UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended: December 31, 2025
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ____________ to ____________
Commission
file number: 001-38834
TON
STRATEGY COMPANY
(Exact
name of registrant as specified in its charter)
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (855)250-2300
Former Address:
3024 Sierra Juniper Court, Las Vegas, Nevada 89138
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, $0.0001 par value TONX 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.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 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 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 Exchange 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 Exchange 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
The
aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates based on the closing price
of the registrant’s common stock as quoted on The Nasdaq Capital Market as of the last business day of the registrant’s most
recently completed second fiscal quarter was approximately $6,804,000.
As
of March 24, 2026, there were 56,530,617 shares of common stock, $0.0001 par value per share, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
portions of the registrant’s Definitive Proxy Statement for the registrant’s 2026 annual meeting of stockholders to be filed with the
Securities and Exchange Commission no later than 120 days after the end of the fiscal year ended December 31, 2025 are incorporated herein
by reference in Part III of this Annual Report on Form 10-K.
TABLE
OF CONTENTS
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 5
ITEM 1B. UNRESOLVED STAFF COMMENTS 27
ITEM 1C. CYBERSECURITY 28
ITEM 2. PROPERTIES 28
ITEM 3. LEGAL PROCEEDINGS 28
ITEM 4. MINE SAFETY DISCLOSURES 28
ITEM 6. [RESERVED] 29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 41
ITEM 9A. CONTROLS AND PROCEDURES 42
ITEM 9B. OTHER INFORMATION 42
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 42
PART III 43
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 43
ITEM 11. EXECUTIVE COMPENSATION 43
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 43
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 49
i
CAUTIONARY
NOTE REGARDING Forward-Looking Statements AND SUMMARY RISK FACTORS
This
Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (this “Annual Report”) includes
“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which statements are subject to considerable risks and uncertainties. All statements other than statements of historical fact
contained in this Annual Report should be considered forward-looking statements, including, but not limited to, statements regarding
our future results of operations and financial position, the success of our TON treasury strategy, the availability of adequate
capital to grow and compete, our profitability and operational viability, the regulatory environment for digital assets, and general
macroeconomic conditions are forward-looking statements. Forward-looking statements generally relate to future events or future
financial or operating performance. These forward-looking statements are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “believes,”
“could,” “estimates,” “expects,” “intends,” “may,” “plans,”
“potential,” “predicts,” “projects,” “seeks,” “should,”
“will,” “would” or similar expressions and the negatives of those expressions.
Our
forward-looking statements are based on our management’s current beliefs, assumptions and expectations about future events and
trends, which affect or may affect our business, strategy, operations, financial performance or liquidity. Although we believe these
forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties
and are made in light of information currently available to us. Some of the risks and uncertainties that may impact our forward-looking
statements include, but are not limited to, the following principal risks:
●
our incursion of significant net losses and uncertainty whether we will achieve or maintain profitable operations;
●
our ability to grow and compete in the future, and to execute our business strategy;
●
our decision to implement a cryptocurrency treasury strategy, whereby we acquire Toncoin, the native cryptocurrency of The Open Network
(“TON”) blockchain and our dependence on TON and Toncoin as a result of this strategy;
●
our ability to maintain and expand our customer base and to convince our customers to increase the use of our services and/or platform;
●
our financial results and the market price of our common stock may be affected by the price of Toncoin, and our Toncoin holdings will
be less liquid than cash and cash equivalents;
●
changes in the broader digital asset regulatory landscape and as it relates to TON and Toncoin and our failure to comply with applicable
regulatory requirements and risks related to any actions we may take to prevent or correct such failure;
●
the availability of opportunities to stake Toncoin;
●
the competitive market in which we operate;
●
our ability to increase the number of our strategic relationships and grow the revenues from our current strategic relationships;
●
our ability to develop enhancements and new features to our existing service or acceptable new services that keep pace with technological
developments;
●
our ability to successfully launch new product platforms, including MARKET.live, the rate of adoption of these platforms and the revenue
generated from these platforms;
●
our ability to deliver our services, in light of our dependency on third party Internet providers;
●
our ability to attract and retain qualified management personnel;
●
our susceptibility to cybersecurity incidents and other disruptions, particularly as it relates to our holdings of Toncoin;
●
our ability to maintain compliance with the listing requirements of the Nasdaq Capital Market; and
●
the impact of, and our ability to operate our business and effectively manage our growth under evolving and uncertain global economic,
political, and social trends, including inflation, rising interest rates, and recessionary concerns.
