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

We expect ourthe results of operations of our toy and souvenir business to fluctuate on a quarterly and annual basis, which could cause our stock price to fluctuate or decline.

Our use of third-party manufacturers to produce our products presents risks to our toy and souvenir business.

Our toy and souvenir business may be harmed by the imposition or threat of tariffs, including reciprocal or retaliatory tariffs, in markets in which we operate which could increase our product costs and other costs of doing business, impact consumer spending, or lower our revenues and earnings.

High levels of competition and low barriers to entry make it difficult to achieve, maintain, or build upon the success of SRM’sthe Company’s brands, products, and product lines.

SRMThe Company faces competitors who are also constantly monitoring and attempting to anticipate consumer tastes, seeking ideas which will appeal to to consumers, and introducing new products that compete with SRM’sthe Company’s products. In addition, competition for access to entertainment properties has and may continue to lessen SRM’sthe Company’s ability to secure, maintain, and renew popular licenses to entertainment products products developed by other parties and licensed to SRM,the Company, or require SRMthe Company to pay licensors higher royalties and higher minimum guaranteed payments to obtain or retain these licenses. As a licensee of entertainment properties, SRMthe Company has no guarantee that a particular property or brand will translate into a successful toy, game, or other product. In addition, the barriers to entry for new participants in the toy products industry and entertainment industry are low. In a very short period of time, new market participants with a popular product idea or entertainment property can become a significant source of competition for SRMthe Company and its products. Reduced demand for SRM’sthe Company’s brands, products, and product lines as a result of these factors may adversely affect SRM’sthe Company’s business, financial condition, and results of operations. Some of our competitors may have greater resources than the Company. In order to compete successfully, SRMthe Company may have to lower prices and increase marketing expenses which could result in reduced margins.

SRMThe Company is not always able to successfully identify and/or satisfy consumer preferences, which could cause its business, financial condition, and results of operations to be adversely affected.

SRM’sThe Company’s business and operating results in the toy and souvenir segment depend largely upon the appeal of its products, driven by both innovation and marketing. Consumer preferences are continuously changing. SRMThe Company is not always able to identify trends in consumer preferences or identify and satisfy consumer preferences in a timely manner. Significant, sudden shifts in demand are caused by popular toys which steer trends, which are often unpredictable. SRM the Company offers a diverse range of products for all ages and families that includes, among others, toys for toddlers and preschoolers, toys for school-aged children, toys for all ages, and media-driven products. The SRMCompany competes domestically and internationally with a wide range of large and small manufacturers, marketers, and sellers of toys, and consumer goods, as well as retailers, which means that SRM’s the Company’s market position is always at risk. SRM’sThe Company’s ability to maintain its current product sales and increase its product sales or establish product sales with new, innovative toys, depends on SRM’sthe Company’s ability to satisfy play preferences, enhance existing products, develop and introduce new products, and achieve market acceptance of these products. These challenges are intensifying due to trends towards shorter life cycles for individual toy products, the phenomenon of children outgrowing traditional toys at younger ages, an increasing use of more sophisticated technology in toys, and an evolving path to purchase.

General economic conditions may have an adverse impact on our toy and souvenir business, financial condition or results of operations.

Failure to successfully implement new initiatives or meet product introduction schedules can have an adverse effect on SRM’sthe Company’s business, financial condition, and results of operations.

SRMThe Company has in the past announced, and in the future may announce, initiatives to reduce its costs, optimize its manufacturing footprint, increase increase its efficiency, improve the execution of its core business, globalize and extend SRM’sthe Company’s brands, catch new trends, create new brands, offer new innovative products and improve existing products, enhance product safety, develop people, improve productivity, simplify processes, and maintain customer service levels, as well as initiatives designed to drive sales growth, capitalize on SRM’sthe Company’s scale advantage, and improve its supply chain. These initiatives involve investment of capital and complex decision-making as well as extensive and intensive execution, and the success of these initiatives is not assured. Failure to achieve any of these initiatives could harm SRM’sthe Company’s business, financial condition, and results of operations.

From time to time, SRMthe Company anticipates introducing new products, product lines, or brands at a certain time in the future. There is no guarantee guarantee that SRMthe Company will be able to manufacture, source, ship, and distribute new or continuing products in a timely manner and on a cost-effective basis. Unforeseen delays or difficulties in the development process or significant increases in the planned cost of development for new SRM products of the Company may cause the introduction date for products to be later than anticipated or, in some situations, may cause a product or new product introduction to be discontinued. Failure to successfully implement any of these initiatives or launches, or the failure of any of these initiatives or launches to produce the results anticipated by management, could have an adverse effect on SRM’sthe Company’s business, financial condition, and results of operations.

