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

Our financial results and the market price of the common stock may be affected by the price of Toncoin.

Toncoin is a highly volatile asset, and fluctuations in the price of Toncoin, like fluctuations experienced in prior years, are likely to influence our financial results and the market price of our common stock. Our financial results and the market price of our common stock has in the past been and would in the future be adversely affected, and our business and financial condition would be negatively impacted, if the price of Toncoin decreased substantially (as it has in the past) or entirely, including as a result of:

The Company’s Toncoin holdings will be less liquid than existing cash and cash equivalents and may not be able to serve as a source of liquidity for it to the same extent as cash and cash equivalents.

The Toncoin market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets and certain other digital assets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability or due to contractual arrangements, we may not be able to sell our Toncoin at favorable prices, for a certain period of time, or at all. For example, a wholly owned subsidiary of the Company entered into a purchase agreement on July 31, 2025, pursuant to which the purchased Toncoins are subject to a lock-up period. As a result, our Toncoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Furthermore, Toncoin we hold with our custodians and transact with our trade execution partners will not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered Toncoin or otherwise generate funds using our Toncoin holdings, including in particular during times of market instability or when the price of Toncoin may have experienced significant decline. If we are unable to sell our Toncoin, enter into additional capital raising transactions, including capital raising transactions using Toncoin as collateral, or otherwise generate funds using our Toncoin holdings, or if we are forced to sell our Toncoin at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

We have recently announced our new TON treasury strategy, and we may be unable to successfully implement it.

We have announced a significant change in strategy to our new TON treasury strategy. There is no assurance that we will be able to successfully implement this new strategy or operate Toncoin-related activities at the scale or profitability currently anticipated. TON operates with a Proof-of-Stake (“PoS”) consensus mechanism. This strategic shift requires specialized employee skillsets and operational, technical and compliance infrastructure to support Toncoin and related staking activities. Our new strategy also requires that we implement different security protocols and treasury management practices. Errors by the Company could result in significant loss of funds and reduced rewards. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company cryptocurrency treasury strategies. As a result, our shift to our TON treasury strategy could have a material adverse effect on our business and financial condition.

Our TON treasury strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.

Consensus on the TON network is accomplished through a Proof-of-Stake mechanism in which validators stake Toncoin to participate in block production and validation. Validators are selected through periodic election rounds, and the frequency at which a validator participates in consensus is generally proportional to its staked Toncoin. Validators earn rewards derived from transaction fees and network-generated Toncoin for successfully validating blocks. We may choose to operate our own validator node or delegate our Toncoin to third-party validators through nominator pools. If we delegate to third-party validators, those validators typically retain a commission from staking rewards, which would reduce our returns. The TON network automatically imposes slashing penalties on validators that experience significant downtime, commit consensus faults such as double-signing, or produce invalid blocks, and so would require that we maintain consistent up time to ensure that we are eligible for staking rewards and to avoid slashing penalties. If we delegate our Toncoin through a nominator pool, our delegated stake would also be subject to slashing proportionally if the underlying validator is penalized, which would be outside of our control.

Staked Toncoin is also subject to lock-up periods tied to election cycles, during which it cannot be withdrawn or sold. This lack of liquidity could limit our ability to respond to market changes or meet our financial needs. We may seek to mitigate this risk through liquid staking protocols, where we deposit Toncoin into a smart contract and receive a liquid staking token in exchange. While we anticipate that the price of liquid staking tokens will generally correlate to Toncoin, prices could diverge, particularly if the validators utilized by the liquid staking protocol are subject to slashing penalties, in which case we may be able to withdraw fewer Toncoin than we originally deposited.

The TON ecosystem continues to evolve, with protocol upgrades and changes that may require adjustments to our or our validators’ operational setup. Technical failures, slashing events, or operational errors could impact our ability to obtain staking rewards, which could result in our failure to meet our financial projections. Any of these operational risks could materially and adversely affect our ability to execute our TON treasury strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.

