UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
For
the fiscal year ended December 31, 2025
or
For
the transition period from _____________________ to _______________________
Commission
file number 001-36366
FG
Nexus Inc.
(Exact
name of registrant as specified in its charter)
(State of incorporation) (I.R.S Employer Identification No.)
(Address of principal executive offices) (Zip Code)
(704)994-8279
(Registrant’s
telephone number)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share FGNX The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes ☐ No
☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 (the “Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.:
Large Accelerated Filer ☐ Accelerated Filer ☐
Non-Accelerated Filer ☒ Smaller Reporting Company ☒
Emerging Growth Company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
On
June 30, 2025, the aggregate market value of the Registrant’s common stock held by non-affiliates was approximately $13.2 million,
computed on the basis of the closing sale price of the Registrant’s common stock on that date.
As of March 23, 2026, the total number
of shares outstanding of the Registrant’s common stock was 6,530,207.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Company’s Proxy Statement for its 2026 Annual Meeting of Stockholders are incorporated by reference in Part III, Items 10,
11, 12, 13 and 14.
FG
NEXUS INC.
Table
of Contents
PART I 2
ITEM 1. BUSINESS 3
ITEM 1A. RISK FACTORS 9
ITEM 1B. UNRESOLVED STAFF COMMENTS 23
ITEM 1C. CYBERSECURITY 23
ITEM 2. PROPERTIES 23
ITEM 3. LEGAL PROCEEDINGS 23
ITEM 4. MINE SAFETY DISCLOSURES 23
ITEM 6. [RESERVED] 25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 35
ITEM 9A. CONTROLS AND PROCEDURES 71
ITEM 9B. OTHER INFORMATION 71
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 71
PART III 72
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 72
ITEM 11. EXECUTIVE COMPENSATION 72
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 72
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 73
SIGNATURES 75
FG
NEXUS INC.
PART
I
This
Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
These statements are therefore entitled to the protection of the safe harbor provisions of these laws. These statements may be identified
by the use of forward-looking terminology such as “anticipate,” “believe,” “budget,” “can,”
“contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,”
“evaluate,” “forecast,” “goal,” “guidance,” “indicate,” “intend,”
“likely,” “may,” “might,” “outlook,” “plan,” “possibly,” “potential,”
“predict,” “probable,” “probably,” “pro-forma,” “project,” “seek,”
“should,” “target,” “view,” “will,” “would,” “will be,” “will
continue,” “will likely result” or the negative thereof or other variations thereon or comparable terminology. In particular,
discussions and statements regarding the Company’s future business plans and initiatives are forward-looking in nature. We have
based these forward-looking statements on our current expectations, assumptions, estimates, and projections. While we believe these to
be reasonable, such forward-looking statements are only predictions and involve a number of risks and uncertainties, many of which are
beyond our control. These and other important factors may cause our actual results, performance, or achievements to differ materially
from any future results, performance or achievements expressed or implied by these forward-looking statements and may impact our ability
to implement and execute on our future business plans and initiatives. Management cautions that the forward-looking statements in this
Annual Report on Form 10-K are not guarantees of future performance, and we cannot assume that such statements will be realized or the
forward-looking events and circumstances will occur. Factors that might cause such a difference include, without limitation, the Company’s
ability to execute its business plans which are contemplated to include increasing the Company’s scale through acquisition, fluctuations
in the market price of ETH and other digital assets and any associated mark to market charges that the Company may incur as a result
of a decrease in the market price of ETH below the value at which the Company’s ETH are carried on its balance sheet, changes in
the accounting treatment relating to the Company’s ETH holdings, the Company’s ability to achieve profitable operations,
government regulation of digital assets, changes in securities laws or regulations such as accounting rules as discussed below, customer
acceptance of new products and services including the Company’s real world tokenization and ETH treasury strategies, general conditions
in the global economy; risks associated with operating in the merchant banking industry; risks of not being able to execute on our asset
management strategy and potential loss of value of our holdings; risk of becoming an investment company; fluctuations in our short-term
results as we implement our business strategies; risks of not being able to attract and retain qualified management and personnel to
implement and execute on our business and growth strategy; failure of our information technology systems, data breaches and cyber-attacks;
our ability to establish and maintain an effective system of internal controls; the requirements of being a public company and losing
our status as a smaller reporting company or becoming an accelerated filer; any potential conflicts of interest between us and our controlling
stockholders and different interests of controlling stockholders; and potential conflicts of interest between us and our directors and
executive officers.
Our
expectations and future plans and initiatives may not be realized. If one of these risks or uncertainties materializes, or if our underlying
assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. You are cautioned not to
place undue reliance on forward-looking statements. The forward-looking statements included or incorporated by reference to the Form
10-K are made only as of the date hereof and do not necessarily reflect our outlook at any other point in time. We do not undertake and
specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements
to reflect new information, future events or developments.
FG
NEXUS INC.