● a potential delisting of our common
stock from trading on the Nasdaq Capital Market if we do not comply with Nasdaq listing requirements;
● we granted some equity awards pursuant
to our 2019 Stock and Incentive Compensation Plan, as amended, or the Incentive Plan, that may not have been registered or had a valid
exemption from registration, and we may, despite our current understanding of the issue, be subject to claims for rescission or damages;
● we ratified certain corporate actions under Nevada law, however,
there can be no assurance that claims will not be made to challenge the validity of the ratification or the related corporate actions.
The
forward-looking statements contained in this Annual Report are based on management’s current plans, estimates and expectations
in light of information currently available to us, and they are subject to uncertainty and changes in circumstances. There can be no
assurance that future developments affecting us will be those we have anticipated. Actual results may differ materially from these expectations
due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of
which are beyond our control, as well as the other factors described in the section entitled “Risk Factors” within
this Annual Report and in the other reports we file with the Securities and Exchange Commission (“SEC”). These risks and
uncertainties include those described in the section entitled “Risk Factors.”
You
should not place undue reliance on these forward-looking statements. Our forward-looking statements are based on the information currently
available to us and speak only as of the date on which they were made. Additional factors or events that could cause our actual results
to differ may also emerge from time to time, and it is not possible for us to predict all of them. Over time, our actual results, performance,
or achievements may differ from those expressed or implied by our forward-looking statements, and such difference might be significant
and materially adverse to our security holders. Comparisons of results for current and any prior periods are not intended to express
any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data. Except
as required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information,
future events, or otherwise. We have identified some of the important factors that could cause future events to differ from our current
expectations and they are described in this Annual Report under the captions “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” as well as in other documents that we may file with
the SEC, all of which you should review carefully. We qualify all of our forward-looking statements by these disclaimers.
ii
PART
I
ITEM
1. BUSINESS
Our
Business
References
in this document to the “Company,” “TON,” “we,” “us,” or “our” are intended
to mean TON Strategy Company, individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.
TON
Strategy Company is a digital asset treasury and Web3 ecosystem company focused on supporting The Open Network, a public blockchain originally
developed to integrate with Telegram, one of the world’s largest messaging platforms. The Open Network blockchain is designed to
process transactions quickly and at scale, enabling a range of decentralized applications and digital services that can be accessed directly
through Telegram’s global user base of more than one billion people.
The
Company’s core business is the management of its corporate treasury holdings of Toncoin (“TON” or “Toncoin”),
the native digital asset of the TON blockchain. This includes staking TON, which involves locking up tokens to help secure and validate
the network in exchange for staking rewards. Through these activities, the Company seeks to support the TON ecosystem while managing
its digital assets in line with applicable regulatory, accounting, and risk-management standards. The Company may also pursue other Web3
initiatives within the TON ecosystem to help promote the network’s long-term growth and adoption.
Beginning
in August 2025, the Company implemented its TON Treasury Strategy, utilizing proceeds from its capital-raising activities to acquire
Toncoin and participate in staking activities on the TON network (the “Network”). The Company formally commenced staking
operations in August of 2025. Staking has since become a primary source of yield generation and a core component of the Company’s digital
asset treasury strategy.
As
of December 31, 2025, the Company utilized two third-party custodians—BitGo Trust Company, Inc. and Blockchain.com (Cayman) Limited—to
manage and stake its Toncoin holdings. While the Company’s staking agreements are governed directly through these custodians, the
custodians may engage third-party service providers to operate validator or staking infrastructure on their behalf. All TON staked by
the Company is deployed through single-nominator validator pools and is not commingled with assets of other clients or participants.