Digital assets do not pay interest, dividends or other returns and must be used in staking or decentralized finance activities to generate revenue, which involves additional risks.

Digital assets such as Toncoin do not pay interest, dividends, or other returns and we can only generate revenue from our digital asset holdings if we sell our digital assets or implement strategies to create revenue streams or otherwise generate cash by using our digital asset holdings. For example, the Toncoin we purchase can be deployed in profit-making activities by operating a validator, staking to other validators, or engaging in yield-generating activities in decentralized financing.

Even if we pursue any strategies such as staking or decentralized finance transactions, we may be unable to create revenue streams or otherwise generate cash from our digital asset holdings, and any such strategies may subject us to additional risks. All trading and investment activity involves risk, which is heightened in the case of decentralized finance due to the irrevocable nature of blockchain transactions and the possibility of errors in smart contracts. Decentralized finance protocols also attract hackers and persons looking to exploit flaws in or the ability to misuse smart contracts, which may result in loss of our digital assets. We also may incur losses in connection with our decentralized finance activity due to human error or our inability to predict future price movements, or due to “slashing” in connection with our staking activities. Any losses we sustain in connection with decentralized finance activities or staking could cause an adverse impact on our financial condition, results of operations, and the market price of our common stock.

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

In connection with our TON treasury strategy, including staking, restaking, liquid staking, and other decentralized finance activities, we expect to interact with various smart contracts deployed on TON in order to optimize our strategy. Smart contracts are self-executing code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit contracts, liquid staking protocols, restaking platforms, and 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 Toncoin or other digital assets, which could have a materially adverse impact on our business. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the 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.

A significant decrease in the market value of our Toncoin holdings could adversely affect our ability to satisfy our financial obligations under any future debt financings.

Our ability to make scheduled payments on or to refinance any indebtedness and financial commitments we incur depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions including financial, business and other factors beyond our control. If the market value of Toncoin decreases significantly, we may be unable to generate sufficient cash flow to permit us to pay the principal, premium, if any, and interest on any indebtedness.

If our cash flows and capital resources are insufficient to fund debt and other obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure our indebtedness. Our ability to restructure or refinance indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to service our debt would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. If we face substantial liquidity problems, we might be required to sell assets to meet debt and other obligations. Future indebtedness may restrict our ability to dispose of assets and dictates our use of the proceeds from such disposition.

We may not be able to consummate dispositions, and the proceeds of any such disposition may be inadequate to meet obligations. We may be unable to access adequate funding as a result of a decrease in lender commitments due to an unwillingness or inability on the part of lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover a defaulting lender’s portion. As a result, we may be unable to execute our plan of operations, make acquisitions or otherwise conduct operations, which would have a material adverse effect on our financial condition and results of operations.

Unrealized fair value gains on our Toncoin holdings could cause us to become subject to the corporate alternative minimum tax.

Unless an exemption applies, the Internal Revenue Code imposes a 15% corporate alternative minimum tax (“CAMT”) on certain corporations. In general, CAMT applies to corporations with respect to their initial tax year and subsequent tax years if the average annual adjusted financial statement income for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. However, the determination of CAMT applicability is computationally and administratively complex and limited guidance has been provided by the Internal Revenue Service (the “IRS”). In June 2025, the Internal Revenue Service released a notice covering CAMT, which included an optional simplified method for determining CAMT applicability and announced its intention to revise regulations addressing CAMT that were proposed in September 2024.

The Company may be required to adopt ASU 2023-08, under which the Company’s Toncoin holdings must be measured at fair value in the Company’s statement of financial position, with gains and losses from changes in the fair value of Toncoin recognized in net income each reporting period. When determining whether the Company is subject to CAMT and when calculating any related tax liability for an applicable tax year, although the September 2024 proposed regulations provide that, among other adjustments, the Company’s adjusted financial statement income must include any unrealized gains or losses reported in the applicable tax year, the June 2025 notice indicated that the IRS intends to issue additional interim guidance addressing how unrealized gains and losses on certain investment assets, such as the Company’s Toncoin holdings, which are reported for financial statement purposes, are taken into account for purposes of determining the application of CAMT, and that the revised CAMT regulations will incorporate such interim guidance.