SRM’sThe Company’s toy and souvenir business is highly seasonal, and its operating results depend, in large part, on sales during the relatively brief traditional holiday season. Events that disrupt SRM’sthe Company’s business during its peak demand times can adversely and disproportionately affect SRM’s the Company’s business, financial condition, and results of operations.

SRM’sThe Company’s toy and souvenir business is subject to risks associated with the underproduction of popular toys and the overproduction of toys that are less popular with consumers. SRMThe Company attempts to manage their inventories tightly, which requires SRMthe Company to ship products closer to the expected date SRM the Company sells the products to consumers. This in turn results in shorter lead times for production. These factors may decrease sales or increase the risks that SRMthe Company may not be able to meet demand for certain products at peak demand times or that SRM’sthe Company’s own inventory levels may be adversely impacted by the need to pre-build products before orders are placed.

In addition, as a result of the seasonal nature of SRM’sthe Company’s business, SRMthe Company may be adversely affected, in a manner disproportionate to to the impact on a company with sales spread more evenly throughout the year, by unforeseen events, such as public health crises and pandemics, pandemics, terrorist attacks, economic shocks, severe weather due to climate change or otherwise, earthquakes or other catastrophic events, that that harm the retail environment or consumer buying patterns during its key selling season, or by events, such as strikes, disruptions in in transportation, or port delays, that interfere with the manufacture or shipment of goods during the critical months leading up to the the purchasing season.

SRM’sThe Company’s toy and souvenir business depends in large part on the success of its vendors and outsourcers, and SRM’sthe Company’s brands and reputation are subject to harm from actions taken by third parties that are outside SRM’sthe Company’s control. In addition, any significant failure, inadequacy, or interruption from such vendors or outsourcers could harm SRM’sthe Company’s ability to effectively operate itsthis business.

As a part of its efforts to cut costs, achieve better efficiencies, and increase productivity and service quality, SRMthe Company relies significantly on vendor and outsourcing relationships with third parties for services and systems including manufacturing, transportation, logistics, and information technology. Any shortcoming of a SRM vendor or outsourcer,outsourcer of the Company, particularly an issue affecting the quality of these services or systems, results in risk of damage to SRM’sthe Company’s reputation and brand value, and potentially adverse effects to SRM’sthe Company’s business, financial condition, and results of operations. In addition, problems with transitioning these services and systems to, or operating failures with, these vendors and outsourcers cause delays in product sales and reduce the efficiency of the SRM’sCompany’s operations, and significant capital investments could be required to remediate the problem.

SRMThe Company depends on key personnel and may not be able to hire, retain, and integrate sufficient qualified personnel to maintain and expand its its toy and souvenir business.

SRM’sThe Company’s future success depends partly on the continued contribution of key executives, designers, and technical, sales, marketing, manufacturing, manufacturing, entertainment, and other personnel. The loss of services of any of SRM’sthe Company’s key personnel could harm SRM’sthe Company’s business. Recruiting and retaining skilled personnel is costly and highly competitive. In addition, changes to SRM’sthe Company’s current and future work environments may not meet the needs or expectations of its employees or be perceived as less favorable compared to other companies’ policies, which could negatively impact SRM’sthe Company’s ability to hire and retain qualified personnel. If SRMthe Company fails to retain, hire, train, and integrate qualified employees and contractors, SRMthe Company may not be able to maintain or expand its business.

Disruptions in SRM’sthe Company’s manufacturing operations or supply chain due to political instability, civil unrest, or disease could adversely affect affect SRM’sthe Company’s toy and souvenir business, financial position, sales, and results of operations.