ITEM
1. BUSINESS
FG
Nexus Inc., formerly known as Fundamental Global Inc. (“FGNX”, the “Company”, “we”, or “us”),
is a holding company incorporated in the state of Nevada. On December 9, 2022, we completed our reincorporation from a Delaware corporation
to a Nevada corporation. On September 5, 2025, we changed our name from “Fundamental Global Inc.” to “FG Nexus Inc.”
Our common stock and Series A preferred shares are currently listed on Nasdaq under the symbols “FGNX” and “FGNXP,”
respectively. We currently conduct business through our business segments including digital assets and merchant banking. The address
of our principal executive offices is 6408 Bannington Road, Charlotte, North Carolina 28226,
and our telephone number is (704) 994-8279.
Recent
Developments
Reverse
Stock Split
On
January 21, 2026, our Board of Directors approved a reverse stock split of the authorized, issued and outstanding shares of our
common stock, par value $0.001 per share (the “Common Stock”) at a ratio of one (1)-for-five (5) (the “Reverse Stock
Split”). The Reverse Stock Split became effective on February 13, 2026 (the “Effective Date”), at 9:30 a.m., Eastern
Time, and our common shares began trading on a split-adjusted basis at the commencement of trading on the same day. No fractional shares
were issued in connection with the Reverse Stock Split, rather stockholders who would have otherwise received fractional shares received
cash payments in lieu of such fractional shares. After the Reverse Stock Split, we had 6,555,124 shares of Common Stock outstanding.
All equity awards outstanding immediately prior to the Reverse Stock Split were adjusted to reflect the Reverse Stock Split. As a result
of the Reverse Stock Split, all references to Common Stock in this Annual Report on Form 10-K (this “Form 10-K”) have been
adjusted to reflect the Reverse Stock Split.
Letter
of Intent to Sell Quebec Real Estate
In
October 2025, we signed a non-binding letter of intent to sell our Quebec property for $15.0 million CAD, or approximately $11.0 million
USD. Following repayment of the existing installment loan, the transaction is expected to generate approximately $8.0-$9.0 million USD
in net pretax proceeds. The letter of intent does not constitute a binding agreement, and there can be no assurance that a definitive
sale agreement will be reached or that the transaction will be completed. The transaction, if completed, is expected to close during
the first half of 2026, subject to the execution of definitive agreements, completion of due diligence, and satisfaction of customary
closing conditions.
Agreement
to Sell Reinsurance Business
In
October 2025, we entered into an agreement to sell the remaining portion of our reinsurance business. On January 2, 2026, we completed
the initial closing of the sale of our reinsurance business in exchange for (1) the release of $3.3 million of collateral that we had
posted in connection with certain reinsurance contracts; and (2) a 40% equity interest in the entity purchasing the reinsurance business.
Pursuant to the agreement, we agreed to leave approximately $1.3 million in cash in the reinsurance business in exchange for a promissory
note in the amount of approximately $1.3 million that accrues interest at a rate of 6% per annum with all principal and accrued interest
due and payable on June 30, 2027.
An
additional closing of the sale of our reinsurance business occurred on March 23, 2026, when
the purchaser tendered the $1.0 million cash payment to us, which the purchaser obtained through a loan from Saltire Capital
Ltd.
Share
Repurchase Programs
In
September 2025, our Board adopted a share repurchase program to acquire up to $200 million of our outstanding Common Stock (the “Common
Stock Repurchase Program”). The Common Stock Repurchase Program, which is open-ended, allows us to repurchase our Common Stock
from time to time in the open market and in negotiated transactions. Any repurchases conducted pursuant to the Common Stock Repurchase
Program will be in accordance with Rule 10b-18 of the Exchange Act and will be made in accordance with applicable laws and regulations
in effect from time to time. Subject to applicable rules and regulations, the shares of common stock may be purchased from time to time
in the open market transactions and in amounts as we deem appropriate, based on factors such as market conditions, legal requirements,
and other business considerations.
Commencing
on October 23, 2025, and through March 23, 2026, we have purchased a total of approximately 2.2 million shares of our Common Stock
at a total cost (including commissions) of approximately $34.9 million. Through March 23, 2026, we have repurchased approximately
25.8% of our Common Stock outstanding immediately prior to implementation of the program. All shares repurchased under the Common
Stock Repurchase Program are recorded as treasury stock.
In
December 2025, our Board approved a preferred share repurchase program to acquire up to 894,580 shares of our outstanding preferred shares
(the “Preferred Share Repurchase Program”). The Preferred Share Repurchase Program, which is open-ended, allows the Company
to repurchase its preferred shares from time to time in the open market and in negotiated transactions. Any repurchases conducted pursuant
to the Preferred Share Repurchase Program will be in accordance with Rule 10b-18 of the Exchange Act and will be made in accordance with
applicable laws and regulations in effect from time to time. Commencing on December 12, 2025 and through March 23, 2026, we have purchased
approximately 202 thousand shares of our Series A Preferred Stock at a total cost (including commissions) of approximately $5.0 million. Through
March 23, 2026, we have repurchased approximately 22.6% of our Series A Preferred Stock outstanding immediately prior to implementation
of the program. All repurchased Series A Preferred Stock are recorded as a reduction to the liquidation value of the Preferred Stock.
