TON Strategy Company (TONX) swings to Q2 profit as Gram treasury and staking grow
TON Strategy Company reported a sharp transition into a Gram-focused digital asset treasury model for the quarter ended June 30, 2026. Revenue from staking rewards reached about $15.0 million for the quarter and $18.0 million for the first half of 2026, compared with no such revenue a year earlier. A large swing in other income, mainly from digital asset-related items, drove net income attributable to common shareholders to about $76.8 million for the quarter, versus a net loss of roughly $2.5 million in the prior-year quarter.
Digital asset holdings are now central to the balance sheet, with $369.5 million of Gram at fair value as of June 30, 2026, of which $111.3 million is unrestricted and $258.2 million restricted. The company had 230.5 million Gram units outstanding and 229.9 million units staked, making staking rewards a primary economic driver, while cash and cash equivalents declined to about $28.8 million from $39.5 million at year-end 2025. Continuing operations used approximately $10.6 million of operating cash in the first half of 2026.
Legacy digital media businesses are being exited and are presented as discontinued operations, generating a loss of about $7.0 million in the quarter and $6.6 million year-to-date, including a $5.2 million goodwill impairment tied to this wind-down. The company discloses significant exposure to Gram price movements, TON network performance, and evolving regulation, alongside use of long-dated advisory and custody arrangements and ongoing legal proceedings.
Positive
- Staking-focused revenue scaled rapidly, reaching $15.0 million in Q2 2026 and $18.0 million for the first half, versus no comparable revenue a year earlier.
- Q2 2026 net income attributable to common shareholders was about $76.8 million, a substantial improvement from a $2.5 million loss in the prior-year quarter.
- Gram digital asset holdings totaled $369.5 million at June 30, 2026, providing a large on-balance-sheet asset base tied to the TON ecosystem.
Negative
- Continuing operations used approximately $10.6 million in operating cash during the first half of 2026, while cash and equivalents fell to about $28.8 million.
- Discontinued operations generated a Q2 2026 loss of roughly $7.0 million and year-to-date loss of $6.6 million, including a $5.2 million goodwill impairment.
- Profitability is heavily influenced by Gram price movements and staking economics, concentrating risk in a single digital asset and network.
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Analyzing...
Key Figures
Key Terms
staking rewards financial
discontinued operations financial
TON Treasury Strategy financial
Locked GRAM technical
bifurcated embedded derivative asset financial
non-marketable equity securities financial
Earnings Snapshot
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FAQ
How did TON Strategy Company (TONX) perform financially in Q2 2026?
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ________ to ________
Commission
file number:
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| incorporation or organization) | Identification No.) |
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
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Securities registered pursuant to Section 12(g) of the 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act
| Large accelerated filer | ☐ | 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 Act). ☐ Yes
As
of August 4, 2026, there were
TON STRATEGY COMPANY
TABLE OF CONTENTS
| CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS | 2 |
| PART I - FINANCIAL INFORMATION | 3 |
| ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) | 3 |
| ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 28 |
| ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 38 |
| ITEM 4 - CONTROLS AND PROCEDURES | 38 |
| PART II - OTHER INFORMATION | 39 |
| ITEM 1 - LEGAL PROCEEDINGS | 39 |
| ITEM 1A - RISK FACTORS | 39 |
| ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 39 |
| ITEM 3 - DEFAULTS UPON SENIOR SECURITIES | 39 |
| ITEM 4 - MINE SAFETY DISCLOSURES | 39 |
| ITEM 5 - OTHER INFORMATION | 39 |
| ITEM 6 - EXHIBITS | 39 |
| SIGNATURES | 41 |
| 1 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026 (the “Quarterly Report”), includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not statements of historical facts and can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those expressions. Forward-looking statements also include the assumptions underlying or relating to such statements.
Our forward-looking statements are based on our management’s current beliefs, assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations, financial performance or liquidity. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Such forward-looking statements include, but are not limited to, statements regarding:
● our expectation that we will continue to acquire GRAM and expand our digital asset treasury;
● the availability of opportunities to stake GRAM;
● our incursion of significant net losses and uncertainty whether we will achieve or maintain profitable operations;
● our ability to grow and compete in the future, and to execute our business strategy;
● our ability to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological developments;
● our ability to attract and retain qualified management personnel; and
● our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market.
The forward-looking statements contained in this Quarterly Report are based on management’s current plans, estimates and expectations in light of information currently available to us, and they are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, including, but not limited to:
● our decision to implement a digital asset currency treasury strategy, whereby we acquire GRAM (formerly known as “Toncoin”), the native digital asset currency of The Open Network (“TON”) blockchain and our dependence on TON and GRAM as a result of this strategy;
● our financial results and the market price of our common stock may be affected by the price of GRAM, and our GRAM holdings will be less liquid than cash and cash equivalents;
● changes in the broader digital asset regulatory landscape and as it relates to TON and GRAM and our failure to comply with applicable regulatory requirements and risks related to any actions we may take to prevent or correct such failure;
● the competitive market in which we operate;
● our susceptibility to cybersecurity incidents and other internet disruptions, particularly as it relates to our holdings of GRAM;
● the impact of evolving and uncertain global economic, political, and social trends—including inflation, rising interest rates, and recession concerns—and our ability to operate and manage growth effectively in that environment;
● potential claims for rescission or damages associated with our granting some equity awards pursuant to our 2019 Stock and Incentive Compensation Plan, as amended, or the Incentive Plan, that may not have been registered or had a valid exemption from registration;
● the possibility that claims may be made to challenge the validity of certain corporate actions, notwithstanding our ratification of those actions under Nevada law; and
● other factors described in the section entitled “Risk Factors” within this Quarterly Report and in the other reports we file with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “Annual Report”).
You should not place undue reliance on these forward-looking statements. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which they were made. Additional factors or events that could cause our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Over time, our actual results, performance, or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our security holders. Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Except as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. We have identified some of the important factors that could cause future events to differ from our current expectations and they are described in our Annual Report under the captions “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in other documents that we may file with the SEC, all of which you should review carefully. We qualify all of our forward-looking statements by these disclaimers.
Effective June 8, 2026, following a community governance vote, the native digital asset of The Open Network, previously known as “Toncoin” (ticker: TON), was rebranded as “Gram” (ticker: GRAM). The rebrand changed only the name and ticker of the digital asset and did not affect the underlying blockchain, the Company’s holdings of the digital asset, or its staking positions. Accordingly, the Company refers to its digital asset holdings as “Gram” or “GRAM” throughout this Quarterly Report, and references to “Toncoin” or “TON” in the Company’s previously issued filings refer to the same digital asset.
| 2 |
PART I — FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
| Condensed Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025 | 4 |
| Condensed Consolidated Statements of Income for the three and six months ended June 30, 2026 and 2025 (unaudited) | 5 |
| Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2026 and 2025 (unaudited) | 6-7 |
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 (unaudited) | 8 |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 9-25 |
| 3 |
TON STRATEGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| June 30, 2026 | December 31, 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| ERC receivable | ||||||||
| Prepaid expenses and other current assets – related parties | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Assets of discontinued operations – current | ||||||||
| Total current assets | ||||||||
| Assets of discontinued operations – non-current | ||||||||
| Long-lived assets, net | ||||||||
| Intangible assets, net | ||||||||
| GRAM - unrestricted | ||||||||
| GRAM - restricted | ||||||||
| Other non-current assets – related party | - | |||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued officers’ compensation | ||||||||
| Liabilities of discontinued operations - current | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Liabilities of discontinued operations - non-current | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 11) | - | - | ||||||
| Stockholders’ equity | ||||||||
| Common
stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity in Ton Strategy Company | ||||||||
| Non-controlling interests of discontinued operations | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 4 |
TON STRATEGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| GRAM | - | - | ||||||||||||||
| GRAM – related party | - | - | ||||||||||||||
| GRAM | - | - | ||||||||||||||
| Total Revenue | - | - | ||||||||||||||
| Cost of revenue | - | - | ||||||||||||||
| Gross profit | - | - | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative – related parties | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense), net | ||||||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain on investments | - | - | ||||||||||||||
| Other income (expense), net | - | ( | ) | ( | ) | |||||||||||
| Total other income (expense), net | ( | ) | ||||||||||||||
| Net income (loss) from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: Net income (loss) attributable to non-controlling interests of discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to Ton Strategy Company | ( | ) | ( | ) | ( | ) | ||||||||||
| Preferred dividends attributable to preferred shareholder | - | ( | ) | - | ( | ) | ||||||||||
| Net income (loss) attributable to common shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Income (loss) per share from continuing operations - basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Income (loss) per share from continuing operations - diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Income (loss) per share from discontinued operations – basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) per share from discontinued operations – diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) per share attributable to common shareholders - basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Income (loss) per share attributable to common shareholders - diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Weighted average number of common shares outstanding – diluted | ||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 5 |
TON STRATEGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(unaudited)
For the three months ended June 30, 2026
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Non-controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Balance as of March 31, 2026 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Fair value of vested restricted stock awards and stock options | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||
| Balance as of June 30, 2026 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
For the six months ended June 30, 2026
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Non-controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Balance as of December 31, 2025 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Fair value of vested restricted stock awards and stock options | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance as of June 30, 2026 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| 6 |
TON STRATEGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)
(unaudited)
For the three months ended June 30, 2025
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Non-controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Balance as of March 31, 2025 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Sale of Series D Preferred Shares | - | - | ( | ) | - | - | ||||||||||||||||||||||||||
| Shares issued in connection with acquisition | - | - | - | - | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock awards and stock options | - | - | - | - | - | |||||||||||||||||||||||||||
| Series D Preferred Stock dividends | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of June 30, 2025 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
For the six months ended June 30, 2025
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Non-controlling | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | interests | Total | |||||||||||||||||||||||||
| Balance as of December 31, 2024 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Balance | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Sale of Series D Preferred Shares | - | - | ( | ) | - | - | ||||||||||||||||||||||||||
| Shares issued in connection with acquisition | - | - | - | - | - | |||||||||||||||||||||||||||
| Fair value of vested restricted stock awards and stock options | - | - | - | - | - | |||||||||||||||||||||||||||
| Series D Preferred Stock dividends | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of June 30, 2025 | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
| Balance | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
| 7 |
TON STRATEGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| 2026 | 2025 | |||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss from discontinued operations, net of tax | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities, net of discontinued operations: | ||||||||
| Depreciation and amortization | ||||||||
| Share-based compensation | ||||||||
| Income tax expense | ||||||||
| Non-cash consideration received in the form of GRAM | ( | ) | - | |||||
| Non-cash consideration received in the form of GRAM – related party | ( | ) | - | |||||
| Non-cash transaction fees paid with Digital Assets | - | |||||||
| Realized (Gains) / Losses on Digital Assets | ( | ) | - | |||||
| Unrealized (Gains) / Losses on Digital Assets | - | |||||||
| Unrealized gain on short-term investments - trading | - | ( | ) | |||||
| Effect of changes in assets and liabilities, net of discontinued operations: | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Prepaid expenses and other non-current and current assets – related parties | - | |||||||
| ERC receivable | - | |||||||
| Accounts payable – related parties | - | |||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities attributable to continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities attributable to discontinued operations | ( | ) | ( | ) | ||||
| Investing Activities: | ||||||||
| Proceeds from sale of Digital Assets | - | |||||||
| Purchases of property and equipment | ( | ) | - | |||||
| Purchases of investments – trading securities | - | ( | ) | |||||
| Proceeds from sale of investments - trading securities | - | |||||||
| Purchases of intangible assets | - | ( | ) | |||||
| Net cash provided by (used in) investing activities attributable to continuing operations | ( | ) | ||||||
| Net cash provided by (used in) investing activities attributable to discontinued operations | ( | ) | ||||||
| Financing Activities: | ||||||||
| Proceeds from sale of preferred stock offering, net of issuance costs | - | |||||||
| Payment of notes payable | - | ( | ) | |||||
| Net cash provided by financing activities | - | |||||||
| Net change in cash, cash equivalents, and restricted cash | ( | ) | ( | ) | ||||
| Cash, cash equivalents, and restricted cash - beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash - end of period | $ | $ | ||||||
See accompanying notes to the condensed consolidated financial statements
| 8 |
TON STRATEGY COMPANY
Notes to Condensed Consolidated Financial Statements
For the Three and Six months Ended June 30, 2026 and 2025
(in thousands, except share and per share data)
(unaudited)
1. DESCRIPTION OF BUSINESS
Our Business
References in this document to the “Company,” “we,” “us,” or “our” are intended to mean TON Strategy Company, individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.