Accordingly, although the exact approach that any guidance from the IRS or revised CAMT regulations would take is unclear, it is possible that if the Company adopted ASU 2023-08, the Company could become subject to CAMT. If the Company becomes subject to CAMT, it could result in a material tax obligation that the Company would need to satisfy in cash, which could materially affect the Company’s financial results, including its earnings and cash flow, and its financial condition.

Future developments regarding the treatment of crypto assets for U.S. and non-U.S. tax purposes could adversely impact the Company’s business and liquidity.

Due to the evolving nature of cryptocurrencies and the absence of comprehensive legal and tax guidance with respect to digital asset products and transactions, many significant aspects of the U.S. and non-U.S. tax treatment of transactions involving cryptocurrencies are uncertain, and it is unclear whether, when and what guidance may be issued in the future. In 2014, the IRS released Notice 2014-21, discussing certain aspects of “virtual currency” for U.S. federal income tax purposes and, in particular, stating that such virtual currency (i) is “property,” (ii) is not “currency” for purposes of the rules relating to foreign currency gain or loss, and (iii) may be held as a capital asset. In 2019, the IRS released Revenue Ruling 2019-24 and a set of “Frequently Asked Questions” (which have been periodically updated), that provide additional guidance, including guidance to the effect that, under certain circumstances, hard forks of digital currencies are taxable events giving rise to ordinary income and guidance with respect to the determination of the tax basis of virtual currency. However, this guidance does not address other significant aspects of the U.S. federal income tax treatment of cryptocurrencies and related transactions.

There continues to be uncertainty with respect to the timing, character and amount of income inclusions for various digital asset transactions. Although we believe our treatment of digital asset transactions for U.S. federal income tax purposes is consistent with existing guidance provided by the IRS and existing U.S. federal income tax principles, because of the rapidly evolving nature of digital asset innovations and the increasing variety and complexity of digital asset transactions and products, it is possible the IRS and various U.S. states may disagree with our treatment of certain digital asset transactions for U.S. tax purposes, which could adversely affect our business. There can be no assurance that the IRS, the U.S. state revenue agencies or other non-U.S. tax authorities, will not alter their respective positions with respect to cryptocurrencies in the future or that a court would uphold the treatment set forth in existing guidance. It also is unclear what additional guidance may be issued in the future on the treatment of existing digital asset transactions and future digital asset innovations for purposes of U.S. or non-U.S. tax regulations. Any such alteration of existing IRS, U.S. state and non-U.S. tax authority positions or additional guidance regarding digital asset products and transactions could result in adverse tax consequences for holders of cryptocurrencies and could have an adverse effect on the value of cryptocurrencies and the broader cryptocurrency markets. Future technological and operational developments that may arise with respect to cryptocurrencies may increase the uncertainty with respect to the treatment of cryptocurrency for U.S. and non-U.S. tax purposes. The uncertainty regarding tax treatment of digital asset transactions could adversely impact our business and our operations, including how we are taxed, if the volume of cryptocurrency transactions decreases due to an adverse tax effect.

The regulatory and legislative environment for digital assets is evolving rapidly and remains uncertain; changes in applicable law or regulation could materially and adversely affect our ability to execute our TON Treasury Strategy.

Toncoin and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of Toncoin or the ability of individuals or institutions such as us to own or transfer Toncoin.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Toncoin or the ability of individuals or institutions such as us to own or transfer Toncoin. For example, without limitation, within the past several years:

Furthermore, in 2019 the SEC filed a complaint against Telegram alleging that Telegram was conducting an unregistered offering of securities by selling interests (in the form of promissory notes) in unissued and incomplete “Grams”, which at the time was the proposed native token of the proposed Telegram Open Network blockchain. A district court enjoined Telegram’s distribution of Grams, ultimately resulting in Telegram returning more than $1.2 billion to investors and paying an $18.5 million civil penalty, on the basis that the SEC had shown a substantial likelihood of success in proving that Telegram’s plan to distribute Grams was an unregistered offering of securities to which no exemption applied. Following the injunction, Telegram ceased involvement with 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.