ATM
Offering
On
August 7, 2025, we entered into a Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”),
pursuant to which we may offer and sell, from time to time through the Sales Agent, up to such number or dollar amount of shares that
would not (a) exceed the number or dollar amount of shares of Common Stock registered on the effective registration statement pursuant
to which the offering is being made, (b) exceed the number of authorized but unissued shares of Common Stock (less shares of Common Stock
issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from our authorized
capital stock), (c) exceed the number or dollar amount of shares of Common Stock permitted to be sold under Form S-3 or (d) exceed the
number or dollar amount of shares of Common Stock for which the Company has filed a Prospectus Supplement (defined below) (the lesser
of (a), (b), (c) and (d), the “Shares”) of our Common Stock, subject to the terms and conditions of the Sales Agreement.
We filed a Registration Statement on Form S-3 offering up to $5 billion of the Shares. Under the Sales Agreement, the Sales Agent may
sell the Shares in sales deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities
Act of 1933, as amended (the “Securities Act”), including sales made directly on or through The Nasdaq Global Market or any
other existing trading market for the Common Stock, in negotiated transactions at market prices prevailing at the time of sale or at
prices related to such prevailing market prices, and/or any other method permitted by law. We may instruct the Sales Agent not to sell
the Shares if the sales cannot be effected at or above the price designated by us from time to time. Through December 31, 2025, we sold
a total of approximately 0.4 million shares of Common Stock pursuant to the Sales Agreement, which generated gross proceeds of approximately
$15.5 million, or approximately $14.1 million after offering costs. As of October 13, 2025, we suspended the ATM. While we plan to reinstate
the ATM and to sell additional Shares, as of the date of this Form 10-K, the reinstatement of the ATM has not yet occurred.
Private
Placement Offering
In
July 2025, we entered into securities purchase agreement with certain accredited investors (the “Purchasers”) pursuant to
which we agreed to sell and issue to the Purchasers in a private placement offering (the “Private Placement Offering”) pre-funded
warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 8.0 million shares (the “Pre-Funded Warrant
Shares,”) of our Common Stock at an offering price of $25.00 per Pre-Funded Warrant payable at the option of the Purchaser in cash,
Bitcoin, USDC or ETH. The Private Placement Offering closed in August 2025, and we received gross cash proceeds of approximately $176.0
million, or $168.6 million after offering costs, and cryptocurrency totaling approximately $24.0 million. Upon the effectiveness of the
September Charter Amendment (as defined below), approximately 6.8 million Pre-Funded Warrants automatically converted into shares of
our Common Stock. As of December 31, 2025, all Pre-Funded Warrants have been converted into our Common Stock.
Charter
Amendments
As
approved by a majority of its stockholders by written consent, dated July 23, 2025, we filed a certificate of amendment to our amended
and restated articles of incorporation with the Nevada Secretary of State on September 5, 2025 to (i) increase the total number of authorized
shares of Common Stock from 0.8 million to 200.0 million, (ii) increase the total number of authorized shares of preferred stock, par
value $.001 per share (the “Undesignated Preferred Stock”) from 100.0 million to 500.0 million, (iii) increase the total
number of authorized shares of 8% cumulative preferred stock, Series A (the “Series A Preferred Stock”) from 1.0 million
to 15.0 million and (iv) change the name of the Company to “FG Nexus Inc.” (the “September Charter Amendment”).
The September Charter Amendment was declared effective on September 5, 2025.
A
majority of our stockholders approved, by written consent dated September 4, 2025, a certificate of amendment to our amended and restated
articles of incorporation to (a) increase the total number of authorized shares of Common Stock from 200.0 million shares to 180.0 billion
shares and the total number of authorized shares of preferred stock from 500.0 million shares to 100.0 billion shares (collectively,
the “Preferred Stock”), of which (i) 10.0 billion shares of Preferred Stock (increased from 15.0 million) are designated
8% cumulative preferred stock, Series A, par value $25.00 (the “Series A Preferred Stock”), and (ii) 90.0 billion shares
of Preferred Stock (increased from 485.0 million shares) are undesignated preferred stock, par value $0.001 per share (the “Undesignated
Preferred Stock”), (b) require that certain “Concurrent Jurisdiction Actions” and “Internal Actions” (as
such terms are defined in NRS 78.046, collectively, the “Internal Actions”) must be brought solely or exclusively in the
Eighth Judicial District Court of Clark County in the State of Nevada and that such Internal Actions should be tried before a judge rather
than a jury, in accordance with NRS 78.046(4); (c) clarify that any change of the Company’s name shall not require consent of the
Company’s stockholders, in accordance with NRS 78.390(8); (d) have the Company “opt out” of the interested stockholder
combination provisions set forth in NRS Sections 78.411 to 78.444, inclusive; and (e) have the Company “opt out” of the control
share provisions set forth in NRS Sections 78.378 to 78.3793, inclusive (the “Additional Charter Amendment”). In connection
with the Additional Charter Amendment, we also amended our By-laws to clarify the applicable voting thresholds for proposed amendments
to the By-Laws. The Additional Charter Amendment was filed with and declared effective by the Secretary of State of the State of Nevada,
on October 7, 2025.