Name Change
Effective September 2, 2025, we changed our name from Verb Technology Company, Inc. to TON Strategy Company by filing a Certificate of Amendment to the Company’s Articles of Incorporation with the Secretary of the State of Nevada. As a result of the name change, the Company changed its trading symbol on the Nasdaq Capital Market for the Company’s common stock from “VERB” to “TONX,” effective September 2, 2025.
TON Strategy Company
TON Strategy Company is a digital asset treasury and Web3 ecosystem company focused on supporting The Open Network, a public blockchain originally developed to integrate with Telegram, one of the world’s largest messaging platforms. The Open Network blockchain is designed to process transactions quickly and at scale, enabling a range of decentralized applications and digital services that can be accessed directly through Telegram’s global user base of more than one billion people.
Effective June 8, 2026, following a community governance vote, the native digital asset of The Open Network, previously known as “Toncoin” (ticker: TON), was rebranded as “Gram” (ticker: GRAM). The rebrand changed only the name and ticker of the digital asset and did not affect the underlying blockchain, the Company’s holdings of the digital asset, or its staking positions. Accordingly, the Company refers to its digital asset holdings as “Gram” or “GRAM” throughout this Quarterly Report on Form 10-Q, and references to “Toncoin” or “TON” in the Company’s previously issued filings refer to the same digital asset.
The Company’s core business is the management of its corporate treasury holdings of Gram. This includes staking Gram, which involves locking up tokens to help secure and validate the network in exchange for staking rewards. Through these activities, the Company seeks to support the TON ecosystem while managing its digital assets in line with applicable regulatory, accounting, and risk-management standards. The Company may also pursue other Web3 initiatives within the TON ecosystem to help promote the network’s long-term growth and adoption.
Beginning in August 2025, the Company implemented its TON Treasury Strategy, utilizing proceeds from its capital-raising activities to acquire Gram and participate in staking activities on the TON network (the “Network”). The Company formally commenced staking operations in August of 2025 and staking is now a primary source of yield generation and a core component of its digital asset treasury strategy.
| 9 |
As of June 30, 2026, the Company utilizes two third-party custodians—BitGo Trust Company, Inc. and Blockchain.com (Cayman) Limited—to manage and stake its Gram holdings. While the Company’s staking agreements are governed directly through these custodians, the custodians may engage third-party service providers to operate validator or staking infrastructure on their behalf. All Gram staked by the Company is deployed through single-nominator validator pools and is not commingled with assets of other clients or participants. When chosen as validators by the TON network, these validators earn staking rewards and transaction fees proportional to the amount of stake delegated to them.
As
of June 30, 2026, the Company had
Private Placement in Public Equity
On
August 7, 2025, the Company completed a private investment in public equity (“PIPE”) with certain institutional investors
(the “PIPE Subscribers”) pursuant to a subscription agreement. The PIPE included the sale of (i)
Approximately one-third of the PIPE Subscribers (the “Lock-Up Investors”) agreed to lock-up restrictions under which they may not sell or transfer their Acquired Securities for six months (for all securities held) and 12 months (for 50% of those securities), measured from the date of the subscription agreement, subject to customary exceptions. Lock-Up Investors that contributed non-transferable Gram (“Locked Gram”) are also subject to equivalent lock-up restrictions for the Acquired Securities received as consideration for the Locked Gram. The Locked Gram may, however, be staked by the Company to generate staking revenue.
Historical Operations
On October 18, 2021, the Company established verbMarketplace, LLC (“Market LLC”), a Nevada limited liability company. Market LLC is a wholly owned subsidiary of the Company established for the MARKET.live platform.
On November 15, 2024, the Company formed Go Fund Yourself Show LLC (“Go Fund Yourself”), a Nevada limited liability company, to operate the Go Fund Yourself business.
On January 15, 2025, the Company formed Good Girl LLC, a majority-owned Nevada limited liability company, and subsequently sold this subsidiary during the year ended December 31, 2025. There was no consideration paid or received in this sale transaction.
| 10 |
On
April 11, 2025, the Company, Lyvecom and the Lyvecom Shareholders entered into a definitive Stock Purchase Agreement with respect to
the Acquisition that incorporated the terms of the Binding Term Sheet (the “Purchase Agreement”). The Acquisition closed
on April 11, 2025. The purchase price paid for the shares of capital stock of Lyvecom was $
On July 28, 2025, the Company formed VERB Subsidiary 1, Corp., VERB Subsidiary 2, Corp., and VERB Subsidiary 3, Corp., all Nevada corporations, to operate the digital asset business.
On August 21, 2025, the Company announced the commencement of its TON Treasury Strategy, designating Gram as its primary treasury reserve asset. The Company began purchasing Gram under this strategy and initiated staking activities during the third quarter of 2025 to earn rewards on its digital asset holdings. See Note 3 – Digital Asset Holdings and Note 10 – Stock Warrants.
As
of June 30, 2026, the Company had cash and cash equivalents, restricted cash, and unrestricted GRAM holdings of $
Economic Disruption and Network Disruption
Our business, including both our traditional operations and our digital asset treasury activities involving Gram, is dependent on general economic conditions and the performance of Gram. Macroeconomic factors such as inflation, rising interest rates, foreign exchange volatility, or economic instability in jurisdictions where we or our partners operate may adversely affect demand for our products and services, as well as the value of our digital asset holdings. These conditions can also influence liquidity, capital availability, and investor sentiment across all of our business lines.
In addition, our digital asset operations are directly exposed to risks specific to the TON ecosystem. Network disruptions, validator downtime, software vulnerabilities, governance disputes, or changes in protocol parameters may impair access to our Gram holdings or reduce staking rewards. Adjustments to validator incentives, inflation rates, or reward distributions could materially alter the economics of staking. Likewise, declines in network activity, competition from other blockchains, or regulatory developments affecting Gram or related ecosystem participants could negatively impact Gram’s utility and price.
Given the evolving nature of both global markets and the Network, we cannot predict the timing or magnitude of any economic or network-specific disruption. Any such events could materially and adversely affect our business, financial condition, and results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the SEC on March 31, 2026 (the “2025 Annual Report”). The consolidated balance sheet as of December 31, 2025 included herein was derived from the audited consolidated financial statements as of that date.
As
of June 30, 2026, the Company has met the criterion pursuant to ASC 205-20, Discontinued Operations, as a strategic shift from
operating and managing a digital media business to operating and managing a crypto currency business has occurred due to the shutdown
of the Company’s Global Media Division. The shutdown of this division eliminates 2 of the 3 segments of the Company. As a result,
there is only
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
| 11 |
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Ton Strategy Company, Verb Direct, LLC, Verb Acquisition Co., LLC, verbMarketplace, LLC, LyveCom, Inc., Go Fund Yourself Show, LLC, VERB Subsidiary 3, Corp, VERB Subsidiary 2, Corp and VERB Subsidiary 1, Corp. All intercompany accounts have been eliminated in the consolidation.
As
of March 31, 2025, the Company had consolidated the results of Go Fund Yourself Show, LLC and Good Girl LLC as the Company had a
All of the financial results of Go Fund Yourself Show, LLC are classified as discontinued operations in the Company’s condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025, and in its condensed consolidated statements of income and statements of cash flows for the three and six months ended June 30, 2026 and 2025.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the pandemic, as well as certain macroeconomic factors, including inflation, rising interest rates, and recessionary concerns, on its business and operations.
Significant estimates include assumptions made in analysis of assumptions made in purchase price allocations, impairment testing of long-term assets, realization of deferred tax assets, determining fair value of its investments in debt and equity securities and valuation of equity instruments issued for services. Some of those assumptions can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions.
Segment Information
The Company operates as one reportable segment. The chief operating decision maker is the Chief Executive Officer, who reviews consolidated operating results to allocate resources and assess performance. Significant segment expenses regularly provided to the chief operating decision maker, other segment items, and the measure of segment profit or loss used are disclosed for each interim period presented.
Digital Assets
The
Company’s digital assets are comprised of Gram. As of June 30, 2026, the Company held $
The Company’s digital wallets infrequently receive miscellaneous deposits of Gram, commonly referred to as “dust,” and represent unsolicited transactions. Owing to the underlying blockchain mechanics, it is both economically and technically impractical to remove these balances. The Company maintains control over the related Gram units and anticipates realizing potential future economic benefit from these deposits. The miscellaneous deposits are recorded in other income, net in the unaudited condensed consolidated statements of income.
| 12 |
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standard Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers (“ASC 606”).
The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes
| (1) | identifying the contract(s) or agreement(s) with a customer, | |
| (2) | identifying our performance obligations in the contract or agreement, | |
| (3) | determining the transaction price, | |
| (4) | allocating the transaction price to the separate performance obligations, and | |
| (5) | recognizing revenue as each performance obligation is satisfied. |
A performance obligation is a promise in a contract to transfer a distinct product. Performance obligations promised in a contract are identified based on the goods that will be transferred that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. Performance obligations for each segment are described below within each segment’s discussion of revenue recognition.
Pursuant to ASC 606, revenue is recognized when performance obligations under the terms of the contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is recognized in an amount that reflects the contractual consideration that the Company receives in exchange for its services.
TON Strategy revenue is derived from staking rewards. The Company recognizes staking rewards as revenue in accordance with ASC 606. As the amount of rewards are not known by the Company until a validation activity is completed, the staking rewards are constrained under the Topic 606 guidance on variable consideration. Staking rewards are recognized as revenue at the end of each validation round, or block processing time, or when earned and measurable and to the extent that it is probable that a significant reversal would not occur. The amount of revenue recognized is measured at fair value and is presented net of validator or other protocol fees. The Company acts as an agent in staking transactions as it provides access to its Gram to third-party validator operators who perform the technical validation responsibilities on the blockchain.