Future regulatory actions, changes in interpretation or administrations, or new legislation could adversely affect our ability to hold, acquire, or utilize Toncoin and other crypto assets, and could materially impact our business, financial condition, and results of operations.

Furthermore, these types of activities are subject to heightened regulatory scrutiny, and future changes in laws or regulations could restrict our ability to engage in such strategies or impact our ability to recover assets in the event of a counterparty default. If we are unable to recover our Toncoin or funds from a counterparty, or if regulatory changes adversely affect our ability to generate income from our Toncoin holdings, our business, financial condition, and results of operations could be materially and adversely affected.

It is not possible to predict whether, or when, new laws will be enacted that change the legal framework governing digital assets or provide additional authorities to the SEC or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and Toncoin specifically. The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of Toncoin, as well as our ability to hold or transact in Toncoin, and in turn adversely affect the market price of our common stock.

Moreover, the risks of engaging in a TON treasury strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

The growth of the digital assets industry in general, and the use and acceptance of Toncoin in particular, may also impact the price of Toncoin and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of Toncoin may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to Toncoin, institutional demand for Toncoin as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for Toncoin as a store of value or means of payment, and the availability and popularity of alternatives to Toncoin. Certain other digital assets are better-known and have more liquidity than Toncoin. Even if growth in Toncoin adoption occurs in the near or medium-term, there is no assurance that Toncoin usage will continue to grow over the long-term.

Because Toncoin has no physical existence beyond the record of transactions on TON blockchain, a variety of technical factors related to TON blockchain could also impact the price of Toncoin. For example, malicious attacks by certain network participants, inadequate fees to incentivize validating of transactions, hard “forks” of TON blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of TON blockchain and negatively affect the price of Toncoin. The liquidity of Toncoin may also be reduced and damage to the public perception of Toncoin may occur, if financial institutions were to deny or limit banking services to businesses that hold Toncoin, provide Toncoin-related services or accept Toncoin as payment, which could also decrease the price of Toncoin. Actions by U.S. banking regulators, such as the issuance in February 2023 by federal banking agencies of the “Interagency Liquidity Risk Statement,” which cautioned banks on contagion risks posed by providing services to digital assets customers, and similar actions, have in the past resulted in or contributed to reductions in access to banking services for Toncoin-related customers and service providers, or the willingness of traditional financial institution to participate in markets for digital assets. Though this statement was withdrawn in April 2025, indicating a shift towards a more permissive stance on crypto-asset activities for financial institutions. there is no guarantee that federal banking agencies in the future will maintain this approach. The liquidity of Toncoin may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for Toncoin and other digital assets.

The availability of spot ETPs for digital assets may adversely affect the market price of our common stock.

Given the relative novelty of digital assets, general lack of familiarity with the processes needed to hold digital assets directly, as well as the potential reluctance of financial planners and advisers to recommend direct digital asset holdings to their retail customers because of the manner in which such holdings are custodied, some investors have sought exposure to digital assets, particularly Bitcoin, through investment vehicles that hold digital assets and issue shares representing fractional undivided interests in their underlying digital asset holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net asset value, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to the underlying digital asset.