SRMThe Company primarily utilizes third-party manufacturers and suppliers throughout Asia. The risk of political instability and civil unrest exists exists in certain of these countries, which could temporarily or permanently damage the manufacturing operations of SRMthe Company and/or its third-party manufacturers located there. Outbreaks of communicable diseases have also been known to occur in these countries. For example, the COVID-19 pandemic began in Wuhan, Hubei Province, China and has caused supply chain disruption for SRM,the Company, its suppliers, and its customers that contributed to lower net sales in the first half of 2020 and may cause lower net sales to the extent they remain issues in the future. Other disruptions from public health crises such as these result from, among other things, workers contracting diseases, restrictions on factory openings, restrictions on travel, restrictions on shipping, and the closure of critical infrastructure. The design, development, and manufacture of SRM’sthe Company’s products could suffer if SRM’sthe Company’s employees or the employees of its third-party manufacturers or their suppliers contract communicable diseases, or if SRM,the SRM’sCompany, the Company’s third-party manufacturers, or their suppliers are adversely affected by other impacts of such diseases. In addition, the contingency plans SRMthe Company has developed to help mitigate the impact of disruptions in its manufacturing operations and supply chain may not prevent its business, financial position, sales, and results of operations from being adversely affected by a significant disruption to its manufacturing operations or suppliers.

SRMThe Company relies extensively on information technology in its operations, and any material failure, inadequacy, interruption, or security breach breach of that technology could have an adverse effect on its business, financial condition, and results of operations.

SRMThe Company relies extensively on information technology systems across its operations, including for management of its supply chain, sale and delivery of its products and services, reporting its results and various other processes and transactions. Many of these systems are managed by third-party service providers. SRMThe Company uses third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions. A small and growing volume of SRM’sthe Company’s consumer products and services are web-based, and some are offered in conjunction with business partners or such third-party service providers. SRM’sThe Company’s ability to effectively manage its business and coordinate the production, distribution, and sale of its products and services depends significantly on the reliability and capacity of these systems and third-party service providers.

SRMThe Company faces risks related to protecting its proprietary intellectual property and information and is subject to third-party claims that SRM the Company is infringing on their intellectual property rights, either of which could adversely affect SRM’sthe Company’s business, financial condition, and results of operations.

As used in this annual report and unless otherwise indicated, the terms “we”, “us”, “our”, “SRMTron” and the “Company” mean SRM Entertainment,Tron Inc. and its consolidated subsidiary unless the context dictates otherwise.

The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”). The acquisition of SRM Ltd and SRM Inc occurred on August 14, 2023. The financial statements are prepared using Reverse Acquisition Accounting and as such, for legal purposes SRM Inc was the acquiring company and for GAAP accounting, SRM Ltd was the acquiring company. Therefore, the financial statements are presented using the historical financial statements of SRM Ltd. using the capital structure of SRM Inc.

We generated $4,311,382$4,740,551 in revenues for the year ended December 31, 20242025 compared to $5,760,533$4,311,382 revenues for the year ended December 31, 2023.2024. The decrease can be attributed to our largest theme park orders were down due to major expansion resulting in a decrease in attendance at their OrdandoOrlando facility, timing delays for orders from another theme park operator and an election year in which retailers were very cautious in buying. We believe with the new theme park opening in Orlando in 2025, our business should benefit from the publicity and and enthusiasm that typically surrounds new theme park openings.

Operating expenses for the year ended December 31, 20242025 totaled $5,194,576$3,579,816 were in connection with our daily operations as follows: (i) marketing expenses of $55,803$118,939; (ii) legal and professional expenses of $1,432,537$483,335 including board of director fees, auditing and accounting fees, investor relations and public awareness campaigns, legal services, corporate advisory services, registration statement preparation fees, general corporate governance fees; (iii) rent of $55,417$145,323; (iv) depreciation and amortization of $16,880$334,522; (v) salary and wages of $1,255,713; (vi) general and administrative expenses of $1,667,548,$584,311, consisting of payroll and related taxes, travel, meals and entertainment, office supplies and expense and other other normal office and administration expenses; (vivii) stock based compensation of $1,861,743$488,966 consisting primarily of investor relations and and public awareness campaign and the fair value of stock options granted to officers, directors and employees.employees; Other(viii) expensesstock consistedtransfer and SEC fees of $304,118; and (ix) net interest expenseincome of $4,548.$135,411.

Operating expenses for the year ended December 31, 20232024 totaled $3,371,309$5,194,576 were in connection with our daily operations as follows: (i) marketing expenses of $38,694$55,803; (ii) legal and professional expenses of $1,598,179$1,432,537 including board of director fees, auditing and accounting fees, investor relations and public awareness campaigns, legal services, corporate advisory services, registration statement preparation fees, general corporate governance fees; (iii) rent of $12,475$55,417; (iv) depreciation and amortization of $6,651$116,880; (v) salary and wages of $1,074,014; (vi) general and administrative expenses of $1,270,681,$593,535, consisting of payroll and related taxes, travel, meals and entertainment, office supplies and expense and other other normal office and administration expenses; (vivii) stock based compensation of $427,702$1,861,743 consisting primarily of investor relations and public awareness campaign and public awarenessthe campaign.fair Other expenses consistedvalue of stock options granted to officers, directors and employees; and (viii) net interest expense of $16,927.$4,548.