Cost of Revenue
Cost of revenue consists primarily of staking service fees charged by the Company’s third-party custodians and validation fees incurred in connection with the Company’s staking activities on the TON blockchain.
Investments
The Company’s investments in equity securities primarily consist of non-marketable equity securities in private companies without readily determinable fair values. These investments are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, as permitted under ASC 321, Investments – Equity Securities.
The Company assesses its equity investments for impairment at each reporting period. If qualitative factors indicate that the investment is impaired, and the fair value is less than the carrying amount, an impairment loss is recognized in the Company’s consolidated financial statements. Observable price changes in orderly transactions for identical or similar securities of the same issuer are considered and may result in adjustments to the carrying amount of the investment. These changes, if any, are recorded in earnings in the period when identified.
Gains and losses resulting from remeasurements, impairments, or observable price changes are included in Other income (expense) in the accompanying consolidated statements of income. The Company reevaluates the basis of its investments as of each balance sheet date and updates its carrying values as necessary.
See Note 4 – Investments and Fair Value Measurements for further details of the Company’s investments.
| 13 |
Promissory Convertible Notes
The Company provides certain services in exchange for consideration in the form of convertible promissory notes. These notes are classified as long-term assets and presented on the balance sheet under the caption “Other non-current assets” when the contractual maturity exceeds one year from the balance sheet date.
The convertible notes receivable are non-derivative financial instruments that are generally convertible into equity of the issuing party upon specified terms, including a fixed maturity date and conversion provisions. The Company evaluates the fair value of the services rendered based on the transaction price agreed with the counterparty, which is typically supported by recent transactions or comparable service arrangements.
Revenue is recognized in accordance with ASC 606, Revenue from Contracts with Customers, upon satisfaction of the performance obligations in the underlying contract. The corresponding note receivable is initially recorded at its estimated fair value, which is generally based on the fair value of the services provided unless the fair value of the note is more readily determinable.
The
Company evaluates the convertible notes receivable for impairment at each reporting period in accordance with ASC 326, Financial
Instruments – Credit Losses (CECL). The allowance for credit losses, if any, reflects management’s estimate of
expected credit losses over the life of the instrument, based on historical experience, credit quality, and other relevant factors.
As of June 30, 2026 and December 31, 2025, the allowance for long term credit losses balance was $
If the embedded conversion feature within a note is determined to require bifurcation under ASC 815, Derivatives and Hedging, the derivative component is separately recognized at fair value with changes in fair value recognized in earnings. As of each reporting date, the Company assesses whether bifurcation is required and whether any embedded derivative instruments exist.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
In accordance with FASB ASC 350, Intangibles-Goodwill and Other, we review goodwill and indefinite lived intangible assets for impairment at least annually or whenever events or circumstances indicate a potential impairment. Our impairment testing is performed annually at December 31 (our fiscal year end). Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of our reporting units to the carrying value of the underlying net assets in the reporting units. If the fair value of a reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.
In
connection with the Company’s decision to wind down and discontinue all business segments in the Global Digital Media
Division, the Company recorded an impairment of $
| 14 |
Fair Value of Financial Instruments
The Company follows the guidance of FASB ASC 820 and ASC 825 for disclosure and measurement of the fair value of its financial instruments. FASB ASC 820 establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The three (3) levels of fair value hierarchy defined by ASC 820 are described below:
| Level 1: | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| Level 2: | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| Level 3: | Pricing inputs that are generally observable inputs and not corroborated by market data. |
The Company uses Level 1 observable prices for digital assets. The carrying amount of the Company’s financial assets and liabilities, such as cash and cash equivalents, prepaid expenses, and accounts payable and accrued expenses approximate their fair value due to their short-term nature. The carrying amount of notes payable approximates the fair value due to the fact that the interest rates on these obligations are based on prevailing market interest rates. The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities.
As discussed in Note 1 – Description of the Business, the Company holds certain Gram digital assets that are subject to restrictions on trading and transfer. Pursuant to the guidance of ASC 820, the restrictions are specific to the Company and would not be transferred with the assets in a theoretical sale. The Company does not consider these restrictions to be part of the unit of account, and the restrictions are not factored into the fair value measurement of the digital assets.
As discussed in Note 2 – Summary of Significant Accounting Policies and Supplemental Disclosures, the Company stakes its Gram digital assets. While assets are staked, they are held in a smart contract for the duration of the validation round. The Company maintains control over the staked Gram during this time. The Company can unstake its Gram at any time and the Gram will be returned to the Company within eighteen hours, the period to complete the validation round. Given the short-term nature of this lock up period, the Company does not consider the protocol restrictions to be part of the unit of account, and the restrictions are not factored into the fair value measurement of the digital assets.
| 15 |
Derivative Financial Instruments
The Company evaluates all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of income each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s condensed consolidated balance sheet. Refer to Note 4 – Investments and Fair Value Measurements for further details.
Digital Assets Embedded Derivatives
Certain custodial fees and staking fees payable included in accounts payable may be denominated in digital assets. These payables are hybrid instruments consisting of payable host contracts containing embedded derivatives driven by changes in fair value of the underlying digital assets. The payable host contracts are recorded at fair value at the time the Company is charged based on the fair value of the underlying digital assets at that time. The embedded derivatives are carried at fair value, with changes in fair value recognized in other income, net on the consolidated statements of income. The payable host contracts and embedded derivatives are included in accounts payable on the consolidated balance sheets. Cash flows related to the embedded derivatives are recognized as adjustments to reconcile net loss used in operating activities in the condensed consolidated statements of cash flows.
Share-Based Compensation
The Company issues stock options and warrants, shares of common stock and restricted stock units as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation in accordance with FASB ASC 718, Compensation – Stock Compensation. Share-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock and is recognized as expense over the service period. Forfeitures are accounted for as they occur. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for services.
Net Loss Per Share
Basic net loss per share is computed by using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential shares of common stock that were outstanding during the period. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise or conversion.
For
the year ended December 31, 2025, the Company considered the earnings per share (“EPS”) implications of the Warrant shares
as contingently issuable and potential Common Shares. The Company considered ASC 260-10-45-13 and concluded that
For the three and six months ended June 30, 2026 and 2025, no dilutive potential shares of common stock were included in the computation of diluted net loss per share because their impact was anti-dilutive except for vested restricted stock awards for the three months ended June 30, 2026 as their inclusion are considered to have a dilutive impact on EPS. The number of vested restricted stock units is considered outstanding as of the later of the beginning of the period or the grant date for diluted EPS computation purposes.
As
of June 30, 2026, and 2025, the Company had total outstanding options of
Concentration of Credit and Other Risks
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited
with a limited number of financial institutions. The balances held at any one financial institution at times may be in excess of Federal
Deposit Insurance Corporation (“FDIC”) insurance limits of up to $
The Company’s concentration of credit risk includes its concentrations from key customers and vendors. The details of these significant customers and vendors are presented in the following table for the six months ended June 30, 2026 and 2025:
SCHEDULE OF CONCENTRATION RISK
| Six months Ended June 30, | ||||
| 2026 | 2025 | |||
| The Company’s largest customers are presented below as a percentage of the aggregate | ||||
| Revenues and Accounts receivable | No
customers individually over | No
customers individually over | ||
| The Company’s largest vendors are presented below as a percentage of the aggregate | ||||
| Purchases | One
vendor accounted for | No
vendors accounted for greater than | ||
| 16 |
Supplemental Cash Flow Information
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION
| 2026 | 2025 | |||||||
| Six months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | - | $ | |||||
| Cash paid for income taxes attributable to continuing operations | $ | $ | ||||||
| Cash paid for income taxes attributable to discontinued operations | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities attributable to discontinued operations: | ||||||||
| - | ||||||||
| Settlement of accounts receivable with non-marketable equity securities | $ | - | $ | |||||
| Issuance of common shares in connection with the purchase of Lyvecom | - | |||||||
| Addition of contingent liability recorded in connection with the purchase of Lyvecom | $ | - | $ | |||||
Recent Accounting Pronouncements
New Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures (“ASU 2024-03”). ASU 2024-03 requires additional information about specific expense categories in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. The amendments should be applied either (1) prospectively to financial statements issued after the effective date or (2) retrospectively to all prior periods presented in the financial statements. The Company is in the process of evaluating the effect this standard will have on the consolidated financial statement disclosures.
| 17 |
3. DIGITAL ASSET HOLDINGS
Digital Assets
The following table sets forth the units held, cost basis, and fair value of digital assets held, as shown on the condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025:
SCHEDULE OF FAIR VALUE OF DIGITAL ASSETS
| Units | Cost Basis | Fair Value | ||||||||||
| Balance, June 30, 2026 | ||||||||||||
| GRAM | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
| Units | Cost Basis | Fair Value | ||||||||||
| Balance, December 31, 2025 | ||||||||||||
| GRAM | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
Cost
basis is equal to the cost of the digital assets inclusive of any transaction fees, if any, at the time of purchase or upon receipt.
Fair value represents the quoted digital asset prices within the Company’s principal market at the time of measurement (midnight
UTC). Of the units of GRAM presented above
The following tables represent a reconciliation of GRAM – Unrestricted digital assets held at June 30, 2026:
SCHEDULE OF UNRESTRICTED DIGITAL ASSETS
For the three months ended June 30, 2026 | ||||
| Fair Value, March 31, 2026 | $ | |||
| Receipt of GRAM from staking | ||||
| Sale of GRAM | ( | ) | ||
| Non-cash transaction fees | ( | ) | ||
| Vesting of locked GRAM | ||||
| Unrealized gain | ||||
| Unrealized loss | - | |||
| Fair Value, June 30, 2026 | $ | |||
For the six months ended June 30, 2026 | ||||
| Fair Value, December 31, 2025 | $ | |||
| Receipt of GRAM from staking | ||||
| Sale of GRAM | ( | ) | ||
| Non-cash transaction fees | ( | ) | ||
| Vesting of locked GRAM | ||||
| Unrealized loss | ( | ) | ||
| Fair Value, June 30, 2026 | $ | |||
The
receipts of GRAM from staking represent the rewards earned from staking activities. The sale of GRAM represents the Company’s sale
of GRAM units during the period. The vesting of Locked GRAM represents restricted GRAM that vested during the period and was reclassified
to unrestricted GRAM. During the three and six months ended June 30, 2026, the Company recognized cumulative realized gains of $
| 18 |
The following tables represent a reconciliation of GRAM – Restricted digital assets held at June 30, 2026:
SCHEDULE OF RESTRICTED DIGITAL ASSETS
For the three months ended June 30, 2026 | ||||
| Fair Value, March 31, 2026 | $ | |||
| Vesting of locked GRAM | ( | ) | ||
| Unrealized gain | ||||
| Unrealized loss | - | |||
| Fair Value, June 30, 2026 | $ | |||
For the six months ended June 30, 2026 | ||||
| Fair Value, December 31, 2025 | $ | |||
| Vesting of locked GRAM | ( | ) | ||
| Unrealized loss | ( | ) | ||
| Fair Value, June 30, 2026 | $ | |||
The vesting of Locked GRAM represents restricted GRAM that vested during the period and was reclassified to unrestricted GRAM. During the three and six months ended June 30, 2026, the Company recognized no realized gains or losses from the use of restricted GRAM to pay gas fees and transaction costs.