On January 10, 2024, the SEC approved the listing and trading of spot bitcoin ETPs, the shares of which can be sold in public offerings and are traded on U.S. national securities exchanges. Additionally, on May 23, 2024, the SEC approved rule changes permitting the listing and trading of spot ETPs that invest in ether, the main crypto asset supporting the Ethereum blockchain. The approved spot ETPs commenced trading directly to the public on July 23, 2024. Furthermore, on July 29, 2025, the SEC approved orders that permit in-kind creations and redemptions for crypto asset ETPs, aligning the regulatory treatment of digital asset ETPs with established practices for traditional commodity-based ETPs. The SEC has not, to date, but may in the future approve, a spot Toncoin ETP. The listing and trading of spot ETPs for ether offers investors another alternative to gain exposure to digital assets, which could result in a decline in the trading price of Toncoin as well as a decline in the value of our common stock relative to the value of our Toncoin.

Although we are an operating company, and we believe we offer a different value proposition than a spot ETP, investors may nevertheless view our common stock as an alternative to an investment in an ETP and choose to purchase shares of a spot digital asset ETP instead of our common stock. They may do so for a variety of reasons, including if they believe that ETPs (including any future SEC-approved Toncoin Spot ETP) offer a “pure play” exposure to particular digital assets that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot ETPs, we (i) do not seek for our shares of common stock to track the value of the underlying digital asset we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Securities Exchange Act of 1934, as amended, including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are a corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our Toncoin holdings or our daily net asset value. Furthermore, recommendations by broker-dealers to buy, hold, or sell complex products and non-traditional ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to our common stock. Based on how we are viewed in the market relative to ETPs and other vehicles that offer economic exposure to digital assets, such as any future SEC-approved spot ETP that invests in Toncoin, futures exchanged-traded funds, leverage futures ETFs, and equivalent vehicles on international exchanges, including ETPs for Toncoin, any premium or discount in our common stock relative to the value of our Toncoin holdings may increase or decrease in different market conditions.

As a result of the foregoing factors, availability of spot ETPs for Toncoin or other digital assets could have a material adverse effect on the market price of our common stock.

Our TON treasury strategy will subject us to enhanced regulatory oversight.

There has been increasing focus on the extent to which digital assets may be used to launder the proceeds of illegal activities, commit or facilitate fraud schemes, fund criminal or terrorist activities, or circumvent sanctions regimes. Our policies and procedures that are designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our Toncoin through entities subject to anti-money laundering regulation and related compliance rules in the United States may not be completely successful and, if we are found to have purchased any of our Toncoin from bad actors that have used Toncoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in Toncoin by us may be restricted or prohibited.

We may incur indebtedness or enter into other financial instruments in the future that may be collateralized by the Toncoin we acquire. We may also consider pursuing strategies to create income streams or otherwise generate funds using our Toncoin holdings. These types of Toncoin-related transactions are the subject of enhanced regulatory oversight. These and any other Toncoin-related transactions we may enter into, beyond simply acquiring and holding Toncoin, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.

Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting digital assets, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in Toncoin.

In addition, private actors that are wary of Toncoin or the regulatory concerns associated with Toncoin may take actions, including but not limited to litigation, that may have an adverse effect on our business or the market price of our common stock.

Toncoin trading venues may experience greater fraud, security failures, or regulatory or operational problems than trading venues for more established asset classes.

Toncoin trading venues are relatively new and, in many cases, unregulated. Furthermore, there are Toncoin trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in Toncoin trading venues, including exchanges that handle a significant volume of Toncoin trading and/or are subject to regulatory oversight, in the event one or more Toncoin trading venues cease or pause for a prolonged period the trading of Toncoin or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.

The SEC has brought recent actions against individuals and digital asset market participants alleging that such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling of the same assets in fictitious transactions to manipulate their underlying trading price. Any actual or perceived wash trading in the Toncoin market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of Toncoin. Negative perception, a lack of stability in the broader Toncoin markets and the closure, temporary shutdown or operational disruption of Toncoin trading venues, institutional investors, custodians, or other major participants in the TON ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in Toncoin and the broader TON ecosystem, and greater volatility in the price of Toncoin. As we expect the price of our common stock to be affected by the value of our Toncoin holdings, the failure of a major participant in the TON ecosystem could have a material adverse effect on the market price of our common stock.