Expenses during 20242025 were higherlower than the same period in 20232024 due primarily to increaseddecreased stock basedstock-based compensation related to investor relations and public awareness campaign and the fair value of stock options granted to officers, directors and employees and other costs costs associated with our company being listed and traded on Nasdaq. In addition, during 2024 we launched new product lines as well as increased marketing, promotional and social media efforts.

As of December 31, 2024,2025, we had working capital of $11,757,517 and approximately $1,352,373$10,455,360 in cash and cash equivalents, aan decreaseincrease in cash and cash equivalents of $1,628,368$9,102,987 from the $2,980,741$1,352,373 as of December 31, 2023.2024. During the year ended December 31, 2024 and 2023,2025, we raised net proceeds of $2,501,255 and $5,168,325, respectively$11,440,137 from the sale of securities.securities and exercise of warrants and options. Additionally, the Company received a total of $210,000,000 in Digital Assets from the combination of sales of common and preferred stock.

Net cash used in our operating activities of $766,877$ during1,443,401during the year ended December 31, 2023,2025, was primarily due to our operating loss of of $2,053,843$2,527,567 offset by $1,288,800$488,966 of stock-based (non-cash) compensation.

On June 16, 2025, we entered into a Securities Purchase Agreement (the “June Securities Purchase Agreement”) with Bravemorning Limited, a British Virgin Islands business company and related party. Under the terms of the June Securities Purchase Agreement, the Company sold at the price of $100,000,000: (i) 100,000 shares of its Series B Preferred Stock Shares convertible into 200,000,000 shares of the Company’s common stock (the “Series B Preferred Stock”) and (ii) warrants to purchase up to 220,000,000 shares of the Company’s common stock at an exercise price of $0.50 per share (the “June Pipe Warrants”). On August 29, 2025, Bravemorning acquired 220,000,000 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”), via its exercise of the June Pipe Warrants with total dollar amount of $110,000,000, and upon such acquisition, Bravemorning became the owner of approximately 86.6% of the Company’s outstanding shares of Common Stock. Mr. Weike Sun, who is a director of the Company, is the sole shareholder of Bravemorning. Upon the exercise of the June Pipe Warrants, Bravemorning held 220,000,000 shares of the Company’s common stock and alsoalong heldwith the conversion of the 100,000 Preferred Stock Shares, which are convertibleShares into an additional 200,000,000 shares of Common Stock and which vote on an as-converted basis with the Common Stock; and as such,Stock, Bravemorning’s ownership of Common Stock and Preferred Stock Shares gave it an aggregaterepresented voting power of approximately 92.5%. Subsequently, the Company issued 13,067,151 shares of its common stock to Black Anthem Ltd (see below) therefore reducing Bravemorning’s voting power. As of MarchJune 31,30, 2026, Bravemorning holds an aggregatethe voting power of of approximately 88.5%. These moves reflect the Company’s broader strategic transformation and its commitment to aligning more closely closely with the TRON blockchain ecosystem, following the launch of its Tron-focused treasury strategy. The Company’s ticker change to to “TRON” reinforces its brand identity and positions it as a key corporate player in the rapidly evolving blockchain and digital digital asset economy.

On December 24, 2025, the Company entered into a Stock Purchase Agreement for the purchase of $18,000,000 of our restricted common stock with Black Anthem Limited owned by Justin Sun and payable in USDT (Tether) stablecoins (the “December SPA”). The transaction closed on January 8, 2026, at which time, $18 million USDT (Tether) stablecoins were transferred to the Treasury Wallet (as defined below). and 13,067,151 shares of the Company’s common stock were issued to Black Anthem. Additionally, the Company entered into a token sale and purchase agreement (“BGDL Token S&P Agreement”) with BiT Global Digital Limited (“BGDL”), a British Virgin Islands Business Company, dated January 6, 2026, under which the Company is purchasing $18,000,000 worth of TRX tokens from BGDL using a dollar-cost averaging mechanism over a 360-day period commencing January 22, 2026, as follows:

AtDuring Marchthe 31,six months ended June 30, 2026, the Company hadpurchased purchaseda total of approximately 11,695,34125,350,215 TRX tokens with an aggregate price of $3,400,001 $7,950,000 under the BGDL Token S&P Agreement.