Asset
Transfer and CVR Trust
In
August 2025, in connection with the Private Placement Offering and the launch of our treasury strategy, we transferred a significant
portion of our legacy assets (the “Asset Transfer”) to a trust (the “CVR Trust”) established in connection with
the creation of contingent value rights (“CVRs”) for the benefit of our stockholders as of August 8, 2025. We distributed
the CVRs prior to the effectiveness of the Charter Amendment and the exercise of any of the Pre-Funded Warrants sold in the Private Placement
Offering. The CVRs represent the contractual right to receive a pro rata portion of the net proceeds received by the CVR Trust upon the
future disposition, if any, of the assets transferred to the CVR Trust by the Company. See Item 8, Note 6, in the Notes to the Consolidated
Financial Statements included in this 10-K for additional details.
Prior
Year Developments and Transactions
On
February 29, 2024, FG and FG Group Holdings, Inc. (“FGH”) closed a plan of merger to combine the companies in an all-stock
transaction (the “Merger”). In connection with the Merger, FGH common stockholders received one share of FG common stock
for each share of common stock of FGH held by such stockholder. Upon completion of the Merger, the combined company was renamed to Fundamental
Global Inc.
On
May 3, 2024, Strong Global Entertainment, Inc. (“Strong Global Entertainment” or “SGE”), a majority owned subsidiary
of the Company, entered into an acquisition agreement (the “Acquisition Agreement”) with FG Acquisition Corp. (“FGAC”),
a special purpose acquisition company (“SPAC”), Strong/MDI Screen Systems, Inc. (“Strong/MDI”), FGAC Investors
LLC, and CG Investments VII Inc. The transaction closed on September 25, 2024. As part of the closing, FGAC was renamed Saltire Holdings,
Ltd (“Saltire”), and Saltire acquired all of the outstanding shares of one of the Company’s indirect wholly-owned subsidiaries,
Strong/MDI. As a result of the acquisition, Strong/MDI became a wholly-owned subsidiary of Saltire.
On
May 30, 2024, the Company and Strong Global Entertainment, an operating company in which we held approximately 76% of the Class A common
shares, entered into a definitive arrangement agreement and plan of arrangement to combine the companies in an all-stock transaction
(the “Arrangement”). Upon completion of the Arrangement, the stockholders of Strong Global Entertainment received 1.5 common
shares of the Company for each share of Strong Global Entertainment. The transaction closed on September 30, 2024. Following the closing,
Strong Global Entertainment ceased to exist, and its common shares were delisted from NYSE American LLC and deregistered under the Securities
Exchange Act of 1934.
In
April 2024, we sold our Digital Ignition technology incubator and co-working facility in Alpharetta, Georgia for gross proceeds of $6.5
million. In connection with the sale of the land and building, we recorded a non-cash impairment charge of approximately $1.4 million
during the first quarter of 2024 to adjust the carrying value of the assets to the fair market value less costs to sell.
Overview
and Business Operations
We
currently have two primary operating segments, digital assets and merchant banking.
Digital
Assets
Following
the private placement in July 2025, the Company transitioned its operations to focus primarily on operating as a digital asset treasury
focused on ETH and tokenization opportunities, particularly the tokenization of real-world assets. Ethereum and other Ether related digital
assets serve as our primary treasury assets, Ethereum is the foundation of digital finance and settlement layer for the majority of stablecoins,
Decentralized Finance (DeFi), and tokenized assets. ETH is the native token of the Ethereum network, which we purchased ETH as our initial
treasury asset following the private placement.
Our
treasury strategy is focused on commercializing and expanding the tokenization of real-world assets, potentially including
affordable housing, reinsurance, real estate and other asset classes. As of December 31, 2025, our digital asset portfolio included
40,093 ETH, with an estimated fair value of $119.4 million. As of March 23, 2026, our digital asset portfolio had expanded and was
comprised of a combination of ETH and wrapped staked ETH (“WSETH”), with an
estimated combined fair value of approximately $64.6 million.
We
utilize third-party custodians, including Anchorage and BitGo as well as third-party treasury management services including Galaxy Digital
(as defined below) to facilitate our treasury strategies.
Merchant
Banking
Merchant
banking services include various strategic, administrative, and regulatory support services to newly formed SPACs (our SPAC platform).
Additionally, the Company co-founded a partnership, FG Merchant Partners, LP (“FGMP”), formerly known as FG SPAC Partners,
LP, to participate as a co-sponsor for newly formed SPACs and other merchant banking clients.
In
addition, our merchant banking division has facilitated the launch of several new companies, including FG Communities, Inc. (“FGC”),
a self-managed real estate company focused on a growing portfolio of manufactured housing communities which are owned and operated by
FGC, and Craveworthy LLC (“Craveworthy”), an innovative fast casual restaurant platform company.
