ORBS 10-K & 10-Q changes, risk factors and insider trading

Our Digital Asset Treasury (“DAT”) Strategy exposes us to significant volatility and potential losses, and may materially affect our financial condition and results of operations.

In September 2025, we adopted a Digital Asset Treasury Strategy under which a substantial portion of our liquidity, including proceeds from financing transactions, is allocated to the acquisition and holding of digital assets. Digital asset markets are highly volatile and historically subject to significant price fluctuations. As of December 31, 2025, we held approximately $176 million of digital assets measured at fair value under ASU 2023-08. Future fluctuations in the prices of these assets, including Worldcoin (WLD), Ethereum (ETH), and other crypto assets, may result in material gains or losses in our consolidated statements of operations.

Significant declines in digital asset prices may reduce our liquidity, impair our ability to execute our operating strategy, reduce the value of our balance sheet, and adversely affect our stock price.

The fair value measurement model required under ASU 2023-08 may increase earnings volatility.

Effective January 1, 2025, we adopted ASU 2023-08, which requires us to measure eligible digital assets at fair value, with changes recognized in net income each reporting period. As a result, our earnings will be sensitive to short-term price movements in digital asset markets. This may produce material period to period volatility, reduce comparability to prior periods, and result in losses independent of our operating performance.

We may be unable to liquidate digital assets at favorable prices or in a timely manner due to limited market liquidity or trading halts.

Digital asset markets may experience illiquidity, exchange outages, trading halts, or disruptions. Some of our digital assets are custodied or executed through a limited number of regulated and unregulated trading venues. In periods of high volatility or market stress, we may be unable to convert digital assets into fiat currency at acceptable prices or within required timeframes, which may impair our ability to satisfy operational or financing needs.

Digital asset custody, exchange, and counterparty risks may expose us to loss of assets.

We rely on third-party custodians and trading counterparties, including Kraken, Coinbase, and FalconX, to safeguard and execute transactions relating to our digital assets. The digital asset industry has experienced failures of exchanges, custodians, trading firms, and stablecoin issuers. A cybersecurity breach, insolvency, operational failure, or misappropriation at any custodian or counterparty could result in partial or total loss of our digital assets, which would materially and adversely affect our financial condition.

We may need additional capital in the future, and our access to financing may be adversely affected by volatility in digital asset markets.

Although we raised significant capital during the quarter through a PIPE and through our ATM program, our future liquidity and capital raising capacity may depend on the value of our digital asset holdings and capital market conditions. Material reductions in digital asset prices could limit our ability to raise capital on favorable terms, or at all, which could adversely affect our operations and strategic plans.

The tax treatment of our digital asset holdings and transactions is subject to significant uncertainty, and adverse developments in tax law or interpretive guidance could materially increase our tax liabilities.

Under current IRS guidance, digital assets are treated as property for federal income tax purposes. Purchases, dispositions, and exchanges of digital assets, including conversions between different digital asset types, may give rise to taxable gains or losses. The tax treatment of certain digital asset transactions, including decentralized finance activities, staking rewards, airdrops, and token-for-token exchanges, remains uncertain and subject to evolving regulatory and judicial interpretation. The IRS may issue new guidance, or Congress may enact new legislation, that changes the tax treatment of digital assets in a manner that is materially adverse to us. For example, changes to the tax treatment of unrealized gains on digital assets, limitations on the deductibility of digital asset losses, or new reporting requirements for digital asset custodians could increase our tax obligations, reduce our after-tax returns, or impose additional compliance costs. We hold significant positions in multiple digital assets across different blockchain networks, and the interaction of federal, state, and international tax regimes with our digital asset holdings creates additional complexity and risk. Any adverse change in the tax treatment of our digital asset holdings or transactions could materially and adversely affect our financial condition and results of operations.

Our treasury portfolio is heavily concentrated in digital assets and private company investments, and the lack of diversification across traditional asset classes may amplify the risks to our financial condition.