The initial $18,000,000 was recorded as a prepayment for Digital Asset purchases. At MarchJune 31,30, 2026, the balance of the prepayment was $14,599,999. $10,050,000.

The TRX token is the native token of the TRON blockchain. As of MayJuly 4,30, 2026, the TRX token ranked number 6 by market valuation among all non-stablecoin crypto tokens globally. The Company’s plan is to accumulate and hold TRX tokens in its treasury and stake substantially all TRX tokens to earn yield. The Company has been engaging primarily in liquid staking activities by staking TRX tokens in its treasury through JustLend DAO, the leading decentralized finance (“DeFi”) protocol on the TRON blockchain, whereby it stakes its digital assets (TRX tokens) into the JustLend protocol to support network operations and, in return, accrues network rewards. The JustLend platform generates yield through a combination of standard staking rewards (i.e. token rewards derived from delegating to super representative nodes) and “energy” rental income on the TRON blockchain (i.e. renting to other users the idle TRON “energy” resources entitled by TRX staking).

(i) Governance of TRON blockchain: By staking their TRX token holdings, TRX token holders will be able to vote for super representative candidates. The top 27 super representative candidates with the highest votes will become the super representative nodes (the “SR”) and be able to participate in validation and block production. The super representative candidates who rank 28th to 127th are called super representative partners (the “SR Partners”). Each of the SRs, SR Partners and other super representative candidates may initiate community proposals, but only SRs are entitled to vote for the proposals. As of MayJuly 4,30, 2026, the SRs of TRON blockchain include, among others, Google Cloud, Binance, HTX, Kraken, OKX, OKCoin Japan, Kiln, P2P.org, Nansen, and Abra Capital.

The genesis supply of the TRX token was 100 billion. New tokens are generated currently at the rate of approximately 1.5% per annum as governance governance and block validation rewards. On the offsetting side, TRX token is burned by the users to pay transaction fees for on-chain activities. Consequently, the supply change of TRX token depends on how active the blockchain is. During the period from January 1, 2022 to MayJuly 4,30, 2026, TRX token has been in deflation at approximately 1.6%1.5% per annum. As of MayJuly 4,30, 2026, the supply of TRX token is approximately 94.8 94.9 billion. Currently there is no lock-up, and substantially all the TRX tokens are in circulation.

Through years of development, TRON blockchain has been uniquely positioned as the dominant settlement protocol for on-chain stablecoin payment. As of MayJuly 4,30, 2026, TRON had over 379396 million in total user wallets globally, hosting approximately 88.490.3 billion in TRC-20 USDT (Tether) accounting for approximately 46.6%47.7% of total USDT circulation.supply.

TRON block generation is secured and validated by a diverse group of super representative nodes globally including major industry players such as Google Cloud, Binance, HTX, Kraken, OKX, OKCoin Japan, Kiln, P2P.org, Nansen, and Abra Capital.

The TRX token is the native token of the TRON blockchain, and it serves as the utility token for various scenarios. The staked TRX token (sTRX) is a derivative token issued by the JustLend DAO protocol that represents the “staked” TRX tokens, and provides holders holders exposure to automatically accruing yield through standard TRX staking rewards and energy renting. Users can obtain sTRX tokens by staking TRX tokens on JustLend. The sTRX token is not fixed at a 1:1 conversion ratio with the TRX token; instead, the number of TRX tokens which can be exchanged from one sTRX token increases over time as rewards accumulate in the overall pool of staked tokens. As the voting rewards and energy rent accrue, the conversion ratio of the TRX token to the sTRX token increases gradually, so that the number of TRX tokens which can be obtained by users by unstaking and swapping from sTRX tokens back to TRX tokens increases accordingly. By holding sTRX tokens, the Company is able to accrue enhanced yields from both standard TRX staking and energy rental. For the avoidance of doubt, the sTRX token does not generate discrete staking rewards. Instead, the economic benefit of staking is reflected through a floating conversion rate between TRX and sTRX, which increases over time based on accrued protocol rewards. For comparison, the TRX token remains the native token of the TRON blockchain, and which can be used directly for transaction fee payments and community governance; whereas the sTRX token functions as a staking and yield-bearing certificate. On June June28, 2025, August 28, 2025 and AugustApril 28,5, 2025,2026, 365,096,800365,096,800, 312,500,000 and 312,500,00012,487,000 TRX tokens were converted into approximately 297,543,246297,543,246, 252,133,646 and approximately 252,133,6469,700,149 sTRX tokens respectively, based on the real-time conversion ratio according to the JustLend webpage. According to the JustLend DAO documentation, users who unstake their sTRX must wait 14 days before they can withdraw the unstaked TRX by clicking “Withdraw” on the same page.