When chosen as validators by the TON network, these validators earn staking rewards and transaction fees proportional to the amount of
stake delegated to them.
As
of December 31, 2025, the Company had staked 219,709,826 units of TON on the TON blockchain. For the year ended December 31, 2025, the
Company earned 2,185,286 units of TON and recognized revenue from staking rewards of approximately $4.0 million. As of December 31, 2025, the Company owns 4.2% of the total supply of Toncoin. (https://ton.org/en/toncoin)
In
addition to our digital asset business, the Company has three additional complementary business units. They are MARKET.live, a livestream
shopping platform and digital media agency; LyveCom, an AI social commerce technology software provider; Go Fund Yourself, a social crowd-funding
platform and interactive reality TV show for Regulation CF and Regulation A issuers. For segment reporting purposes, however, MARKET.live and LyveCom are aggregated and presented as a single reportable
segment in the Company’s consolidated financial statements, resulting in three reportable segments, TON, MARKET.live and Go Fund
Yourself, each of which generates revenue.
MARKET.live
Focused
on interactive, video-based social commerce, MARKET.live is a multi-vendor livestream shopping platform that merges e-commerce and entertainment,
enabling brands, retailers, and creators to broadcast shoppable events simultaneously across major social and video channels, including
TikTok, YouTube, Facebook, Instagram, and Pinterest. The platform’s integrations with Meta, TikTok, Pinterest, and other networks
enable native, frictionless checkout experiences within each application, with purchase and order data flowing seamlessly back through
MARKET.live to vendors for fulfilment. In 2024, MARKET.live expanded its relationship with TikTok through a formal partnership with TikTok
Shop, becoming an official TikTok Shop Partner (TSP). Under this partnership, TikTok refers brands, retailers, influencers, and affiliates
to MARKET.live for recurring-fee services, including onboarding and store setup, creative production, influencer management, and store
optimization—now representing the largest and fastest-growing segment of MARKET.live’s business.
LyveCom
During
2025, the Company consummated its acquisition of LyveCom, an artificial intelligence (AI)–driven video commerce platform,
pursuant to a stock purchase agreement dated April 11, 2025. The integration of LyveCom’s technology into MARKET.live is
intended to enhance the platform’s multicast and AI capabilities, enabling brands and merchants to deliver a true omnichannel
livestream shopping experience across social media channels, proprietary websites, and mobile applications, while maintaining
unified checkout and inventory control. LyveCom’s technology allows brands to own their audience and data by capturing
“zero-party” customer information—data intentionally shared by customers regarding preferences and purchase
intentions—providing deeper insight and reducing reliance on third-party platforms.
GO
FUND YOURSELF
Go
Fund Yourself is an interactive social crowdfunding platform that provides public and private companies with broad-based exposure for
their Regulation CF and Regulation A offerings. The program airs weekly on CheddarTV and generates revenue from issuer fees related to appearances,
marketing, advertising, and content production.
Private
Placement in Public Equity
On
August 7, 2025, the Company completed a private investment in public equity (“PIPE”) with certain institutional investors
(the “PIPE Subscribers”) pursuant to a subscription agreement. The PIPE included the sale of (i) 57,024,121 shares of common
stock, par value $0.0001 per share, at a price of $9.51 per share, and (ii) pre-funded warrants to purchase up to 1,677,996 shares of
common stock at a price of $9.5099 per warrant (together, the “Acquired Securities”). Each pre-funded warrant is exercisable
for one share of common stock at an exercise price of $0.0001 per share, is immediately exercisable, and remains outstanding until exercised
in full. The PIPE generated gross proceeds of approximately $558.0 million, funded with a combination of cash, TON, and USD-denominated
stablecoins (USDC and USDT), before deducting placement agent fees and offering expenses. The Company incurred cash placement agent fees
of $11.4 million and offering expenses of $13.2 million. In addition, the equity fee consisted of 512,860 shares of common stock valued
at $10.4 million, that were issued to the placement agent.