Discontinued
Operations
We
operated a reinsurance business, which has been classified as assets held for sale since as of December 31, 2024. We sold a portion of
our reinsurance business in the first half of 2025 and sold the remaining portion of the reinsurance business in early 2026.
Our
wholly-owned subsidiary and managed services business, Strong Technical Services (“STS”), a leader in the entertainment industry
providing mission critical products and services to cinema exhibitors and entertainment venues for over 90 years was transferred to the
CVR Trust in August 2025. STS provides comprehensive managed service offerings including remote network operating center support, on-site
field service, content delivery, installation and other services designed to support cinema and entertainment operators.
We
previously operated Strong Studios, Inc. and Strong/MDI Screen Systems, Inc. Those business units were sold in 2024 and are no longer
part of our operations as of December 31, 2025.
These
discontinued business units are more fully described in Item 8, Note 7, in the Notes to the Consolidated Financial Statements included
in this Form 10-K.
Background
on Digital Assets and Ethereum
Ethereum
is an open-source, decentralized blockchain that went live on July 30, 2015; its native digital asset, ether (“ETH”), is
required to pay transaction fees and for computation on the network (often called “gas,” commonly quoted in gwei, where 10^9
gwei = 1 ETH). The Ethereum network’s software is maintained by multiple independent client teams and upgraded through the public
Ethereum Improvement Proposal (“EIP”) process; developers publish proposed changes in the open, and upgrades are only activated
if node operators and validators voluntarily download and run client releases implementing them—no single entity controls the protocol.
In practice, community consensus among client teams, researchers, node operators, validators, application developers and users drive
adoption of upgrades; updates are not “automatically” adopted and take effect only to the extent validators and nodes choose
to run the new code.
At
genesis, 72.0 million ETH were created and distributed as follows: 60.0 million ETH (≈83.33%) sold to the public in a 2014 crowd
sale; 6.0 million ETH (≈8.33%) to the Ethereum Foundation; 3.0 million ETH (≈4.17%) to developers; and 3.0 million ETH (≈4.17%)
to a developer purchase program. Subsequent supply growth was originally driven by issuance to miners under proof-of-work; in August
2021, the EIP-1559 upgrade introduced a protocol-set base fee that is burned (permanently removed from supply) plus a separate priority
fee (tip) to compensate block producers. On September 15, 2022, Ethereum completed “the Merge,” transitioning to proof-of-stake,
under which validators stake ETH (a full validator currently requires a 32-ETH deposit) to propose and attest to blocks and earn protocol
rewards, subject to penalties and potential slashing (loss of a portion of staked ETH) for malicious behavior or certain faults. On March
13, 2024, the Dencun upgrade (including EIP-4844) added “blob” data space intended to reduce data costs for Layer-2 rollups
that settle to Ethereum, improving throughput economics for those systems.
ETH
serves as: (i) gas to pay for transactions and smart-contract computation on the base layer (the required base fee is burned; users may
add a priority tip); (ii) economic security for the network via staking by validators; and (iii) widely used collateral and medium of
exchange across decentralized finance (“DeFi”) applications and for purchasing or minting non-fungible tokens (“NFTs”)
on Ethereum.
ETH
does not have a fixed maximum supply under the protocol; net supply varies over time based on issuance (primarily to validators) less
burns under EIP-1559, and has at times been net-inflationary and at other times net-deflationary depending on network activity. As of
March 23, 2026, ETH’s circulating supply was approximately 121 million ETH. ETH’s market capitalization was approximately
$260 billion; 24-hour spot trading volume was approximately $30 billion; and 30-day cumulative spot volume was approximately $411
billion, implying a 30-day average daily volume of about $14 billion/day; figures are sourced from a widely used third-party aggregator
and are volatile.
Ethereum’s
base-layer protocol is open-source and developed through the EIP process (see EIP-1), with public discussion and review among core developers,
independent client teams, researchers, node operators, validators, and users; upgrades are implemented in client software and become
effective on-chain only as operators and validators elect to run the upgraded clients. This decentralized, opt-in governance model means
no central authority can unilaterally impose changes to the network. Of additional note, transaction fees on Ethereum are only payable
in ETH, and gas prices are often quoted in gwei (1 ETH = 1,000,000,000 gwei). Staking exposes validators to potential slashing penalties
(e.g., for double-signing or extended downtime) under protocol rules.
During
the year, we staked a portion of our ETH to generate yield, however, all of our ETH is currently not staked in order to maximize operational
flexibility and liquidity. Staking rewards are issued natively by the Ethereum protocol and are deposited into our custodial wallet in
the form of additional ETH. Reward amounts are determined based on the staked amount, validator performance (particularly uptime and
attestation accuracy), overall network participation, and the protocol’s random selection process for block proposals.
When
we do stake our ETH, it is staked directly in the Ethereum protocol through institutional-grade validator infrastructure, participating
in both block validation and attestations to secure the network and support consensus. We earn rewards denominated in ETH for these activities.