Our TRX token strategy generally involves from time to time, subject to market conditions, (i) issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase TRX tokens, and (ii) acquiring TRX tokens with our liquid assets that exceed working capital requirements. We intend to fund further TRX token acquisitions primarily through issuances of common stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock. As of MarchJune 31,30, 2026, our authorized capital stock consists of 1,000,000,000 shares of Common Stock, and 10,000,000 shares of preferred stock, par value $0.0001 per share (the “Preferred Stock”), of which 1,000,000 shares are designated as Series A Preferred Stock and 5,000 shares of the Series A Preferred Stock are designated as convertible, and 100,000 shares are designated as Series B Preferred Stock, of which 100,000, are designated as convertible.

With respect to the $18,000,000 December SPA and related BGDL Token S&P Agreement, on January 22, 2026, the Company commenced buying $50,000 USDT worth of TRX tokens daily (price of which shall be reasonably determined with reference to the market price of TRX token on a global cryptocurrency trading platform on each day) which have been and will be delivered daily to the Treasury Wallet for 360 consecutive days. As of MarchJune 31,30, 2026, the Company had accumulatedpurchased approximately 11,695,34125,350,215 TRX tokens under the BGDL Token S&P Agreement, none of which 12,487,000 had been staked as of that date.

As of MarchJune 31,30, 2026, the Company held approximately 11,695,42312,863,291 TRX tokens and approximately 549,676,892559,377,041 sTRX tokens.

As of the date of hereof, Hong Kong does not have regulations similar regulationsto asthose of the PRC to extend oversight and control over offerings that that are conducted overseas. Hong Kong does not have regulation similar regulation as ofto the Trial Measures and the Guidance Rules and Notice, and Measures for Cybersecurity Review of the PRC. However, the legal and operational risks associated in Mainland China also apply to operations in Hong Kong, and we face the risks and uncertainties associated with the complex and evolving PRC laws and regulations and as to whether and how the recent PRC government statements and regulatory developments, such as those relating to data and cyberspace security and anti-monopoly concerns, would be applicable to a company such as our subsidiary and our Company, given the Hong Kong aspects of our subsidiary in Hong Kong and the possibility that the Chinese government may exercise significant oversight over the conduct of business in Hong Kong. In the event we or our subsidiary were to become subject to PRC laws and regulations, we could incur material costs to ensure compliance, and we or our subsidiary might be subject to fines, experienced evaluationexperience devaluation of securities or delisting, restrictions on securities offerings, and/or no longer be permitted to continue business operations as presently conducted. In the event that (i) the PRC government expands the categories of industries and companies whose foreign securities offerings are subject to review by the CSRC or the CAC or if applicable laws, regulations or interpretations change and we are required to obtain such permissions or approvals, (ii) we inadvertently conclude that relevant permissions or approvals were not required, or (iii) we did not receive or maintain relevant permissions or approvals required, any action taken by the PRC government could significantly limit or completely hinder our operations in Hong Kong and our ability to offer or continue to offer securities to investors and could cause the value of our Common Stock or other securities to decline.

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements for the threesix months ended MarchJune 31,30, 2026 and 2025 and audited financial statements for the year ended December 31, 2025, which have been been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows. There were no cash equivalents as of MarchJune 31,30, 2026 or December 31, 2025.

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants, convertible securities and preferred stock, unless the effect is to reduce a loss or increase earnings per share. As such, options, warrants, convertible securities and preferred stock are not considered in the calculations for the March 31, 2025 fully diluted shares.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Since we were incorporated on October 24, 2018, the evaluation was performed for 2018 tax year, which would be the only period subject to examination. We believe that our income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to our financial position. Our policy for recording interest interest and penalties associated with audits is to record such items as a component of income tax expense.

