 31, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

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Item 6. Exhibits

 

Exhibit

Number

 

Exhibit

Description

     
10.1   Settlement Agreements with Certain Lenders (incorporated by reference to the Company’s Current Report on Form 8-K filed February 23, 2026 with respect to Item 1.01 and Exhibit 10.1 thereto).
31.1   Certification of Chief Executive and Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002
     
32.1   Certification of Chief Executive and Financial Officer Pursuant to 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
     
**   The certifications furnished herein are deemed to accompany this Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: May 20, 2026

I-ON DIGITAL CORP.
   
  By: /s/ Carlos X. Montoya
    Carlos X. Montoya
   

Chairman, President

(Principal Executive, Financial and Accounting Officer)

 

23

FAQ

How much revenue did I-ON Digital Corp. (IONI) generate in Q1 2026?

I-ON Digital generated $27,000 in revenue for the three months ended March 31, 2026, all from a Master Treasury Lease and Custody Agreement with GGBR Inc. No revenue was recorded in the same period of 2025, so this reflects early monetization of that arrangement.

What drove I-ON Digital Corp.’s Q1 2026 net income of $4.1 million?

Net income of $4,149,246 was driven mainly by a $4,064,680 gain on exchanging ION.au gold-backed assets for pmUSD and xPM, and a $440,619 gain on settling defaulted promissory notes with ION.au, plus $274,711 of DeFi yield income.

What is I-ON Digital Corp.’s liquidity position as of March 31, 2026?

As of March 31, 2026, I-ON Digital held $193,012 in cash and cash equivalents and reported negative operating cash flow of $391,217 for the quarter. Total assets were $22,923,406, heavily concentrated in intangible digital assets, including $22,385,136 of indefinite-lived intangibles.

Why does I-ON Digital Corp. cite substantial doubt about its going concern status?

Management states there is substantial doubt about continuing as a going concern due to recurring operating losses, negative operating cash flows, and a working capital deficiency as of March 31, 2026. The quarter’s profit is non-recurring and does not reflect improved underlying operations.

What are the key terms of I-ON Digital Corp.’s new convertible notes?

I-ON Digital issued a $183,370 Crom Note and $724,240 of Q1 2026 notes, all maturing 12 months from issuance. They carry a one-time 8% interest charge and convert at 80% of the lowest closing market price over the prior ten trading days, creating a derivative liability.

How large is I-ON Digital Corp.’s derivative liability from convertible notes?

The embedded conversion features in the convertible notes are recorded as a derivative liability of $790,312 at March 31, 2026. This Level 3 fair value item reflects variable-price conversion terms and is remeasured each period, with changes reported in earnings.

What internal control issues does I-ON Digital Corp. (IONI) disclose?

I-ON Digital reports that its disclosure controls and procedures were not effective as of March 31, 2026, due to material weaknesses in internal control over financial reporting previously described in its 2025 Form 10-K. Remediation efforts are ongoing but were not yet completed.