In
addition to direct staking, we continue to evaluate yield-generation strategies, which may include leveraging institutional lending desks
(e.g. Galaxy), liquid staking, re-staking mechanisms, wrapped instruments and utilizing other vetted institutional managers. During the
first quarter of 2026, for example, we purchased WSETH which is intended to provide additional yield enhancement while maintaining
flexibility and liquidity.
Agreements
with Custodians
Our
ETH is currently held with two institutional custodian platforms, pursuant to written agreements, which include Anchorage Digital Bank
N.A., a national trust bank regulated by the Office of the Controller of the Currency (“Anchorage Digital”) and BitGo Trust
Company, Inc., a South Dakota Trust chartered under the South Dakota Consolidated Laws and is supervised by the South Dakota Division
of Banking (“BitGo”). All of our digital assets are in proprietary cold storage solutions at Anchorage and BitGo.
We
maintain internal controls requiring multiple levels of approval for access, initiation and approval of all transactions related to those
assets. We also monitor and evaluate the internal controls of our third-party custodians, whose control environments and control procedures
are subject to external audits. One element of our control procedures includes obtaining and evaluating the SOC-1 and SOC-2 reports issued
by the custodians’ external auditors.
Our
digital assets held by the custodians are fully segregated on-chain accounts, and as such they are not comingled with any of the custodians’
clients, or the custodians’ own balance sheet assets. Only we and our asset manager, Galaxy Digital (as defined below), have access
to our ETH held by the custodians. Our custodians maintain insurance policies ranging from $100 million to $250 million for loss of property
due to theft, robbery or burglary, as well as third-party computer and funds transfer fraud. However it is unlikely any form of insurance
would cover 100% of our loss in the event of a total loss scenario. Our digital assets held by the custodians are not accessible by the
custodians’ creditors and would never be used in the case of insolvency. As regulated entities, in the unlikely event of a custodian’s
insolvency, the custodian would be liquidated by its regulator who would protect assets designated for the benefit of customers. Our
digital assets are held by the custodians, such that our assets are our assets and not the assets of the custodian. Each of our custodial
agreements are for a term of 1 year, with an automatic renewal if the agreement is not terminated in advance of the ending of the initial
term of the agreements.
The
foregoing summary of The Master Custody Service Agreement, dated July 17, 2025, between the Company and Anchorage Digital Bank N.A. and
the BitGo Custodial Services Agreement, dated August 1, 2025, between the Company and BitGo Trust Company, Inc. do not purport to be
complete and readers are referred to the complete text of the actual agreements, copies of which are attached hereto as Exhibits 10.25
and 10.26, respectively, and are herein incorporated by reference.
Galaxy
Asset Management Agreement
We
entered into an Asset Management Agreement, dated July 23, 2025 (the “Asset Management Agreement”) with Galaxy Digital Capital
Management LP (“Galaxy Digital”). Galaxy Digital shall provide discretionary investment management services with respect
to, among other assets (including without limitation certain subsequently raised funds), our proceeds from the Price Placement Offering
(the “Account Assets”) in accordance with the terms of the Asset Management Agreement. Galaxy Digital will pursue a long-only
investment strategy investing in ETH only, which strategy may include staking, restaking and liquid staking ETH to improve returns (the
“ETH Strategy”). The ETH Strategy (and its risk-adjusted returns) will be overseen by our designated authorized persons.
The custodian under the Asset Management Agreements will consist of Anchorage, BitGo and potentially other cryptocurrency custodians
agreed to by us and Galaxy Digital.
The
Company shall pay Galaxy Digital a tiered asset-based fee (the “Asset-based Fee”) ranging from 0.75% to 1.25% per annum of
the Galaxy Digital’s Account Assets under management; provided, however, that the minimum Asset-based Fee payable to Galaxy Digital
in any given month shall be $83,333.33 ($1 million per annum). However, the Company and Galaxy Digital have agreed to eliminate the minimum
fee for the period of December 1, 2025 through March 31, 2026 and to revisit the appropriateness of the minimum based on the current
scale and level of digital assets held currently. We expect, but cannot provide assurance, that we will eliminate or significantly reduce
the contractual minimum fee based on the level of digital assets held and services provided.