The Company’s deferred tax liability at MarchJune 31,30, 2026, consisted primarily of unrealized gains on its investments in digital assets and income derived from staking digital assets calculated using the effective tax rate (21% US rate) equating to approximately $1,489,777. $2,253,384. The Company’s deferred tax assets at December 31, 2025 consisted of net operating loss carry forwards calculated using effective tax rates (20% average of China and US rates) equating to $3,253,925, less a valuation allowance in the amount of approximately $3,253,925 for the year ended December 31, 2025.

The following table provides selected financial data about us for the three monthsand six Months ended MarchJune 31,30, 2026 and 2025, respectively.

For the three months ended MarchJune 31,30, 2026 and 2025

We generated $1,184,675$1,568,626 in revenues for the three months ended MarchJune 31,30, 2026, compared to $1,089,634$1,342,929 revenues for the three months ended ended MarchJune 31,30, 2025. The increase is primarily due to relative price increases. Additionally, we have been able to decrease our cost of goods sold therefore increasing our margins.

Operating expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $914,912$826,423 and $913,910,$1,036,406, respectively. The operating expenses for for the three months ended MarchJune 31,30, 2026, consisted of (i) marketing expense of $29,607,$26,761, (ii) legal and professional fees of $29,500,$42,821, (iii) amortization and depreciation of $17,918,$18,252, (iv) rent and utilities of $51,306,$75,354, (v) general and administrative expense of $636,877 $760,909 which included salary and wages of $427,582 and (vi) $25,672$26,358 offor Nasdaq and other related fees, versus the operating expenses for the three months ended MarchJune 31,30, 2025, consisting of (i) marketing expense of $23,122,$28,086, (ii) legal and professional fees of $198,070,$56,298, (iii) amortization and depreciation of $81,571,$77,970, (iv) rent and utilities of $20,323, and$9,815, (v) general and administrative expense of $590,824$523,051 The Companyand had(vi) an unrealized gain on its digital asset investment$341,186 of $20,661,182stock duebased to the increase in market value of the digital asset, unrealized income from digital assets of $2,984,030 from revenue generated from the digital assets and net interest income and expense of $69,677.compensation.

Net income was $21,628,441$24,496,297 for the threesix months ended MarchJune 31,30, 2026 and the net loss was $646,586$821,269 for the threesix months ended MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, we had approximately $9,916,321$9,495,598 in cash and cash equivalents, a decrease of $539,039$959,762 from the $10,455,360 we had as of December 31, 2025. As of MarchJune 31,30, 2026, we had approximately $25,834,451$20,818,562 in working capital, an increase of $14,076,934$9,061,045 from the $11,757,517 we had at December 31, 2025.

Net cash used in our operating activities during the threesix months ended MarchJune 31,30, 2026, totaled $539,039$959,762 compared to $206,514 $165,653 used during the threesix months ended MarchJune 31,30, 2025.

During the threesix months ended MarchJune 31,30, 2026, the Company had no cash based financing activities; however on December 24, 2025, the Company entered entered into a Stock Purchase Agreement (the “Black Anthem SPA”) for the purchase of 13,067,151 shares of our restricted common stock with Black Anthem Limited, which is owned by Justin Sun, for $18,000,000 payable in USDT (Tether) stablecoins. The $18,000,000 was accounted for as a Subscription Receivable and Common Stock Payable at December 31, 2025.

On January 8, 2026, the Black Anthem SPA closed, at which time, $18 million USDT (Tether) stablecoins were delivered to BGDL representing a prepayment on the purchase of the TRX tokens. AsDuring ofthe Marchsix 31,months ended June 30, 2026, the Company had purchased a total of approximately 11,695,341 25,350,215 TRX tokens with an aggregate price of $3,400,001$7,950,000 under the BGDL Token S&P AgreementAgreement. andAt hadJune a30, remaining2026, the balance of $14,599,999 in BGDL’s the prepayment account. was $10,050,000.

In addition to the cash used as described above, the Company entered into a Securities Purchase Agreement under the terms of which the Company Company received $100,000,000 in digital assets and issued 100,000 shares of its Series B Preferred Stock convertible into 200,000,000 shares shares of common stock and warrants convertible into 220,000,000 shares of the Company’s common stock with an exercise price of $0.50 $0.50 per share in return for the issuance of 100,000 Series B Preferred shares. Subsequently,In August 2025, the 220,000,000 warrants were exercised with with the payment of $110,000,000 in digital assets for 220,000,000 shares of the Company’s common stock. In April 2026, the Series B Preferred Stock was converted into 200,000,000 shares of the Company’s common stock.