As of the date of this Annual Report, our treasury assets consist primarily of digital assets, including Worldcoin (WLD), Ethereum (ETH), and stablecoins, as well as strategic investments in private companies including OpenAI and Beast Industries. We do not maintain meaningful allocations to traditional asset classes such as investment-grade debt securities, money market instruments, or diversified equity portfolios. This concentrated allocation to highly volatile digital assets and illiquid private company investments means that our balance sheet, reported earnings, and stock price are disproportionately sensitive to fluctuations in digital asset markets and developments at our portfolio companies. A simultaneous decline in digital asset values and the value of our private company investments could severely impair our liquidity, reduce our stockholders’ equity, and limit our ability to fund operations, service debt, or raise additional capital. The absence of diversification into more stable or liquid asset classes amplifies these risks and may increase the volatility of our reported financial results.

We have adopted a digital asset treasury strategy with a focus on WLD, and we may be unable to successfully implement this new strategy.

We have adopted a digital asset treasury primarily dedicated to WLD, including acquisitions of WLD, including through a process similar to staking and other decentralized finance activities. There is no assurance that we will be able to successfully implement this new strategy or operate Worldcoin-related activities at the scale currently anticipated. Worldcoin is an ERC-20 token operating on the Ethereum Mainnet. The identity layer (iris verification, World identification credentials and the Orb hardware network) is built entirely off-chain. This business requires specialized employee skillsets and operational, technical and compliance infrastructure to support WLD and identity-layer activities. This also requires the implementation of different security protocols and treasury management practices and adherence to privacy laws. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including Nasdaq and the Securities and Exchange Commission (the “SEC”), with respect to the treatment of public company cryptocurrency strategies. There is no assurance that we will be able to execute this strategy by building out the needed infrastructure within the timeframe that we currently anticipate. Errors by key management could result in significant loss of funds and reduced rewards. As a result, our shift towards WLD could have a material adverse effect on our business and financial condition.

Our shift towards a Worldcoin-focused treasury strategy requires substantial changes in our day-to-day operations and may expose us to significant operational risks.

Our shift towards a WLD treasury-focused strategy, including decentralized finance activities, exposes us to significant operational risks. The Worldcoin ecosystem rapidly evolves. The upgrades may require that we incur unanticipated costs and could cause temporary service disruptions to the Worldcoin network. We may also need to employ third-party service providers in our operations, which may introduce risks outside of our control, including significant cybersecurity risks. Any of these operational risks could materially and adversely affect our ability to execute our WLD treasury strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.

We intend to purchase more WLD, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.

We intend to purchase or otherwise acquire more WLD for the furtherance of our digital asset treasury operations. Digital assets, such as WLD, generally are highly volatile assets, including as a result of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements. Our operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements. In addition, digital assets do not pay interest or other returns, unless utilized in financial applications, and so the ability to generate a return on investment from the net proceeds of any capital raising activities will depend on whether there is appreciation in the value of digital assets following our purchases, which is highly speculative. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below what we paid for such digital assets. There is no guarantee that digital assets such as WLD will continue to represent any measure of value. Any decreases in the value of WLD could have a material adverse effect on our financial condition and results of operations. See also “—Ownership of WLD is believed to be highly concentrated.”

The concentration of our WLD holdings enhances the risks inherent in our Worldcoin-focused strategy.

The intended concentration of our WLD holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our Worldcoin-focused strategy. Any future significant declines in the price of WLD could have a pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets. See also “—Ownership of WLD is believed to be highly concentrated” and “—We intend to purchase WLD, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.”

In connection with our WLD treasury strategy, we expect to interact with various smart contracts deployed on the Worldcoin network, which may expose us to risks and technical vulnerabilities.

In connection with our WLD treasury strategy, including decentralized finance activities, we expect to interact with various smart contracts deployed on the Ethereum network in order to optimize our strategy and generate income. Smart contracts are self-executing code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of decentralized finance applications, they are subject to many known risks such as technical vulnerabilities, coding errors, security flaws, and exploits. Any vulnerability in a smart contract we interact with could result in the loss or theft of WLD or other digital assets, which could have a materially adverse impact on our business. In addition, certain smart contracts are upgradable or subject to certain governance controls which could result in unforeseen code errors, asset or account freezing, or the loss of digital assets. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the loss of or inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.

Part of our future business strategy may include acquisitions and investments in companies with Worldcoin-focused or blockchain strategies, and there are risks associated with the integration of any assets or operations acquired and our ability to manage those risks. In addition, we may be unable to make attractive acquisitions or successfully integrate acquired businesses, assets or properties, and any inability to do so may disrupt our business and hinder our ability to grow.