The
Asset Management Agreement was effective on July 23, 2025 and will, unless early terminated in accordance with the provisions of the
Asset Management Agreement, continue in effect until the July 23, 2028, and, unless terminated in accordance with its terms, shall thereafter
continue for successive one-year renewal periods upon the mutual agreement of the Galaxy Digital and us (each, a “Renewal Period”,
and the period during which this Agreement is in effect, the “Term”). This Asset Management Agreement may be terminated
at any time for Cause by us or Galaxy Digital upon at least thirty (30) days prior written notice to the other Party. In addition, at
any time after the date that is three years after the Effective Date, this Agreement may be terminated at any time by us, by providing
90 days’ written notice to Galaxy Digital. The Asset Management Agreement defines the term “Cause” as (i) with
respect to the Galaxy Digital, (a)(1) fraud, (2) material breach of its obligations under this Agreement, or (3) any action or omission
constituting gross negligence in performing its obligations under this Agreement; provided, that Galaxy Digital shall have a cure
period of thirty (30) days following notice of an occurrence of (1) or (2) if such breach, action or omission, as applicable is curable),
(b) an act of insolvency, as defined in the Asset Management Agreement, occurring with respect to the Galaxy Digital; provided
that an act of insolvency shall not be deemed to occur if Galaxy Digital assigns its obligations under this Agreement to an affiliate
that is not subject to an Act of Insolvency, and (c) is dissolved; provided that such dissolution shall not be deemed to occur
if the Galaxy Digital assigns its obligations under this Agreement to an affiliate that is not subject to dissolution; and (ii) with
respect to us (a) a material breach by us of our obligations under the Asset Management Agreement (provided, that we shall have a cure
period of thirty (30) days following notice of breach in the case of any such breach that is susceptible of cure) or (b) it becomes unlawful
under any applicable law (as determined by Galaxy Digital in its sole discretion) for Galaxy Digital to perform its obligations under
the Asset Management Agreement, in which case Galaxy Digital may immediately suspend its performance of all obligations under this Agreement
and may terminate the Asset Management Agreement with three days prior written notice. Termination shall not affect liabilities or obligations
incurred or arising from transactions initiated under the Asset Management Agreement prior to such termination, including the provisions
regarding arbitration, which shall survive any expiration or termination of the Asset Management Agreement.
The
foregoing summary of the Asset Management Agreement does not purport to be complete and readers are referred to the complete text of
the Asset Management Agreement, which is attached hereto as Exhibit 10.12 and is herein incorporated by reference.
Website
Our
corporate website is www.fgnexus.io. A copy of our Code of Business Conduct and Ethics can be found in the Governance
Documents section of our website and is attached hereto as Exhibit 14.1 and is herein incorporated by reference. Information
contained at the website is not a part of this report.
Human
Capital Resources
We
employed 15 persons at December 31, 2025, all of which were full-time. We are not a party to any collective bargaining agreement.
We
believe we comply with all applicable provincial, state, local and applicable international laws governing nondiscrimination in employment
in every location in which we operate. All applicants and employees are treated with the same high level of respect regardless of their
gender, ethnicity, religion, national origin, age, marital status, political affiliation, sexual orientation, gender identity, disability
or protected veteran status. We continue to monitor our demand for skilled and unskilled labor and provide training and competitive compensation
packages in an effort to attract and retain skilled employees.
ITEM
1A. RISK FACTORS
Risks
Related to Cryptocurrencies
The
further development and acceptance of cryptocurrency networks, including the ETH network, which represent a relatively new and rapidly
changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or
acceptance of cryptocurrency networks, including the ETH network, may adversely affect an investment in the Company.
Cryptocurrency
such as ETH may be used, among other things, to buy and sell goods and services or to transfer and store value by users. The cryptocurrency
networks are a new and rapidly evolving industry of which the ETH network is a prominent, but not unique, part. The growth of the cryptocurrency
industry in general, and the ETH network in particular, is subject to a high degree of uncertainty. The factors affecting the further
development of the cryptocurrency industry, as well as the ETH network, include:
● changes in consumer demographics and public tastes and preferences;
A
decline in the popularity or acceptance of the ETH network and other cryptocurrency networks may harm the price of our Common Stock.
There is no assurance that the ETH network, or the service providers necessary to accommodate it, will continue in existence or grow.
Furthermore, there is no assurance that the availability of and access to cryptocurrency service providers will not be negatively affected
by government regulation or supply and demand of ETH.
The
digital asset trading platforms on which cryptocurrency trades are relatively new and largely unregulated or may not be complying with
existing regulations.
Cryptocurrency
markets, including the spot market for ETH, are growing rapidly. The digital asset trading platforms through which ETH and other cryptocurrencies
trade are new and largely unregulated or may not be complying with existing regulations. These markets are local, national and international
and include a broadening range of cryptocurrencies and participants. Significant trading may occur on systems and platforms with minimum
predictability. Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or suspend withdrawals
entirely, rendering the exchange of ETH for fiat currency difficult or impossible. Participation in spot markets requires users to take
on credit risk by transferring ETH or another cryptocurrency from a personal account to a third-party’s account.
Digital
asset trading platforms do not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading
platforms, such as national securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed,
are unregulated, operate without extensive supervision by governmental authorities, and do not provide the public with significant information
regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those
located outside the United States may be subject to significantly less stringent regulatory and compliance requirements in their local
jurisdictions. Digital asset trading platforms may be out of compliance with existing regulations.
As
a result, trading activity on or reported by these digital asset trading platforms is generally significantly less regulated than trading
in regulated U.S. securities and commodities markets and may reflect behavior that would be prohibited in regulated U.S. trading venues.