Our concentration of Toncoin holdings may heighten the risks inherent in the Company’s TON treasury strategy and limit our ability to sell Toncoin.

We have and intend to purchase Toncoin and increase our overall holdings of Toncoin in the future. The intended concentration of our Toncoin 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 TON treasury strategy. Significant declines, like the declines experienced in prior years, in the price of Toncoin could have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

The concentration of our holdings means that any decision by the Company to liquidate, reduce, or pledge a material portion of our Toncoin holdings — whether in response to a liquidity need, a change in strategy, or otherwise — could itself exert significant downward pressure on the price of Toncoin. The resulting decline in price could reduce the proceeds we realize from any such sale and could further impair the value of our remaining holdings. The concentrated nature of our holdings also limits our practical ability to exit our position quickly or in an orderly manner. There is no guarantee that sufficient market liquidity will exist at any given time to support a liquidation of our holdings at prices approximating their then-current fair market value. This risk is heightened during periods of general market stress or declining prices for digital assets, when liquidity in smaller-capitalization assets such as Toncoin may deteriorate significantly.

If the Company or its third-party service providers or partners experience a cybersecurity incident or unauthorized parties obtain access to its TON assets, or if a user or other party commits a market-related exploit, the Company may lose some or all of its TON assets and its financial condition and results of operations could be materially adversely affected.

All Toncoin acquired to date is held in custody accounts at Blockchain.com, a non-U.S. entity, and Bitgo Trust Company Inc. We may in the future use other accounts at other institutions. Cybersecurity incidents are of particular concern with respect to our Toncoin. Toncoin and other blockchain-based cryptocurrencies and the entities that provide services to participants in the TON ecosystem have been, and may in the future be, subject to cybersecurity incidents or other malicious activities. For example, state actors and hacker groups have successfully exploited cryptocurrencies’ underlying code and infiltrated digital asset custodians.

A successful cybersecurity incident could result in:

Further, any actual or perceived cybersecurity incident directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader TON ecosystem or in the use of TON to conduct financial transactions, which could negatively impact us.

Attacks on systems across a variety of industries, including industries related to Toncoin, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors, criminal hackers, hacktivists, and insiders. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving (including the use of artificial intelligence and other emerging technologies), may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners, and may be heightened in the event we determine to transact bilaterally. The Company may be required to expend additional resources to continue to enhance the Company’s cybersecurity measures or to investigate and remediate any cybersecurity incidents or vulnerabilities.

We, our partners and our third-party service providers face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our information technology systems and confidential information, and may experience cybersecurity incidents due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities. In particular, unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems, as well as the systems and facilities of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud and we cannot guarantee that material incidents will not occur in the future. Advanced cyberattacks can be multi-staged, unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing, social engineering, and malware (including ransomware), leaving organizations and users at high risk of being compromised. Any such access, disclosure, or other loss of information, or any other adverse impact to the availability, integrity or confidentiality of our information technology systems or confidential information could result in legal claims or proceedings (such as class actions), liability under laws that protect the privacy of personal information, regulatory penalties, a disruption of our operations, damage to our reputation, a loss of confidence in our business, early termination of our contracts and other business losses, indemnification of our customers, liability for stolen assets or information, increased cybersecurity protection and insurance costs, fines and financial penalties, litigation, regulatory investigations and other significant liabilities, any of which could materially adversely affect our business, revenues, and competitive position.

In addition, certain types of attacks are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative or corrective measures. There can also be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our information technology systems and confidential information. Further, there has been an increase in such activities due to the increase in remote workers. The risk of cyberattacks could also be increased by cyberwarfare in connection with geopolitical conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Additionally, any integration of artificial intelligence in our, our partners’ or any service providers’ operations, products or services is expected to pose new or unknown cybersecurity risks and challenges. Any future cybersecurity incident of our operations or those of others in the broader digital assets industry, including third-party services on which we rely, could materially and adversely affect our business.