We intend to pursue a strategy focused on both WLD accumulation and future acquisitions. Accordingly, in the future we may make acquisitions of businesses or assets that we expect to complement or expand our current assets. However, we may not be able to identify attractive acquisition opportunities in the future. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on commercially acceptable terms. No assurance can be given that we will be able to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.

The success of any acquisition will depend on our ability to integrate effectively the acquired business or asset into our existing operations. The process of integrating acquired businesses and assets may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial resources. The integration of acquisitions is a complex, costly and time-consuming process, and our management may face significant challenges in such process. Some of the factors affecting integration will be outside of our control, and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue. Our failure to achieve consolidation savings, to incorporate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational difficulties could have a material and adverse effect on our financial condition and results of operations.

Additional ability to achieve the objectives of our business strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our business strategy.

Decentralized finance arrangements may expose us to risks of smart contract risk, operational failures and cybersecurity threats.

From time to time, we may generate income through the use of digital assets including WLD or stablecoins in decentralized protocols including decentralized finance (“DeFi”) applications. DeFi applications include over-collateralized borrow-lend vaults, token-exchange pools, and other financial or commercial arrangements. Although these protocols are largely designed to limit counterparty risk in transactions, they introduce novel risks relating to software code bugs, liquidation risks, and governance risks that are designed to operate in decentralized environments but can be subject to failures or exploits. In addition: (a) network congestion or downtime can increase the likelihood of asset loss or liquidation; (b) the volatility of digital assets deployed into DeFi applications may increase the likelihood of liquidation due to market downturns, liquidity crises, governance attacks or other exploits, leading to substantial financial losses; (c) the uncertainty in the accounting treatment of certain DeFi applications; (d) DeFi applications generally operate on a user-to-protocol basis where a user of a DeFi application does not know the identity of other parties utilizing the DeFi application; and (e) the use of monitoring and forensics software to mitigate risks of engaging in DeFi application may not prevent engaging in DeFi pools that are also used by bad actors.

The Company will face risks relating to the custody of its digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our private keys, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.

We expect our primary counterparty risk with respect to our WLD will be custodian performance obligations under the custody arrangements we have entered into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, SEC enforcement actions against other providers, or placement into receivership or civil fraud lawsuit against digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.

While our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially held WLD will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our WLD holdings, we would become subject to additional counterparty risks. We will need to carefully evaluate market conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to implementing any such strategy, all of which could affect our ability to successfully implement and execute on any such future strategy. These risks, along with any significant non-performance by counterparties, including in particular the custodian or custodians with which we will custody substantially all of our WLD, could have a material adverse effect on our business, prospects, financial condition, and operating results.

We face risks relating to the use of third-party trading platforms in connection with our Worldcoin-focused strategy.

We use third-party trading platforms and over-the-counter brokers to purchase WLD for our treasury. However, the entities with which we have entered into agreements may close, go bankrupt, or change their business direction, and we may no longer be able to utilize them to implement our strategy. If we cannot find replacement counterparties, it may severely adversely impact our strategy. We also may be forced to enter into agreements that do not have favorable terms, which could have a material adverse effect on our business, financial condition or the results of our operations.

The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.

Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.

Although we plan to regularly transfer digital assets to or from vendors, consultants and services providers, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.

To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.

We are subject to significant competition in the growing digital asset industry and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.

Following the launch of the Company’s digital asset treasury strategy, the Company operates in a competitive environment and will compete against other companies and other entities with similar strategies, including companies that may have significant holdings in WLD and other digital assets, and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.

The Company previously comprised of two main businesses, Forever 8’s Inventory Cash Flow Solution and the Corrugated Packaging Business of Ferguson Containers. We acquired Forever 8 in October 2022 and it is focused on purchasing inventory and becoming the supplier for e-commerce retailers. We no longer intend to generate revenue from our Web 3 Business. Our Corrugated Packaging Business manufactured and sold custom packaging for a wide variety of products and through packaging helps customers generate brand awareness and promote brand image. In April 2025, the Company divested the Corrugated Packaging Business.

Selling, general and administrative expenses include selling and marketing costs, payroll and employee-related expenses, administrative expenses, professional fees, insurance, technology and software costs, and other overhead required to support both our Forever 8 operations and our corporate infrastructure. SG&A also includes expenses associated with supporting the Digital Asset Treasury function, including custodial fees, compliance costs, and professional services related to digital asset oversight.