Furthermore, many digital asset trading platforms lack certain safeguards put in place by more traditional exchanges to enhance the stability
of trading on the platform and prevent flash crashes, such as limit-down circuit breakers. As a result, the prices of cryptocurrencies
such as ETH on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more
traditional exchanges. Tools to detect and deter fraudulent or manipulative trading activities (such as market manipulation, front-running
of trades, and wash-trading) may not be available to or employed by digital asset trading platforms or may not exist at all. As a result,
the marketplace may lose confidence in, or may experience problems relating to, these venues.
No
digital asset trading platform on which cryptocurrency trades is immune from these risks. The closure or temporary shutdown of digital
asset trading platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in
cryptocurrency and can slow down the mass adoption of it. Further, digital asset trading platform failures can have an adverse effect
on cryptocurrency markets and the price of cryptocurrency and could therefore have a negative impact on the performance of the Common
Stock.
Negative
perception, a lack of stability in the digital asset trading platforms, manipulation of cryptocurrency trading platforms by customers
and/or the closure or temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated
regulation may reduce confidence in cryptocurrency generally and result in greater volatility in the market price of ETH and other cryptocurrency
and our Common Stock. Furthermore, the closure or temporary shutdown of a cryptocurrency trading platform may impact the Company’s
ability to determine the value of its cryptocurrency holdings.
A
disruption of the Internet may affect the operation of the cryptocurrency networks, which may adversely affect the cryptocurrency industry
and an investment in the Company.
The
cryptocurrency networks rely on the Internet. A significant disruption of Internet connectivity could disrupt the cryptocurrency networks’
functionality until such disruption is resolved. A disruption in the Internet could adversely affect an investment in the Company. In
particular, some variants of cryptocurrencies have experienced a number of denial-of-service attacks, which have led to temporary delays
in block creation and cryptocurrency transfers.
Cryptocurrencies
are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for
an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and miners are connected
to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending
and other security issues. If BGP hijacking occurs on any cryptocurrency network, participants may lose faith in the security of cryptocurrency,
which could affect cryptocurrency’s value and consequently the value of our Common Stock.
Any
Internet failures or Internet connectivity-related attacks that impact the ability to transfer cryptocurrency could have a material adverse
effect on the price of cryptocurrency and the value of an investment in the Company.
Our
Common Stock may trade at a substantial premium or discount to the value of the ETH and other assets we hold, and our stock price may
be more volatile than the price of ETH.
The
market price of our Common Stock reflects many factors that do not affect the spot price of ETH and may therefore diverge materially—positively
or negatively—from the per-share value of our ETH holdings (net of cash, other assets and liabilities). These factors include,
among others: our corporate-level expenses; taxes; the timing, size and pricing of equity or debt financings (including at-the-market
offerings or convertible securities), equity awards and other sources of dilution; expectations about our future purchases or sales of
ETH, staking activity, or special distributions; our liquidity, public float, short interest and securities lending/borrow dynamics;
the availability and pricing of exchange-listed alternatives (such as exchange-traded products holding ETH) and differences between those
vehicles and a corporate issuer (including the absence in our case of an in-kind creation/redemption mechanism that can reduce premiums/discounts);
differences in trading hours and market microstructure between our Common Stock and spot markets for ETH; changes in index inclusion,
analyst coverage or investor sentiment toward us as an operating company; our corporate governance, financial reporting, and any actual
or perceived operational, custody, technology or regulatory risks specific to us; and broader equity-market conditions independent of
crypto-asset markets. As a result, our stock may trade at a premium or discount to the value of our ETH holdings for extended periods,
and may be more volatile than the price of ETH. Accordingly, investors could lose all or a substantial part of their investment even
if the market price of ETH does not decline, and may not benefit commensurately from increases in the market price of ETH.
The
market price of ETH is highly volatile and may be adversely affected by factors beyond our control, including competition from other
crypto assets and relative-adoption trends, any of which could negatively affect the value of our ETH holdings and our Common Stock price.
The
price of ETH depends on supply-and-demand dynamics in global, largely unregulated or differently regulated markets and is subject to
extreme volatility. ETH competes for users, developers, capital and transaction “blockspace” with other crypto assets and
networks (including Bitcoin and alternative Layer-1 and Layer-2 protocols), with stablecoins and their underlying settlement rails, and
with non-blockchain payment and computing systems. If users, developers, liquidity providers, applications, or institutions favor other
networks or assets—whether due to perceived performance, scalability, fees, user experience, security, programmability, available
applications, token incentives, or business/regulatory considerations—the relative demand for ETH could decline. Adoption metrics
relevant to ETH’s value (e.g., active addresses, developer activity, validator participation and staking yields, Layer-2 usage,
stablecoin and DeFi activity on Ethereum, and enterprise or government use) may increase or decrease over time and may do so at different
rates than comparable metrics on other networks. ETH’s price may also be adversely affected by protocol-level changes (including
Ethereum Improvement Proposals that alter issuance, burn, fees or economics), hard forks or chain splits, software bugs or vulnerabilities,
validator/slashing events, material disruptions or exploits in applications or Layer-2 systems that depend on Ethereum, changes in MEV
(maximal extractable value) dynamics, changes in transaction fees or demand for blockspace, actions by large holders or market makers,