Restricted Digital Assets
The following table sets forth the fair value of unrestricted and restricted GRAM digital assets held, as shown on the condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025:
SCHEDULE OF FAIR VALUE OF UNRESTRICTED AND RESTRICTED GRAM DIGITAL ASSETS
June 30, 2026 | December 31, 2025 | |||||||
| GRAM – Unrestricted | $ | $ | ||||||
| GRAM – Restricted | ||||||||
| Total | $ | $ | ||||||
Through
contributions from the PIPE the Company received
During
the year ended December 31, 2025 the Company made purchases of
Refer to Note 2 – Summary of Significant Accounting Policies and Supplemental Disclosures for discussion on fair value considerations of the restrictions.
Although
the restricted units of GRAM are not eligible for trading or transfer, the restricted or Locked GRAM do not carry any restrictions regarding
staking and all restricted GRAM can be staked by the Company to generate staking revenue. During the three and six months ended June
30, 2026,
SCHEDULE OF UNITS OF GRAM VEST
| Year ending | GRAM units to vest | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total units of GRAM to vest | ||||
| 19 |
4. INVESTMENTS AND FAIR VALUE MEASUREMENTS
The Company invests its surplus funds in excess of operational and capital requirements in an overnight sweep account that is comprised of cash equivalents, with the objectives of delivering competitive returns while maintaining a high degree of liquidity.
A summary of our short-term investments are as follows:
SCHEDULE OF SHORT TERM INVESTMENT
| June 30, 2026 | December 31, 2025 | |||||||
| Equity securities | $ | - | $ | - | ||||
| Bifurcated embedded derivative asset | - | |||||||
| Short-term investments | $ | $ | - | |||||
A summary of our long-term investments are as follows:
SCHEDULE OF LONG TERM INVESTMENT
June 30, 2026 | December 31, 2025 | |||||||
| Equity securities | $ | $ | ||||||
| Bifurcated embedded derivative asset | ||||||||
| Long-term investments | $ | $ | ||||||
See Note 6 – Discontinued Operations.
Fair Value Measurements
The Company’s financial instruments include cash, prepaid expenses, accounts payable, and accrued liabilities. The fair value of cash, prepaid expenses, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature, which are all considered Level 1.
The Company’s financial instruments measured at fair value on a recurring basis consisted of U.S. treasury securities and corporate bonds. U.S. treasury securities are classified within Level 1 of the fair value hierarchy as they are valued based on quoted market price in an active market. Corporate bonds are valued based on quoted prices in markets that are less active and are generally classified within Level 2 of the fair value hierarchy.
The Company’s financial instruments include investment in equity securities and contingent consideration which are valued based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy.
As disclosed in Note 2 – Summary of Significant Accounting Policies and Supplemental Disclosures, the Company purchased digital assets held at fair value in August of 2025. The fair value of the Company’s digital assets is disclosed in Note 3 – Digital Asset Holdings. The digital assets are measured at fair value on a recurring basis using observable prices (Level 1).
| 20 |
Valuation Techniques
Bifurcated Embedded Derivative Assets
Bifurcated
embedded derivatives are initially recorded at fair value and are then revalued at each reporting date. The fair value of the embedded
derivative was calculated using a with and without method at issuance and revalued at the end of the reporting period using a Monte Carlo
simulation model that used various assumptions related to term of the underlying agreement, equity value of the issuer, expected volatility,
risk-free interest rate, credit risk adjusted rate, and the probability, timing, size of the future qualified financing or non-qualified
financing rounds. Because the embedded conversion features are initially and subsequently carried at fair values, the Company’s
condensed consolidated statements of income will reflect the volatility in these estimate and assumption changes. The bifurcated embedded
derivative net asset was $
SCHEDULE OF BIFURCATED EMBEDDED DERIVATIVE ASSETS
Issuer of Promissory Convertible Note | Measurement Date | Principal | Weighted- Average | Derivative Value | Valuation Technique | |||||||||||
| Customer A | % | |||||||||||||||
| Customer B | % | |||||||||||||||
| Customer C | % | |||||||||||||||
| Weighted-Average Calculation | % | |||||||||||||||
| Asset | Fair Value | Valuation Technique | Significant Unobservable Input | Input Value / Range | Weighted Average | |||||||||||
| Bifurcated Embedded Derivative —Promissory Convertible Notes | Discount Rate (Rd) | % | % | |||||||||||||
| Sale Multiplier | 3.0x | 3.0x | ||||||||||||||
| Conversion Price Factor (Discount to Price) | % | |||||||||||||||
| Time to Maturity | 24 months (from issuance) | Varied | ||||||||||||||
| Risk-Free Interest Rate / Credit Spread | N/A | |||||||||||||||
| Date | Total Transactions | Principal | Accrued Interest | Principal plus Accrued Interest | Valuation Technique | |||||||||||||
| June 30, 2026 | ||||||||||||||||||
| 21 |
Financial instruments measured at fair value on a recurring basis as of June 30, 2026 are classified based on the valuation technique in the table below:
SCHEDULE OF FAIR VALUE ON A RECURRING BASIS AND NONRECURRING BASIS
Fair Value Measurements Using
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Digital assets | ||||||||||||||||
| GRAM - unrestricted | $ | $ | - | $ | - | $ | ||||||||||
| GRAM - restricted | - | - | ||||||||||||||
| Total digital assets | $ | $ | - | $ | - | $ | ||||||||||
| Non-marketable equity securities | ||||||||||||||||
| Non-marketable equity securities | $ | - | $ | - | $ | $ | ||||||||||
| Total non-marketable equity securities | $ | - | $ | - | $ | $ | ||||||||||
| Derivative assets | ||||||||||||||||
| Bifurcated embedded derivative asset | $ | - | $ | - | $ | $ | ||||||||||
| Total derivative assets | $ | - | $ | - | $ | $ | ||||||||||
Financial instruments measured at fair value on a recurring basis as of December 31, 2025 are classified based on the valuation technique in the table below:
Fair Value Measurements Using
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Digital assets | ||||||||||||||||
| GRAM - unrestricted | $ | $ | - | $ | - | $ | ||||||||||
| GRAM - restricted | - | - | ||||||||||||||
| Total digital assets | $ | $ | - | $ | - | $ | ||||||||||
| Non-marketable equity securities | ||||||||||||||||
| Non-marketable equity securities | $ | - | $ | - | $ | $ | ||||||||||
| Total non-marketable equity securities | $ | - | $ | - | $ | $ | ||||||||||
| Derivative assets | ||||||||||||||||
| Bifurcated embedded derivative asset | $ | - | $ | - | $ | $ | ||||||||||
| Total derivative assets | $ | - | $ | - | $ | $ | ||||||||||
Assets and liabilities that are measured at fair value on a nonrecurring basis as of December 31, 2025 are classified based on the valuation technique in the table below:
Fair Value Measurements Using
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||
| Property and equipment, net | $ | - | $ | - | $ | $ | ||||||||||
| Definite-lived intangible assets, net | $ | - | $ | - | $ | $ | ||||||||||
| Indefinite-lived intangible assets | $ | - | $ | - | $ | $ | ||||||||||
| 22 |
5. OPERATING LEASES
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
SCHEDULE OF LEASE COST
| 2026 | 2025 | |||||||
| Six months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Lease cost | ||||||||
| Operating lease cost (included in loss from discontinued operations, net of tax in the Company’s statement of income) | $ | $ | ||||||
| Other information | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term – operating leases (in years) | ||||||||
| Weighted average discount rate – operating leases | % | % | ||||||
SCHEDULE OF OPERATING LEASES ASSETS AND LIABILITIES
June 30, 2026 | December 31, 2025 | |||||||
| Operating leases | ||||||||
| Right-of-use assets | $ | - | $ | |||||
| Short-term operating lease liabilities | $ | $ | ||||||
| Long-term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
SCHEDULE OF PRESENT VALUE OF LEASE LIABILITIES
| Year ending | Operating Leases | |||
| 2026 remaining | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | - | |||
| 2030 and thereafter | - | |||
| Total lease payments | ||||
| Less: Imputed interest/present value discount | ( | ) | ||
| Present value of lease liabilities | $ | |||
6. DISCONTINUED OPERATIONS
The assets and liabilities of discontinued operations were as follows as of June 30, 2026 and December 31, 2025:
SCHEDULE OF BALANCE SHEET AND INCOME STATEMENT OF DISCONTINUED OPERATIONS
June 30, 2026 | December 31, 2025 | |||||||
| Assets: | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Short-term investments (Note 4) | - | |||||||
| Convertible notes receivable, net | - | |||||||
| Prepaid expenses and other current assets | ||||||||
| Assets of discontinued operations - current | $ | $ | ||||||
| Goodwill | - | |||||||
| Long-lived assets, net | - | |||||||
| Intangible assets, net | - | |||||||
| Long-term investments (Note 4) | ||||||||
| Other non-current assets, primarily convertible notes receivable | ||||||||
| Assets of discontinued operations - non-current | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Contract liabilities | - | |||||||
| Accrued liabilities | ||||||||
| Contingent liability related to acquisition - current | - | |||||||
| Lease liabilities - current | ||||||||
| Liabilities of discontinued operations - current | $ | $ | ||||||
| Contingent liability related to acquisition – non-current | - | |||||||
| Lease liabilities - non-current | ||||||||
| Liabilities of discontinued operations - non-current | $ | $ | ||||||
The following information presents the net revenues and major line items that comprise net loss of the Global Digital Media business for the three and six months ended June 30, 2026 and 2025:
| 2026 | 2025 | |||||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenue, including software development amortization expense of
$ | ||||||||
| Gross profit | ||||||||
| Depreciation and amortization | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ||||
| Other income (expense), net | ( | ) | ||||||
| Loss from disposition | ( | ) | - | |||||
| Loss from discontinued operations before tax | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Loss from discontinued operations, net of tax | $ | ( | ) | $ | ( | ) | ||
| 2026 | 2025 | |||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net revenues | $ | $ | ||||||
| Cost of revenue, including software development amortization expense of
$ | ||||||||
| Gross profit | ||||||||
| Depreciation and amortization | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Operating loss from discontinued operations | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Loss from disposition | ( | ) | - | |||||
| Loss from discontinued operations before tax | ( | ) | ( | ) | ||||
| Income tax expense | ||||||||
| Loss from discontinued operations, net of tax | $ | ( | ) | $ | ( | ) | ||
Included as part of general and administrative expense
in the two tables above is share-based compensation amounting to $
| 23 |
7. COMMON STOCK
There was no common stock activity for the six months ended June 30, 2026.
See Note 13 for Subsequent Events.
8. RESTRICTED STOCK UNITS
A summary of restricted stock unit activity for the six months ended June 30, 2026 is presented below.
SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY
| Weighted- Average | ||||||||
| Grant Date | ||||||||
| Shares | Fair Value | |||||||
| Outstanding at January 1, 2026 | $ | |||||||
| Granted | - | - | ||||||
| Vested/deemed vested | - | - | ||||||
| Forfeited | ( | ) | ||||||
| Outstanding at June 30, 2026 | $ | |||||||
| Awards Vested at June 30, 2026 | $ | |||||||
| Awards Non-Vested at June 30, 2026 | - | $ | - | |||||
The
total stock compensation expense recognized relating to the vesting of restricted stock units for the three and six months ended June
30, 2026 and 2025 amounted to $
On
April 28, 2026, the Company and several executive officers and directors entered into an RSU Forfeiture Agreement pursuant to which an
aggregate of
| 24 |
9. STOCK OPTIONS
A summary of option activity for the six months ended June 30, 2026 is presented below.
SCHEDULE OF STOCK OPTION ACTIVITY
| Weighted- | Weighted- Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Price | Life (Years) | Value | |||||||||||||
| Outstanding at January 1, 2026 | $ | $ | - | |||||||||||||
| Granted | - | - | - | - | ||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Outstanding at June 30, 2026 | $ | $ | - | |||||||||||||
| Vested at June 30, 2026 | $ | $ | - | |||||||||||||
| Exercisable at June 30, 2026 | $ | $ | - | |||||||||||||
At June 30, 2026, the intrinsic value of the outstanding options was $0.
The
total stock compensation expense recognized relating to the vesting of stock options for the three and six months ended June 30, 2026
and 2025 amounted to $
The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:
SCHEDULE OF FAIR VALUE ASSUMPTIONS USING BLACK-SCHOLES METHOD
| Six months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Risk-free interest rate | - | % | % | |||||
| Average expected term | - | |||||||
| Expected volatility | - | % | % | |||||
| Expected dividend yield | - | - | ||||||
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.
| 25 |
10. STOCK WARRANTS
The Company has the following warrants outstanding as of June 30, 2026, all of which are exercisable:
SCHEDULE OF WARRANTS OUTSTANDING
| Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2026 | $ | N/A | $ | |||||||||||||
| Granted | - | - | - | - | ||||||||||||
| Forfeited | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Outstanding at June 30, 2026, all vested | $ | N/A | $ | |||||||||||||
At
June 30, 2026 the intrinsic value of the outstanding warrants was $
In
connection with the PIPE offering that occurred in 2025, pre-funded warrants were granted to purchase up to an aggregate of
11. COMMITMENTS AND CONTINGENCIES
Litigation
Meyerson Matter
The
Company is currently in a dispute with a former employee of its predecessor bBooth, Inc. who has interposed a breach of contract claim
in which he alleges that in 2015 he was entitled to approximately $
Graham Derivative Action
On April 2, 2026, a shareholder derivative action, captioned Graham v. Stotz, et. al., No. A-26-943141-C, was filed in Clark County, Nevada, district court against current and former members of the Company’s board of directors as defendants and the Company as a nominal defendant. The plaintiff, suing derivatively on behalf of the Company, alleges that the Company’s directors breached their fiduciary duties, waste, and unjust enrichment by causing the Company to enter into an advisory services agreement with Kingsway Capital Partners Limited (“Kingsway”) and awarding excessive compensation to current and former directors, and that, as a result, the Company has suffered damages. The complaint seeks on behalf of the Company compensatory damages, disgorgement, restitution, and equitable and injunctive relief. On July 27, 2026, defendants filed motions to dismiss.
TOMS Capital Investment Management Lawsuit
On July 30, 2026, a complaint was filed in New York Supreme Court by certain investors for which TOMS Capital Investment Management LLP is an investment advisor, against the Company, Kingsway and the Company’s Executive Chairman, Manuel Stotz. The complaint alleges that defendants made misrepresentations and breached subscription agreements in connection with the Company’s August 2025 private investment in public equity (“PIPE”), including with respect to an advisory services agreement with Kingsway and the Company’s compliance with Nasdaq listing requirements. The complaint asserts claims for breach of contract and rescission against the Company and tortious interference of contract against Kingsway and Stotz. The complaint seeks a preliminary and permanent injunction enjoining the Company from using PIPE proceeds to make further payments under the advisory services agreement, along with compensatory damages, punitive damages, rescission of the subscription agreements, and attorneys’ fees and costs. On July 31, 2026, the plaintiffs filed a motion for an order to show cause. The Company is unable to estimate a possible loss or range of possible losses in connection with this proceeding.
The Company knows of no material proceedings in which any of its directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
The Company believes it has adequately reserved for all litigation within its financial statements.
Severance Agreement with Veronika Kapustina
On
March 31, 2026, the Company entered into a separation agreement with Ms. Kapustina under which the Company paid in April 2026 to Ms.
Kapustina a one-time severance payment equal to $
Board of Directors
The
Company has committed an aggregate of $
Total
board fees expensed during the six months ended June 30, 2026 and 2025 was $
| 26 |
12. RELATED PARTY TRANSACTIONS
Advisory Services Agreement
On
August 7, 2025, the Company entered into an advisory services agreement (the “Advisory Services Agreement”) with Kingsway, a firm controlled by Manuel Stotz, the Company’s Executive Chairman of the Board
of Directors. Pursuant to the Advisory Services Agreement, Kingsway provides advisory and consulting services related to the expansion
and diversification of the Company’s business its TON Treasury Strategy. In consideration for these services, the Company agreed
to pay Kingsway, (i) a one-time set-up fee having a notional value of $
Blockchain.com Agreements
On
July 31, 2025, the Company entered into a master custody agreement with Blockchain.com pursuant to which Blockchain.com has custody of
digital assets held by the Company and executes digital asset transactions on behalf of the Company. Manuel Stotz, the Company’s
newly appointed Executive Chairman of the Board of Directors and Chief Executive Officer of Kingsway serves as director on the Board
of Directors of Blockchain.com PLC, Blockchain.com’s parent company (“Blockchain Parent”), and entities affiliated
with Kingsway hold an approximate
On November 24, 2025, the Company entered Addendum No. 1 (the “Addendum”) to the master custody agreement with Blockchain.com. Under this Addendum, for all unlocked Gram (i.e., non-smart contract locked Gram), the master custody agreement was amended for the following: (i) the custody services fee was reduced from 50 basis points to 5 basis points per annum, (ii) the rewards fee for staking rewards was reduced from 25% to 10%, (iii) the term of the Addendum and the master custody agreement is twelve months. The Company can terminate both the Addendum and master custody agreement early and incur an early termination fee equal to the monthly average of all fees paid by the Company multiplied by the number of months remaining in the term.
Pursuant
to the master custody agreement, for the three and six months ended June 30, 2026, the Company incurred custody fees, staking service
fees and staking rewards fees in an aggregate amount of $
PIPE In-kind Contributions
| 1. | EQCMWZgtAVIiXfeMVAgzVs2MajSbbiWKzmuIDJmQbaQiWDZo | |
| 2. | EQDqBwL09BB_La-qSeijfdA7yNim63TRgF0CuBdEq8CNx9rj | |
| 3. | EQCMeSsnz0NdYcdGIJqfpiPTj4XAVEmOVTZF3oCgQQOZpFy1 | |
| 4. | EQC44YZzJVgEWyC9iGA3Wjr3w3mRmMGO1pixxw5x15jtJsFW | |
| 5. | EQDy4cHV9z_yUurcUDCNReKaWtblM94_Fh3p-dDJhjdb1n2m | |
| 6. | EQB6cfoi_3_cF5MgscR3tTFhk1UsdsE1hQAqKtyAvxY5X7tW | |
| 7. | EQDjam6srORSqJ3uQ74ofGF81DuKY3I_9jMGqpntWHePA6Jv | |
| 8. | EQD0pVnZeode4x-SpnWJFNxL7GvkRyzOL5C_BQPGlm04awIR |
Merkle
Tree Markets Ltd., a subsidiary of Blockchain.com contributed $
EQCI758gcdiZxC6x1ya3a3qVykRxTAjKprKHDwKV7urpHUvN
Vy
Capital contributed $
13. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 11, 2026, the date these financial statements are available to be issued. The Company believes there were no material events or transactions discovered during this evaluation that requires recognition or disclosure in the financial statements other than the items discussed below.
Repurchases of Common Stock
From July 1, 2026 to August 4, 2026, the Company repurchased
Liquidations of Gram
From
July 1, 2026 to August 4, 2026, the Company sold
RSU Grants for Officers and Directors
On
July 21, 2026, the Company granted
On
July 21, 2026, the Company granted
On
July 21, 2026, the Company granted
On
July 21, 2026, the Company granted
On
July 21, 2026, the Company granted
Issuances of Common Stock
On
August 7, 2026, the Company issued
GRAM Fair Value
As
of August 4, 2026, the
Termination of Kingsway Advisory Agreement
On August 10, 2026, the Company notified Kingsway that it had terminated the Advisory Services Agreement dated August 7, 2025. Under the agreement, the Company was required to pay Kingsway an annual advisory fee equal to 2.0% of the Company’s market capitalization, payable monthly in arrears. The Company ceased making payments under the Agreement in March 2026, with its last payment made on March 18, 2026. Following unsuccessful settlement negotiations, the Company terminated the agreement without a settlement, and both parties have reserved all rights. The Company cannot currently estimate the amount of any loss or gain resulting from the termination and does not expect the termination to affect its TON Treasury Strategy or day-to-day operations. Kingsway is controlled by Manuel Stotz, the Company’s Executive Chairman, and is a significant stockholder of the Company.
| 27 |
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion and analysis of the results of operations and financial condition of our company for the three- and six-month periods ended June 30, 2026 and 2025 should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere this Quarterly Report on Form 10-Q. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical fact and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to business decisions, are subject to change. These uncertainties and contingencies can cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
All dollar amounts in the below Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands, unless otherwise noted or the context otherwise provides.
Overview
TON Strategy Company is a digital asset treasury and Web3 ecosystem company focused on supporting The Open Network, a public blockchain originally developed to integrate with Telegram, one of the world’s largest messaging platforms. The TON blockchain is designed to process transactions quickly and at scale, enabling a range of decentralized applications and digital services that can be accessed directly through Telegram’s global user base of more than one billion people.
The Company’s core business is the management of its corporate treasury holdings of Gram, the native digital asset of the TON blockchain. This includes staking Gram, which involves locking up tokens to help secure and validate the network in exchange for staking rewards. Through these activities, the Company seeks to support the TON ecosystem while managing its digital assets in line with applicable regulatory, accounting, and risk-management standards. The Company may also pursue other Web3 initiatives within the TON ecosystem to help promote the network’s long-term growth and adoption.
| 28 |
Revenue Generation
The Company’s digital asset treasury strategy derives revenue from Gram staking rewards. In Gram staking activities, the Company retains the right and ability to direct the use of the underlying Gram, subject to a bonding period. As such, the Company does not derecognize the Gram when participating in staking. The Company recognizes rewards from staking as revenue in accordance with ASC 606. The Company acts as an agent in staking transactions as it provides access to its Gram to third-party validator operators who perform the technical validation responsibilities. Staking rewards are recognized as revenue at the end of each validation round, or block processing time, or when earned and measurable and when the Company’s share of rewards is known. The amount of revenue recognized is measured at fair value and is presented net of validator or other protocol fees.