Restructuring and severance expenses consist of costs associated with organizational changes, including employee severance, benefits continuation, contract termination costs, and costs associated with facility consolidations or other restructuring activities. These expenses vary depending on management’s strategic initiatives. No restructuring or severance costs were incurred during the periods presented.

Change in Fair Value of Digital Assets

Beginning in September 2025, following the deployment of our Digital Asset Treasury strategy, the Company holds digital assets measured at fair value in accordance with ASU 2023-08. Changes in the fair value of digital assets including both realized and unrealized gains and losses are recognized in earnings in the period in which they occur. Because the DAT is not a revenue-generating activity, changes in fair value represent a key driver of period-over-period volatility in our results of operations.

Gain on Divestiture

Gain on divestiture represents gains recognized in connection with the sale of assets. This includes the gain recognized on the sale of the Ferguson Containers corrugated packaging business on April 7, 2025.

Gain on Extinguishment of Liabilities

Gain on extinguishment of liabilities includes gains recognized when outstanding liabilities are settled for amounts less than their carrying value, or when obligations are legally extinguished. No such gains were recorded during the periods presented.

Other income includes the interest income received from the Wattum Note and Reichard Containers Note.

For the year ended December 31, 2025, revenues were $32,981,126, representing a decrease of $6,640,146, or 16.76%, compared to revenues of $39,621,272 for the year ended December 31, 2024. The decrease was primarily driven by lower volumes through our Forever 8 inventory management platform as we continued to exit structurally unprofitable liquidation-model customer relationships and transitioned our mix toward higher-quality recurring inventory financing arrangements. Revenues from our discontinued Corrugated Packaging Business are excluded from continuing operations and presented separately.

Cost of revenues was $32,446,797 for the year ended December 31, 2025 compared to $33,639,274 for the year ended December 31, 2024, a decrease of $1,192,477, or 3.54%. The decrease is primarily attributable to lower inventory volumes consistent with the decline in revenues partially offset by reserves for obsolescence. Cost of revenues as a percentage of revenues increased to 98.38% for 2025 compared to 84.91% in 2024, reflecting continued near-term margin compression as the Company works through older inventory positions and completes its transition away from lower-margin liquidation arrangements.

Gross profit decreased to $534,329 for the year ended December 31, 2025, compared to $5,981,998 for the year ended December 31, 2024, a decline of $5,447,669, or 91.07%. Gross margin for 2025 was 1.62%, compared to 15.10% in 2024. The compression in gross margin reflects the impact of recognition of reserves for inventory obsolescence related to estimated recovery value of inventory and certain product mix shifts, inventory write-downs associated with exiting the liquidation business model, and lower overall volume leverage.

Selling, general and administrative (“SG&A”) expenses were $23,894,648 for the year ended December 31, 2025, compared to $12,759,719 for the year ended December 31, 2024, an increase of $11,134,929, or 87.27%. The increase was primarily attributable to: (i) higher share-based compensation of approximately $10.3 million related to grants issued to employees, directors, and service providers in connection with capital-raising activities; (ii) increased professional fees and legal and advisory costs associated with implementing the Company’s Digital Asset Treasury (“DAT”) strategy; and (iii) higher custodial, compliance, and technology costs associated with managing the Company’s digital asset holdings.

The Company recognized impairment charges of $33,854,230 during the year ended December 31, 2025, related to the write-down of goodwill and intangible assets primarily associated with the Forever 8 acquisition. These charges reflect the Company’s strategic pivot away from the Forever 8 business toward its Digital Asset Treasury strategy. Given the decision to wind down Forever 8 operations and cease further investment in the business, the carrying value of goodwill and intangible assets was no longer supportable. No impairment charges were recorded in 2024. The Company did not incur any restructuring or severance costs in 2025, compared to $1,414,838 in 2024 which related to organizational changes made during the prior year.

Total operating expenses were $57,748,878 for the year ended December 31, 2025 compared to $14,174,557 for the year ended December 31, 2024, an increase of $43,574,321, reflecting the impairment charges and higher SG&A described above.

Interest expense was $(4,082,409) for the year ended December 31, 2025, compared to $(5,287,920) for the year ended December 31, 2024, a decrease of $1,205,511, or 22.80%. The reduction reflects lower average outstanding debt balances during 2025 as certain convertible notes payable to related parties were extinguished in connection with the Company’s capital-raising transactions and the forgiveness of related party obligations. The Company’s line of credit balance as of December 31, 2025 was $10,740,000, representing the primary remaining debt obligation.