Our business is currently comprised of four business units. They are TON Strategy Company, a digital asset treasury; MARKET.live, a livestream shopping platform and digital media agency; LyveCom, an AI social commerce technology software provider; Go Fund Yourself, a social crowd-funding platform and interactive reality TV show for Regulation CF and Regulation A issuers. For segment reporting purposes, however, MARKET.live and LyveCom are aggregated and presented as a single reportable segment in the Company’s consolidated financial statements, resulting in three reportable segments, TON, MARKET.live and Go Fund Yourself.

TON

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 Toncoin, the native digital asset of the TON blockchain. This includes staking TON, 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.

In addition to our digital asset business, the Company has three additional complementary business units. They are MARKET.live, a livestream shopping platform and digital media agency; LyveCom, an AI social commerce technology software provider; Go Fund Yourself, a social crowd-funding platform and interactive reality TV show for Regulation CF and Regulation A issuers. During the year ending December 31, 2025, the Company dissolved Vanity Prescribed LLC and sold Good Girl LLC both wellness focused ecommerce sites providing telehealth services.

MARKET.live

Focused on interactive, video-based social commerce, MARKET.live is a multi-vendor livestream shopping platform that merges e-commerce and entertainment, enabling brands, retailers, and creators to broadcast shoppable events simultaneously across major social and video channels, including TikTok, YouTube, Facebook, Instagram, and Pinterest. The platform’s integrations with Meta, TikTok, Pinterest, and other networks enable native, frictionless checkout experiences within each application, with purchase and order data flowing seamlessly back through MARKET.live to vendors for fulfillment. In 2024, MARKET.live expanded its relationship with TikTok through a formal partnership with TikTok Shop, becoming an official TikTok Shop Partner (TSP). Under this partnership, TikTok refers brands, retailers, influencers, and affiliates to MARKET.live for recurring-fee services, including onboarding and store setup, creative production, influencer management, and store optimization—now representing the largest and fastest-growing segment of MARKET.live’s business.

LyveCom

In April 2025, the Company consummated its acquisition of LyveCom, an artificial intelligence (AI)–driven video commerce platform, pursuant to a stock purchase agreement dated April 11, 2025, as detailed in the Form 8-K filed on that date. The integration of LyveCom’s technology into MARKET.live enhances the platform’s multicast and AI capabilities, enabling brands and merchants to deliver a true omnichannel livestream shopping experience across social media channels, proprietary websites, and mobile applications, while maintaining unified checkout and inventory control. LyveCom’s technology allows brands to own their audience and data by capturing “zero-party” customer information—data intentionally shared by customers regarding preferences and purchase intentions—providing deeper insight and reducing reliance on third-party platforms.

GO FUND YOURSELF

Go Fund Yourself is an interactive social crowdfunding platform that provides public and private companies with broad-based exposure for their Regulation CF and Regulation A offerings. The program airs weekly on CheddarTV and generates revenue from issuer fees related to appearances, marketing, advertising, and content production.

The Company’s digital asset treasury strategy derives revenue from staking TON rewards. In TON staking activities, the Company retains the right and ability to direct the use of the underlying TON, subject to a bonding period. As such, the Company does not derecognize the TON 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 TON 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 December 31, 2025, the Company had staked 219,709,826 units of TON on the TON blockchain. For the year ended December 31, 2025, the Company earned 2,185,286 units of TON and recognized revenue from staking rewards of $3,977.

Our business, including both our traditional operations and our digital asset treasury activities involving Toncoin is dependent on general economic conditions and the performance of TON. 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 TON 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 TON’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.