As of June 30, 2026, the Company had 229,860,889 units of GRAM staked on the TON blockchain. During the three and six months ended June 30, 2026, the Company received staking rewards of 9,438,177 GRAM and 11,613,360 GRAM, respectively, and recognized staking revenue of $15,019 and $18,021, respectively.
In April 2026, The Open Network implemented upgrades to its TON Virtual Machine (TVM), the network’s execution layer, and Catchain 2.0, its consensus mechanism, enhancing overall network efficiency and validation throughput. The Company, in coordination with its service providers, was well positioned to benefit from improved staking yields associated with these changes. Gross staking yield increased to 4.27% for the three months ended June 30, 2026 from 0.99% for the three months ended March 31, 2026, primarily due to the TVM and network consensus upgrades.
Economic and Network Disruption
Our business, is heavily dependent on general economic conditions and the performance of Gram. Macroeconomic factors such as inflation, rising interest rates, foreign exchange volatility, or economic instability in jurisdictions where we or our partners operate may adversely affect demand for our products and services, as well as the value of our digital asset holdings. These conditions can also influence liquidity, capital availability, and investor sentiment across all of our business lines.
In addition, our digital asset operations are directly exposed to risks specific to the TON ecosystem. Network disruptions, validator downtime, software vulnerabilities, governance disputes, or changes in protocol parameters may impair access to our Gram holdings or reduce staking rewards. Adjustments to validator incentives, inflation rates, or reward distributions could materially alter the economics of staking. Likewise, declines in network activity, competition from other blockchains, or regulatory developments affecting TON or related ecosystem participants could negatively impact Gram’s utility and price.
Given the evolving nature of both global markets and the TON Network, we cannot predict the timing or magnitude of any economic or network-specific disruption. Any such events could materially and adversely affect our business, financial condition, and results of operations.
| 29 |
Recent Developments
Ratification of Equity Award Grants and Equity Issuances
We determined that a number of equity awards granted pursuant to our 2019 Stock and Incentive Compensation Plan, as amended, or the Incentive Plan, were inadvertently issued in excess of the amount available under the Incentive Plan, or the Excess Awards, and such issuance of Excess Awards may have required additional shareholder approval. Additionally, some of the equity awards granted pursuant to our Incentive Plan and the shares issued upon exercise or vesting of these equity awards may not have been registered or may not have had a valid exemption from registration or qualification under the Securities Act of 1933 and/or the securities laws of certain states.
Pursuant to Nevada Revised Statues 78.315(2) our Board of Directors adopted resolutions by unanimous written consent to ratify (i) amendments to our Incentive Plan to increase the share reserve under such Incentive Plan, and as may be required in order to align the Incentive Plan and related Equity Awards (as defined below) with all applicable laws, rules and regulations, or the Plan Modifications, and (ii) certain issuances of our shares and grants of equity under the Incentive Plan (including options, restricted stock awards and restricted stock units), or the Equity Awards.
Additionally, we determined that there was lack of clarity on when we effected our reverse stock splits in 2023 and 2024. In order to correct and confirm the effective date for each of the reverse stock splits, we filed certificates of correction with the Nevada Secretary of State on March 30, 2026, to correct the effective date and time of the amendments to our articles of incorporation memorializing the reverse stock splits to April 19, 2023 and October 9, 2024, respectively.
Unregistered Equity Award Grants and Equity Issuances Under Certain Employee Benefit Plans
As mentioned above, we determined that some of the equity awards granted pursuant to our Incentive Plan and the shares issued upon exercise or vesting of these equity awards may not have been registered or may not have had a valid exemption from registration or qualification under the Securities Act of 1933 and/or the securities laws of certain states. Because of the lack of registration and, potentially, the lack of a valid exemption from registration, the equity awards we granted and the shares issued upon exercise or vesting of these equity awards may have been issued in violation of U.S. federal and/or certain state securities laws and we may be subject to claims for rescission or damages.
Under Securities Act Section 12(a)(1), certain purchasers of unregistered securities have a right to recover, upon the tender of such security the consideration paid for such security with interest, less the amount of any income received, or damages if the security holder no longer holds the security. We currently do not believe that any holder has a claim to rescission for the equity awards since we are not aware of any recipient of a potentially unregistered award having suffered damages as a result of such equity award, or shares issued pursuant to such equity award, not being registered.
Although we currently do not believe that any holder has a claim for damages or an economic incentive for rescission of the equity awards, or shares issued upon exercise of these equity awards, our belief could be incorrect, it might later become economically advantageous for a holder to seek rescission, or a holder might otherwise seek rescission for other reasons. If such equity awards, or shares issued or issuable pursuant to such equity awards, are subject to rescission, we could be required to rescind these shares and make payments for rescission, damages, and interest to the holders of these equity awards, or shares issued pursuant to such equity awards, in an amount not yet determinable by us. In addition, we could incur further costs as a result of regulatory inquiries, lawsuits, or additional actions we may be required to take to resolve this matter.
Nasdaq Listing
On March 27, 2026, we provided notice to the Nasdaq Staff regarding our possible violation of Nasdaq Listing Rule 5635(c). The notification to Nasdaq related to our recent determination that the Excess Awards were inadvertently issued in excess of the amount available under the Incentive Plan, and such issuance of Excess Awards may have required additional shareholder approval. On March 30, 2026, we received a letter, or the Letter, from the Nasdaq Staff acknowledging our notice. On April 17, 2026, we submitted a preliminary response to Nasdaq outlining the Company’s plan for compliance. On June 18, 2026, we received a letter from Nasdaq Staff that indicted that a determination had been made to issue a reprimand to the Company (the “Reprimand Letter”). Nasdaq Staff noted in the Reprimand Letter that while the Staff determined that there were failures to comply with the Rule, those failures did not appear to have been the result of a deliberate intent to avoid compliance, and that, as such, the Staff believes that delisting the Company’s securities is not an appropriate sanction.
Forfeiture of RSUs
During the three months ended June 30, 2026, the Company experienced a non-cash stock compensation charge related to the surrender of legacy RSUs amounting to $5,455 as part of remediating the Company’s historical equity incentive plan. Because those awards were not replaced concurrently with new awards, GAAP required the remaining unrecognized compensation expense to be recognized immediately upon their forfeiture. This was an accounting acceleration rather than an economic cost and had no impact on cash flows or shareholder equity.
| 30 |
TON Treasury Strategy
On August 7, 2025, the Company completed transactions involving entry into a subscription agreement with certain institutional investors for a private placement in public equity, offering an aggregate of 57,024,121 shares of Common Stock of the Company, par value $0.0001 per share, at an offering price of $9.51 per share, and pre-funded warrants to purchase up to an aggregate of 1,677,996 shares of Common Stock at a purchase price per warrant of $9.5099. Each of the pre-funded warrants is exercisable for one share of Common Stock at the exercise price of $0.0001 per pre-funded warrant share, immediately exercisable, and may be exercised at any time until all of the pre-funded warrants issued in the PIPE are exercised in full. The gross proceeds from the PIPE, before deducting the placement agent fees and offering expenses, were approximately $558,000 funded in a combination of cash, Gram and other stablecoins. The Company incurred cash and equity placement agent fees of $11,423 and $10,452, respectively, and offering expenses of $13,155. The placement agent equity fee was comprised of 512,860 shares of Common Stock of the Company. Approximately one-third of the PIPE Subscribers agreed to lock-up restrictions with the Company (the “Lock-Up Investors”) whereby they will not sell or transfer the Acquired Securities for six months, with respect to all of the Acquired Securities held by such PIPE Subscribers, or for 12 months, with respect to 50% of the Acquired Securities held by each such PIPE Subscriber, in each case measured from the date of execution of the Subscription Agreement, subject to customary exceptions. The Lock-Up Investors that contributed Gram not eligible for trading or transfer (the “Locked Gram”) are also subject to Lock-Up Restrictions with respect to the Acquired Securities issued as consideration for the Locked Gram for the same duration as the Locked Gram are not eligible for trading or transfer. The Locked Gram do not have any restrictions regarding staking and can be staked by the Company to generate staking revenue. On August 21, 2025, the Company announced the start of its TON Treasury Strategy and used the net proceeds from the PIPE to acquire Gram, the native Digital Asset currency of The Open Network blockchain.
TON is a blockchain platform originally developed by the creators of Telegram, a cloud-based, cross-platform social media and instant messaging service with over one billion monthly active users. Initially named the Telegram Open Network, with its native token Grams, the project faced a U.S. regulatory challenge, that resulted in Telegram ceasing its involvement in the Telegram Open Network blockchain. Grams were not fully developed, and the test version of the tokens was placed into smart contracts, which anyone could mine. A community of open-source developers continued development of the Telegram Open Network, using its codebase, architecture, and documentation, subsequently updating its testnet to mainnet and rebranding it as TON, and used the open-source code as the basis for Toncoin, which became TON’s native token. The TON Foundation, a non-profit organization and network of developers and many network contributors in the TON community, now supports, but does not control or govern, TON blockchain and TON ecosystem.
Effective June 8, 2026, following a community governance vote, the native digital asset of The Open Network, previously known as “Toncoin” (ticker: TON), was rebranded as “Gram” (ticker: GRAM). The rebrand changed only the name and ticker of the digital asset and did not affect the underlying blockchain, the Company’s holdings of the digital asset, or its staking positions. Accordingly, the Company refers to its digital asset holdings as “Gram” or “GRAM” throughout this Quarterly Report on Form 10-Q, and references to “Toncoin” or “TON” in the Company’s previously issued filings refer to the same digital asset.
TON blockchain is a layer-1 blockchain designed to be a scalable, user-friendly platform that supports various decentralized applications. Operating on a Proof of Stake consensus model, TON aims to enhance network scalability, security, and energy efficiency. Validators help secure, and run, TON, which is accomplished by staking Gram, earning rewards for their participation, and contributing to the network’s overall stability. Gram is also used for paying transaction and gas fees and participating in governance. The functionality of TON depends on the use of Gram to power transactions and smart contracts that are essential to the applications built on top of TON. Furthermore, the use of Gram by validators facilitates the security features on which TON relies.
From 2023 to 2024, Gram experienced significant growth in active addresses and wallets. Moreover, in 2024, TON blockchain was the fastest growing blockchain by transactions. In January 2025, Telegram and the TON Foundation announced that TON blockchain would become the exclusive blockchain infrastructure powering Telegram’s Mini App ecosystem, allowing Telegram users to use Gram within Telegram without leaving the interface. This enables TON to leverage Telegram’s fast-growing user population to scale distribution. In July 2025, TON Wallet, a self-custodial wallet built into Telegram’s interface, went live in the United States.