Gain on Divestiture

The Company recognized a gain on divestiture of $1,231,774 during the year ended December 31, 2025, related to the sale of substantially all of the assets comprising its Corrugated Packaging Business (Ferguson Containers, Inc.) which closed on April 7, 2025. The transaction resulted in gross proceeds to the Company of $557,835 in cash plus a $2.5 million seller note receivable, and the buyer assumed certain liabilities. No comparable gain was recorded in 2024.

Change in Fair Value of Digital Assets

The Company recognized a loss of $(202,299,922) related to the change in fair value of digital assets during the year ended December 31, 2025. Beginning in September 2025, following the Board of Directors’ adoption of a Digital Asset Treasury strategy, the Company began acquiring Worldcoin (WLD), Ethereum (ETH), and other digital assets measured at fair value pursuant to ASU 2023-08. The fair value losses reflect unrealized declines in the market prices of those holdings between acquisition and December 31, 2025. The Company did not hold digital assets during the comparable 2024 period. While these non-cash fair value adjustments significantly impacted reported net income for the year, the Company’s cash and digital asset holdings at year-end remained substantial, as reflected on the balance sheet.

On August 5, 2026, we received a notification letter regarding non-compliance with Nasdaq’s minimum bid price requirement for continued listing. If we do not regain compliance, our common stock may be delisted, which would adversely affect liquidity, market price, and our ability to raise capital.

Our common stock is listed on The Nasdaq Capital Market under the symbol “ORBS.” An active trading market may not be sustained, and the failure of such a market to continue would likely have a material adverse effect on the value of our common stock. The trading price of our securities could be volatile and subject to wide fluctuations in response to various factors beyond our control, including general business and economic conditions, the release of financial reports, and analyst coverage. A decline in market price could adversely affect our ability to issue additional securities and obtain additional financing.

On August 5, 2026, we received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, for the 30 consecutive business days from June 23, 2026 to August 4, 2026, the closing bid price of our common stock was below the minimum $1.00 per share required for continued listing pursuant to Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days, or until February 1, 2027, to regain compliance. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of ten consecutive business days during the compliance period.

If we do not regain compliance by February 1, 2027, we may be eligible for an additional 180-calendar-day compliance period, provided we meet all other initial listing standards for The Nasdaq Capital Market (other than the bid price requirement) and provide written notice of our intention to cure the deficiency. If we are not eligible or Nasdaq determines that we will not be able to cure the deficiency, Nasdaq will provide notice that our common stock is subject to delisting, at which time we may appeal to a Nasdaq Hearings Panel. There can be no assurance that we will regain compliance within the compliance period or any extension thereof, or that we will otherwise maintain compliance with other applicable Nasdaq listing requirements. If our common stock were delisted from Nasdaq, we could face significant adverse consequences, including: limited availability of market quotations; reduced liquidity; a determination that our common stock is a “penny stock,” which would require brokers to adhere to more stringent rules and could reduce trading activity; limited analyst coverage; and a decreased ability to issue additional securities or obtain financing. In such event, we would expect our common stock to be quoted on the OTC Markets or a similar system, on which liquidity would likely be significantly diminished.

For the three months ended June 30, 2026, revenues were $2,068,430, representing a decrease of $5,510,216, or 72.7%, compared to revenues of $7,578,646 for the three months ended June 30, 2025. The decrease was primarily attributable to a significant reduction in orders from the Company’s largest customer, which experienced a deterioration in its financial condition during the second quarter of 2026 as further described in Note 7, and to the Company’s continued strategic transition away from the Forever 8 online retail and liquidation-model business.

The Company also recognized impairment charges of $5,211,824 during the three and six months ended June 30, 2026 relating to a receivable arising from the disposition of inventory by the Company’s largest customer without the Company’s authorization (see Note 7 — Accounts Receivable). There were no comparable impairment charges in the prior-year period.

Gain on divestiture

The Company recognized no gain on divestiture for the three months ended June 30, 2026, compared to a gain of $1,231,774 for the three months ended June 30, 2025 related to the sale of the Ferguson Containers corrugated packaging business completed on April 7, 2025.