2025 Nasdaq Deficiency Letter

As previously disclosed, the Company received a letter on October 9, 2025, or the Initial Letter, from the staff at the Listing Qualifications Department, the Nasdaq Staff, of The Nasdaq Stock Market LLC, Nasdaq, notifying the Company that the Nasdaq Staff had determined that the Company failed to comply with Nasdaq’s shareholder approval requirements set forth in Nasdaq Listing Rule 5635(b) in connection with the Company’s August 7, 2025 issuance of shares of common stock (and pre-funded warrants to purchase shares of common stock) pursuant to that certain subscription agreement, dated August 3, 2025, among the Company, certain subsidiaries of the Company and certain investors, the PIPE financing.

On October 28, 2025, the Company received a Letter of Reprimand, or the Reprimand Letter, from the Nasdaq Staff in connection with the Nasdaq Staff’s determination that the Company had violated Nasdaq’s shareholder approval requirements set forth in Nasdaq Listing Rules 5635(a) and 5635(b).

The Reprimand Letter stated that while the Nasdaq Staff determined that there were failures to comply with the Nasdaq Listing Rules 5635(a) and 5635(b), those failures did not appear to have been the result of a deliberate intent to avoid compliance, and that, as such, the Nasdaq Staff believes that delisting the Company’s securities is not an appropriate sanction. The Reprimand Letter states that the Nasdaq Staff further considered, among other things, the fact that the Company has not demonstrated a pattern of non-compliance, and that based on discussion with the Company, the Nasdaq Staff believes the Company inadvertently violated Nasdaq Listing Rules 5635(a) and 5635(b). The Reprimand Letter also noted that the Company has committed to work with Nasdaq in the future to ensure compliance with Nasdaq Listing Rules. Accordingly, Nasdaq Staff communicated their view that it was appropriate to close these matters by issuing the Letter of Reprimand in accordance with Listing Rule 5810(c)(4). Following appropriate disclosure by the Company, there was no further action required from the Company with regard to this matter. The Company accepted the Nasdaq Staff’s determination and considers the matter closed.

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.

Notice to Nasdaq of Possible Violation

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. The Letter has no immediate effect on our continued listing on Nasdaq, subject to our compliance with other continued listing requirements. Pursuant to the Nasdaq Listing Rules, we have 45 calendar days from March 30, 2026 to submit a plan to regain compliance. We intend to work closely and expeditiously with Nasdaq in an effort to resolve this matter. We intend to submit, within the requisite period, a plan to regain compliance under the Nasdaq Listing Rules. If the plan is accepted, Nasdaq may grant us an extension of 180 calendar days from the date of the Letter to evidence compliance. There can be no assurance that Nasdaq will accept our plan or that we will be able to regain compliance with the applicable listing requirements.

Grants Under Certain Employee Benefit Plans made after the PIPE Financing

We plan to make an offer to certain plan participants, who are our directors and officers, to forfeit their equity awards granted after the PIPE financing, which would reduce the number of outstanding grants that may have been inadvertently made in excess of the amount available under the Incentive Plan and that 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. None of these grants have vested, and we do not expect that this offer will have a material impact on our results of operations, financial condition, or liquidity.

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, TON 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 have 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 Toncoin not eligible for trading or transfer (the “Locked Toncoin”) are also subject to Lock-Up Restrictions with respect to the Acquired Securities issued as consideration for the Locked Toncoin for the same duration as the Locked Toncoin are not eligible for trading or transfer. The Locked Toncoin 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 Toncoin, the native cryptocurrency 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.

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 Toncoin, earning rewards for their participation, and contributing to the network’s overall stability. Toncoin is also used for paying transaction and gas fees and participating in governance. The functionality of TON depends on the use of Toncoin to power transactions and smart contracts that are essential to the applications built on top of TON. Furthermore, the use of Toncoin by validators facilitates the security features on which TON relies.

Implementation of the Company’s TON Treasury Strategy was bolstered by an exclusive partnership between Telegram and the TON Foundation. From 2023 to 2024, Toncoin 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 Toncoin 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 Toncoin 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 TON treasury, stake TON, and to support the development of a tokenized economy inside Telegram’s billion-user platform.

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.

Acquisition of Lyvecom

Nasdaq Listing

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.

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.

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.