The Company is focused on the accumulation of Gram for long-term investment, whether acquired through deployment of proceeds from capital raising transactions, staking rewards or via open market purchases. The Company aims to steadily expand its Gram treasury, stake Gram, and to support the development of a tokenized economy inside Telegram’s billion-user platform.
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To further institutionalize our TON-centered strategy, the Company has bolstered its leadership team with executives who bring deep expertise in both traditional and decentralized finance. This structure affirms our intent to build a deeply experienced leadership team across global institutional finance and the TON ecosystem.
Advisory Services Agreement
On January 23, 2026, the Company’s Board of Directors authorized the Company to enter into settlement negotiations with Kingsway Capital Partners Limited (“Kingsway”) to terminate the advisory services agreement dated August 7, 2025. Under the agreement, Kingsway provides advisory and consulting services to the Company in connection with the expansion and diversification of the Company’s business and its TON Treasury Strategy.
On August 10, 2026, after the parties were unable to reach a negotiated settlement, the Company notified Kingsway that it had terminated the advisory services agreement without a settlement. The Company ceased making monthly payments under the agreement in March 2026, with its last payment made on March 18, 2026. Both parties have reserved all rights. As of the date of this filing, the Company cannot estimate the amount of any loss or gain resulting from the termination. The Company does not expect the termination to affect its TON Treasury Strategy or day-to-day operations. Kingsway is controlled by Manuel Stotz, the Company’s Executive Chairman, and is a significant stockholder of the Company.
Hiring of Chief Executive Officer
On April 16, 2026, the Company announced the appointment of Kevin Wilson as Chief Executive Officer, effective May 4, 2026. Mr. Wilson will receive an annual base salary of $950 thousand, a target annual bonus opportunity of 100% of salary as determined by the Board, a one-time $250 thousand signing bonus, and an equity award representing 2% of fully diluted shares to be approved by the Board, along with standard benefits and severance eligibility. Mr. Wilson brings more than 20 years of experience across financial markets, institutional trading and digital assets, including recent leadership roles focused on cryptocurrency trading and blockchain-based initiatives. The Company believes Mr. Wilson’s experience in digital asset markets and scaling trading platforms will support its strategy of building a digital asset treasury centered on Gram and advance the Company’s broader growth initiatives.
Results of Operations
Three Months Ended June 30, 2026 as Compared to the Three Months Ended June 30, 2025
The following is a comparison of our results of continuing operations for the three months ended June 30, 2026 and 2025 (in thousands):
| Three Months Ended June 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| Revenue | $ | 15,019 | $ | - | $ | 15,019 | ||||||
| Cost of Revenue | 766 | - | 766 | |||||||||
| Gross profit | 14,253 | - | 14,253 | |||||||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 3 | 9 | (6 | ) | ||||||||
| General and administrative | 13,771 | 1,253 | 12,518 | |||||||||
| Total operating expenses | 13,774 | 1,262 | 12,512 | |||||||||
| Operating income (loss) from continuing operations | 479 | (1,262 | ) | 1,741 | ||||||||
| Other income (expense), net | ||||||||||||
| Interest income | 272 | 90 | 182 | |||||||||
| Unrealized gain (loss) on investments | - | 39 | (39 | ) | ||||||||
| Other income (expense), net | 2 | - | 2 | |||||||||
| Net gain (loss) on fair value of Digital Assets | 82,782 | - | 82,782 | |||||||||
| Total other income (expense), net | 83,056 | 129 | 82,927 | |||||||||
| Net income (loss) from continuing operations before income taxes | $ | 83,535 | $ | (1,133 | ) | $ | 84,668 | |||||
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Revenue
Revenue was $15,019 for the three months ended June 30, 2026, as compared to no revenue for the three months ended June 30, 2025. The increase was due to staking revenue recognized from the Company’s GRAM staking activities, which commenced during the three months ended September 30, 2025. As a result, no comparable staking revenue was recognized during the prior-year comparable period.
Cost of Revenue
Cost of revenue was $766 for the three months ended June 30, 2026, as compared to $0 for the three months ended June 30, 2025. The increase was due to staking revenue recognized from the Company’s GRAM staking activities, which commenced during the three months ended September 30, 2025. As a result, no comparable cost of revenue was recognized during the prior-year comparable period.
Operating Expenses
Depreciation and amortization expenses were $3 for the three months ended June 30, 2026, as compared to $9 for the three months ended June 30, 2025.
General and administrative expenses for the three months ended June 30, 2026 were $13,771, as compared to $1,253 for the three months ended June 30, 2025, reflecting an increase of $12,518. During the period, the Company experienced a non-cash stock compensation charge related to the surrender of legacy RSUs amounting to $5,455 as part of remediating the Company’s historical equity incentive plan. Because those awards were not replaced concurrently with new awards, GAAP required the remaining unrecognized compensation expense to be recognized immediately upon their forfeiture. This was an accounting acceleration rather than an economic cost and had no impact on cash flows or shareholder equity.
General and administrative expenses excluding share-based compensation expense for the three months ended June 30, 2026 were $8,316 as compared to $924 for the three months ended June 30, 2025, reflecting an increase of $7,392. The increase in general and administrative expenses excluding share-based compensation expense is primarily due to increases in amortization of advisory fees resulting from the Kingsway agreement of $2,902, personnel costs of $1,740, advisory fees resulting from the Kingsway agreement of $832, legal fees of $735, directors’ and officers’ insurance of $403, professional fees of $347, investor relations of $130 and asset custody fees of $124.
Other Income (Expense), net
Other income (expense), net, was $83,056 for the three months ended June 30, 2026. The amount was primarily attributable to an unrealized gain of $82,707 on the Company’s GRAM holdings resulting from an increase in the fair value of GRAM during the period.
Three Months Ended June 30, 2026 as Compared to the Three Months Ended March 31, 2026
The following is a comparison of our results of continuing operations for the three months ended June 30, 2026 and March 31, 2026 (in thousands):
| Three Months Ended, | ||||||||||||
| June 30, 2026 | March 31, 2026 | Change | ||||||||||
| Revenue | $ | 15,019 | $ | 3,002 | $ | 12,017 | ||||||
| Cost of Revenue | 766 | 156 | 610 | |||||||||
| Gross profit | 14,253 | 2,846 | 11,407 | |||||||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 3 | 1 | 2 | |||||||||
| General and administrative | 13,771 | 6,534 | 7,237 | |||||||||
| Total operating expenses | 13,774 | 6,535 | 7,239 | |||||||||
| Operating income (loss) from continuing operations | 479 | (3,689 | ) | 4,168 | ||||||||
| Other income (expense), net | ||||||||||||
| Interest income | 272 | 299 | (27 | ) | ||||||||
| Other income (expense), net | 2 | - | 2 | |||||||||
| Net gain (loss) on fair value of Digital Assets | 82,782 | (87,928 | ) | 170,710 | ||||||||
| Total other income (expense), net | 83,056 | (87,629 | ) | 170,685 | ||||||||
| Net income (loss) from continuing operations before income taxes | $ | 83,535 | $ | (91,318 | ) | $ | 174,853 | |||||
Revenue
Revenue was $15,019 for the three months ended June 30, 2026, compared to $3,002 for the three months ended March 31, 2026. The increase of $12,017, or 400%, was primarily attributable to higher staking rewards earned during the period, reflecting enhanced network efficiency and validation throughput following upgrades to the TON Virtual Machine and network consensus upgrade implemented on the TON blockchain during the three months ended June 30, 2026.
Cost of Revenue
Cost of revenue was $766 for the three months ended June 30, 2026, as compared to $156 for the three months ended March 31, 2026. The cost of revenue increase of $610, or 391%, is consistent with the revenue increase of 400%. The gross profit for the three months ended June 30, 2026 and the three months ended March 31, 2026 remained constant at 95%.
Operating Expenses
Depreciation and amortization expenses were $3 for the three months ended June 30, 2026, as compared to $1 for the three months ended March 31, 2026.
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General and administrative expenses were $13,771 for the three months ended June 30, 2026, as compared to $6,534 for the three months ended March 31, 2026, reflecting an increase of $7,237. During the period, the Company experienced a non-cash stock compensation charge related to the surrender of legacy RSUs amounting to $5,455 as part of remediating the Company’s historical equity incentive plan. Because those awards were not replaced concurrently with new awards, GAAP required the remaining unrecognized compensation expense to be recognized immediately upon their forfeiture. This was an accounting acceleration rather than an economic cost and had no impact on cash flows or shareholder equity.
General and administrative expenses excluding share-based compensation expense for the three months ended June 30, 2026 were $8,316 as compared to $5,412 for the three months ended March 31, 2026, reflecting an increase of $2,904 primarily due to an increase in amortization of advisory fees resulting from the Kingsway agreement of $2,865.
Other Income (Expense), net
Other income (expense), net, was $83,056 for the three months ended June 30, 2026, compared to $(87,629) for the three months ended March 31, 2026. The improvement was primarily attributable to an increase in the fair value of the Company’s GRAM holdings resulting from an increase in the market price of GRAM during the three months ended June 30, 2026, which resulted in an unrealized gain of $82,707, compared to an unrealized loss of $(87,928) during the three months ended March 31, 2026.
Six Months Ended June 30, 2026 as Compared to the Six Months Ended June 30, 2025
The following is a comparison of our results of continuing operations for the six months ended June 30, 2026 and 2025 (in thousands):
| Six Months Ended June 30, | ||||||||||||
| 2026 | 2025 | Change | ||||||||||
| Revenue | $ | 18,021 | $ | - | $ | 18,021 | ||||||
| Cost of Revenue | 922 | - | 922 | |||||||||
| Gross margin | 17,099 | - | 17,099 | |||||||||
| Operating expenses | ||||||||||||
| Depreciation and amortization | 4 | 17 | (13 | ) | ||||||||
| General and administrative | 20,305 | 2,173 | 18,132 | |||||||||
| Total operating expenses | 20,309 | 2,190 | 18,119 | |||||||||
| Operating income (loss) from continuing operations | (3,210 | ) | (2,190 | ) | (1,020 | ) | ||||||
| Other income (expense), net | ||||||||||||
| Interest income | 571 | 211 | 360 | |||||||||
| Unrealized gain (loss) on investments | - | 121 | (121 | ) | ||||||||
| Other income (expense), net | 1 | (1 | ) | 2 | ||||||||
| Net gain (loss) on fair value of Digital Assets | (5,145 | ) | - | (5,145 | ) | |||||||
| Total other income (expense), net | (4,573 | ) | 331 | (4,904 | ) | |||||||
| Net loss from continuing operations before income taxes | $ | (7,783 | ) | $ | (1,859 | ) | $ | (5,924 | ) | |||
Revenue
Revenue was $18,021 for the six months ended June 30, 2026, compared to no revenue for the six months ended June 30, 2025. The increase was attributable to staking revenue recognized from the Company’s GRAM staking activities, which commenced during the three months ended September 30, 2025. As a result, no comparable staking revenue was recognized during the prior-year comparable period.
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Cost of Revenue
Cost of revenue was $922 for the six months ended June 30, 2026, as compared to $0 for the six months ended June 30, 2025. The increase was due to staking revenue recognized from the Company’s GRAM staking activities, which commenced during the three months ended September 30, 2025. As a result, no comparable cost of revenue was recognized during the prior-year comparable period.