Change in Fair Value of Digital Assets

The Company recognized a gain of $29,324,737 related to fair value changes of its digital asset holdings during the three months ended June 30, 2026, reflecting recovery in the market prices of Worldcoin (WLD) and Ethereum (ETH) during the quarter. The Company did not hold digital assets during the comparable 2025 period.

Change in Fair Value of Short-Term Investments

The Company recognized a gain of $17,647 related to fair value changes in its short-term investments during the six months ended June 30, 2026. There were no comparable amounts in the prior-year period.

Other Income

Other income increased to $521,307 for the three months ended June 30, 2026, from $81,969 in the prior-year period, an increase of $439,338, primarily due to interest earned on the Reichard Corrugated Note and other miscellaneous items.

Income tax expense

Income tax expense was $0 for the three months ended June 30, 2026, compared to $0 for the three months ended June 30, 2025. The Company continues to maintain a full valuation allowance on its net deferred tax assets.

Net income (loss)

Net income was $17,701,125 for the three months ended June 30, 2026, compared to a net loss of $(1,169,519) for the three months ended June 30, 2025.

Six Months Ended June 30, 2026 versus Six Months Ended June 30, 2025

The following table sets forth information comparing the components of net (loss) income from continuing operations for the six months ended June 30, 2026 and 2025:

Revenue

For the six months ended June 30, 2026, revenues were $9,630,395, representing a decrease of $7,862,238, or 44.9%, compared to revenues of $17,492,633 for the six months ended June 30, 2025. The decrease was primarily attributable to a significant reduction in orders from the Company’s largest customer, which experienced a deterioration in its financial condition during the second quarter of 2026 as further described in Note 7, and to the Company’s continued strategic transition away from the Forever 8 online retail and liquidation-model business.

For the three and six months ended June 30, 2026, the Company’s Forever 8 subsidiary derived approximately 99% of its revenue from a single customer, as disclosed in Note 3. As described in Note 7, this customer experienced a significant deterioration in its financial condition during the second quarter of 2026, and the Company can provide no assurance that ordering activity from this customer will continue at prior levels, or at all. The Company intends to sell its remaining inventory to new customers as opportunities arise and is exploring opportunities with respect to the Forever 8 business. There can be no assurance as to the outcome or timing of any such efforts, and revenues from the Forever 8 business in future periods may be materially reduced or eliminated.

Cost of Revenues

Cost of revenues was $9,314,888 for the six months ended June 30, 2026, compared to $15,434,078 for the six months ended June 30, 2025, a decrease of $6,119,190, or 39.6%, correlating to the reduction in revenue volumes.

Gross Profit

Gross profit decreased to $315,507 for the six months ended June 30, 2026, compared to gross profit of $2,058,555 for the six months ended June 30, 2025, a decline of $1,743,048, or 84.7%. Gross margin declined to 3.3% from 11.8% in the prior-year period. The decrease was driven primarily by the reduction in revenues and unfavorable product mix during the transition away from the online retail and liquidation-model operations.

Operating Expenses

SG&A expenses were $17,426,952 for the six months ended June 30, 2026, compared to $4,681,257 for the six months ended June 30, 2025, an increase of $12,745,695, or 272.3%, driven by the factors described in the three-month discussion above.

The increase was attributable to:

Interest Expense

Net interest expense totaled $(629,300) for the six months ended June 30, 2026, compared to $(2,565,530) for the six months ended June 30, 2025, a decrease of $1,936,230, or 75.5%, reflecting lower average borrowings under the Forever 8 Facilities.

Change in Fair Value of Short-Term Investments

The Company recognized a gain of $23,666 related to fair value changes in its short-term investments during the six months ended June 30, 2026. There were no comparable amounts in the prior-year period.

During the six months ended June 30, 2026, we used $9.7 million of cash in operating activities, or approximately $1.6 million per month. Substantially all of our reported $(57.9) million net loss for the six-month period consisted of non-cash items, including a net $(37.2) million unrealized loss on digital assets, $5.5 million of non-cash share-based compensation, and the $5.2 million impairment charge. Based on our current operating cash use, we believe our near-cash liquidity is sufficient to fund our operating cash needs substantially in excess of the next 12 months, before consideration of additional capital that may be raised under our ATM equity offering program or monetization of our other digital asset and strategic investment holdings.