Operating Expenses
Depreciation and amortization expenses were $4 for the six months ended June 30, 2026, as compared to $17 for the six months ended June 30, 2025.
General and administrative expenses for the six months ended June 30, 2026 were $20,305, as compared to $2,173 for the six months ended June 30, 2025, reflecting an increase of $18,132. During the period, the Company experienced a non-cash stock compensation charge related to the surrender of legacy RSUs amounting to $5,455 as part of remediating the Company’s historical equity incentive plan. Because those awards were not replaced concurrently with new awards, GAAP required the remaining unrecognized compensation expense to be recognized immediately upon their forfeiture. This was an accounting acceleration rather than an economic cost and had no impact on cash flows or shareholder equity.
General and administrative expenses excluding share-based compensation expense for the six months ended June 30, 2026 were $13,728 as compared to $1,537 for the six months ended June 30, 2025, reflecting an increase of $12,191. The increase in general and administrative expenses excluding share-based compensation expense is primarily due to an increase in amortization of advisory fees resulting from the Kingsway agreement of $2,939, increases in personnel costs of $2,852, legal fees of $2,476, advisory fees resulting from the Kingsway agreement of $1,533, directors’ and officers’ insurance of $826, professional fees of $646, asset custody fees of $228, and investor relations of $197.
Other Income (Expense), net
Other income (expense), net, was $(4,573) for the six months ended June 30, 2026, compared to $331 for the six months ended June 30, 2025. The change was primarily attributable to an unrealized loss of $(5,220) on the Company’s GRAM holdings resulting from a decline in the market price of GRAM during the period offset by a realized gain recorded on the sale of GRAM of $75.
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Use of Non-GAAP Measures – Modified EBITDA
In addition to our results under generally accepted accounting principles (“GAAP”), we present Modified EBITDA as a supplemental measure of our performance. However, Modified EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Modified EBITDA as net income (loss), plus depreciation and amortization, share-based compensation, other (income) expense, net, income tax expense, net (gain) loss on fair value of Digital Assets, loss from discontinued operations, net of tax, and other non-recurring costs.
Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Modified EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Modified EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Net income (loss) | $ | 76,526 | $ | (2,352 | ) | $ | (14,426 | ) | $ | (4,790 | ) | |||||
| Adjustments: | ||||||||||||||||
| Depreciation and amortization | 3 | 9 | 4 | 17 | ||||||||||||
| Share-based compensation | 5,455 | 330 | 6,577 | 636 | ||||||||||||
| Other (income) expense, net | (2 | ) | (39 | ) | (1 | ) | (120 | ) | ||||||||
| Income tax expense | 2 | 1 | 2 | 1 | ||||||||||||
| Net (gain) loss on fair value of Digital Assets | (82,782 | ) | - | 5,145 | - | |||||||||||
| Loss from discontinued operations, net of tax | 7,007 | 1,218 | 6,641 | 2,930 | ||||||||||||
| Other non-recurring costs (a) | 339 | - | 2,065 | - | ||||||||||||
| Total EBITDA adjustments | (69,978 | ) | 1,519 | 20,433 | 3,464 | |||||||||||
| Modified EBITDA | $ | 6,548 | $ | (833 | ) | $ | 6,007 | $ | (1,326 | ) | ||||||
(a) Represents severance and legal litigation costs.
We present Modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Modified EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Modified EBITDA has limitations as an analytical tool, which includes, among others, the following:
| ● | Modified EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; | |
| ● | Modified EBITDA does not reflect changes in, or cash requirements for, our working capital needs; | |
| ● | Modified EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and | |
| ● | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Modified EBITDA does not reflect any cash requirements for such replacements. |
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Liquidity and Capital Resources
Overview
As of June 30, 2026 and December 31, 2025, we had the following balances of cash and cash equivalents, restricted cash, and unrestricted Gram holdings.
| (in thousands) | June 30, 2026 | December 31, 2025 | ||||||
| Cash and cash equivalents | $ | 28,805 | $ | 39,493 | ||||
| Restricted cash | 169 | 169 | ||||||
| Unrestricted Gram holdings | 111,339 | 89,628 | ||||||
| Total | $ | 140,313 | $ | 129,290 | ||||
Sources of Liquidity
We finance our operations with cash on hand and periodic sales of Gram. For the six months ended June 30, 2026, the Company sold Gram resulting in proceeds of $1,049. Further, the Company has the ability to sell shares in the open market through a current At the Market (“ATM”) sales agreement.
Equity Financings
On August 7, 2025, the Company completed a private investment in public equity (“PIPE”) with certain institutional investors (the “PIPE Subscribers”) pursuant to a subscription agreement. The PIPE included the sale of (i) 57,024,121 shares of common stock, par value $0.0001 per share, at a price of $9.51 per share, and (ii) pre-funded warrants to purchase up to 1,677,996 shares of common stock at a price of $9.5099 per warrant (together, the “Acquired Securities”). Each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.0001 per share, is immediately exercisable, and remains outstanding until exercised in full. The PIPE generated gross proceeds of approximately $558,000, funded with a combination of cash, Gram, and USD-denominated stablecoins (USDC and USDT), before deducting placement agent fees and offering expenses. The Company incurred cash placement agent fees of $11,423 and offering expenses of $13,155. In addition, the placement agent equity fee consisted of 512,860 shares of common stock valued at $10,452.
On August 8, 2025, the Company entered into a sales agreement with Cantor Fitzgerald & Co. that provides for sales of our common stock with aggregate proceeds of up to $1.0 billion from time to time through an “at the market” equity offering program (the “ATM Offering”). During the year ended December 31, 2025, we sold 391,988 shares of common stock under our ATM Offering at a weighted average price per share of $18.44 for aggregate gross proceeds of $7,228 net of offering costs of $596.
Short-term and Long-term Liquidity Needs
As of June 30, 2026, our short-term and long-term liquidity needs include the following:
| ● | Short-term liquidity. Our short-term liquidity needs include working capital requirements and third-party software supporting our operations due within the next twelve months. | |
| ● | Long- term liquidity. Beyond the next 12 months, our long-term cash needs are primarily for obligations related to our operating leases of $46. These obligations are classified as long-term liabilities of discontinued operations in our condensed consolidated balance sheet. |
We expect that our existing cash and cash equivalents will be sufficient to fund our operating plans for at least twelve months from the date of this Quarterly Report.
The following is a summary of our cash flows from operating, investing, and financing activities for the six months ended June 30, 2026 and 2025 (in thousands):
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash used in operating activities – continuing operations | $ | (10,640 | ) | $ | (66 | ) | ||
| Cash used in operating activities – discontinued operations | (1,120 | ) | (3,290 | ) | ||||
| Cash provided by (used in) investing activities – continuing operations | 1,047 | (98 | ) | |||||
| Cash provided by (used in) investing activities – discontinued operations | 26 | (4,390 | ) | |||||
| Cash provided by in financing activities | - | 4,582 | ||||||
| Decrease in cash, cash equivalents, and restricted cash | $ | (10,687 | ) | $ | (3,262 | ) | ||
Cash Flows – Operating
For the six months ended June 30, 2026, our cash flows used in operating activities for continuing operations amounted to $10,640, compared to cash flows used for the six months ended June 30, 2025 of $66. The prior-year comparable period included a non-recurring Employee Retention Credit (“ERC”) refund of approximately $1,724. Excluding this refund, cash used in operating activities from continuing operations for the six months ended June 30, 2025 would have been $1,790. The increase in cash used in operating activities for continuing operations in the current period primarily reflects higher operating expenses, legal and professional fees, and personnel costs.
Cash Flows – Investing
For the six months ended June 30, 2026, our cash flows provided by investing activities for continuing operations amounted to $1,047, compared to $98 used for the six months ended June 30, 2025. The increase was due to proceeds received from the sale of GRAM.
Cash Flows – Financing
For the six months ended June 30, 2026, our cash flows provided by financing activities amounted to $0, compared to $4,582 for the same period in 2025. This decrease was primarily a result of the Company having to raise capital in the prior year to assist in the funding of the Lyvecom acquisition in April 2025. No such need existed for the six months ended June 30, 2026.
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Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with GAAP, which require that we make certain assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. There have been no significant and material changes in our critical accounting estimates during the three months ended June 30, 2026, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.
Recently Issued Accounting Pronouncements
For a summary of our recent accounting policies, refer to Note 2 - Summary of Significant Accounting Policies, of our unaudited condensed consolidated financial statements included under Item 1 – Financial Statements in this Form 10-Q.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 4 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d- 15(e) under the Exchange Act) as of June 30, 2026. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2026 at the reasonable assurance level.
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 June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
For information regarding legal proceedings, refer to Note 11 - Commitments and Contingencies of the Notes to our Condensed Consolidated Financial Statements, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Our business, results of operations, and financial condition are subject to various risks. These risks are described elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC, including the Annual Report filed on March 31, 2026. The risk factors identified in our Annual Report have not changed in any material respect.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5 - OTHER INFORMATION
| (a) | On July 20, 2026, the Company entered into an amendment (the “Amendment”) to the employment agreement with each of Kevin Wilson, the Company’s President and Chief Executive Officer, and Sarah Olsen, the Company’s Chief Financial Officer and Chief Operating Officer. Each Amendment provides that the executive is eligible to receive severance provided their employment is terminated by the Company without Cause or the employee resigns for Good Reason (as defined in the executive’s employment agreement) and eliminates the provision that such termination or resignation occur within 18 months following the effective date of the executive’s employment agreement. |
| (b) | None. |
| (c) | During the three months ended June 30, 2026, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) 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. |
ITEM 6 - EXHIBITS
Reference is made to the exhibits listed on the Index to Exhibits.
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INDEX TO EXHIBITS
| Exhibit Number | Description | |
| 10.1 | Separation Agreement between the Company and Ms. Kapustina, dated March 31, 2026 (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 2, 2026). | |
| 10.2 | Employment Agreement, dated April 16, 2026 between the Company and Kevin Wilson (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2026). | |
| 10.3 | Amendment to 2019 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2026). | |
| 10.4 | TON Strategy Company 2026 Equity Incentive Plan (incorporated by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A (File No. 001-38834) filed with the Securities and Exchange Commission on April 30, 2026). | |
| 10.5* | Amendment #1 to Employment Agreement, dated July 20, 2026, between the Company and Kevin Wilson. | |
| 10.6* | Amendment #1 to Employment Agreement, dated July 20, 2026, between the Company and Sarah Olsen. | |
| 31.1* | Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification Required by Rule 13a-14(a) of 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 Principal Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code | |
| 32.2** | Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * | Filed herewith. |
| ** | The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TON STRATEGY COMPANY | ||
| Date: August 11, 2026 | By: | /s/ Kevin Wilson |
| Kevin Wilson | ||
| President, Chief Executive Officer, | ||
| and Director | ||
| (Principal Executive Officer) | ||
| Date: August 11, 2026 | By: | /s/ Sarah Olsen |
| Sarah Olsen | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
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