Approximately
one-third of the PIPE Subscribers (the “Lock-Up Investors”) agreed to lock-up restrictions under which they may not sell
or transfer their Acquired Securities for six months (for all securities held) and 12 months (for 50% of those securities), measured
from the date of the subscription agreement, subject to customary exceptions. Lock-Up Investors that contributed non-transferable Toncoin
(“Locked Toncoin”) are also subject to equivalent lock-up restrictions for the Acquired Securities received as consideration
for the Locked Toncoin. The Locked Toncoin may, however, be staked by the Company to generate staking revenue.
Business Strategy
On
August 21, 2025, the Company announced the commencement of its TON Treasury Strategy, designating Toncoin as its primary treasury reserve
asset. The Company began purchasing TON under this strategy and initiated staking activities during the third quarter of 2025 to earn
rewards on its digital asset holdings. This announcement followed the August 8, 2025 closing of the Company’s $558 million private
placement joined by more than 110 institutional and crypto-native investors. The Company used the majority of the proceeds from the private
placement to acquire Toncoin as its primary treasury reserve asset in furtherance to become the first publicly traded company using Toncoin
as its primary treasury reserve.
The Company’s business strategy related to Toncoin targets the accumulation
of over 5% of Toncoin’s circulating supply, with the aim of establishing the Company as a significant participant in maintaining
and securing the TON blockchain’s network infrastructure. The Company also intends to steadily increase its Toncoin held per share
through reinvestment of cash flows, staking rewards, and disciplined capital markets activity. As of December 31, 2025, the Company owns 4.2% of the total supply of Toncoin. (https://ton.org/en/toncoin)
Revenue
Generation
A
description of our principal revenue generating activities is as follows:
TON
Strategy revenue is derived from staking rewards. The Company recognizes staking rewards as revenue in accordance with ASC 606. As the
amount of rewards are not known by the Company until a validation activity is completed, the staking rewards are constrained under the
Topic 606 guidance on variable consideration. Staking rewards are recognized as revenue at the end of each validation round, or block
processing time, or when earned and measurable and to the extent that it is probable that a significant reversal would not occur. The
amount of revenue recognized is measured at fair value and is presented net of validator or other protocol fees. The Company acts as
an agent in staking transactions as it provides access to its TON to third-party validator operators who perform the technical validation
responsibilities on the blockchain.
MARKET.live
revenue is derived from contract-based recurring fee revenue services that include, among other things, a full suite of social commerce
services for consumer brands and merchants seeking to adopt or expand online commerce and social selling capabilities, including end-to-end
creative services such as content creation and full remote and in-studio production services, host/influencer/affiliate casting and management,
TikTok Shop and other social media platform online store creation, set-up and establishment, maintenance and enhancements. Clients are
referred to us through our existing partnership with TikTok Shop and other social media channels, as well as from several brand agencies
with whom we maintain affiliate relationships.
GO
FUND YOURSELF Show derives revenue from fees charged to issuers to appear on the show and for marketing, ad, and content creation and
distribution services. Appearance fees are based on service packages that range from $15,000 to $60,000 per issuer.
Intellectual
Property
Our
policy is to protect our technology through, among other things, a combination of patents, trade secrets, copyrights, and trademarks. We primarily
rely upon trade secrets and copyrighted proprietary software, code, and know-how to protect our interactive video technology platform
and associated applications. We have taken security measures to protect our trade secrets and proprietary know-how, to the extent possible.
Our means of protecting our proprietary rights may not prove to be adequate and our competitors may independently develop technology
or products that are similar to ours or that compete with ours. Trade secret and copyright laws afford only limited protection for our
technology and products. The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the
United States. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information
that we regard as proprietary. Third parties may also design around our proprietary rights, which may render our protected technology
and products less valuable, if the design around is favorably received in the marketplace.
We
control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees
and contractors, and confidentiality agreements with third parties. Despite our precautions, we cannot assure you that our technology
platform and products do not infringe patents held by others or that they will not in the future. Litigation may be necessary to enforce
our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others,
or to defend against claims of infringement, invalidity, misappropriation, or other claims.
Dependence
on Key Customers
Based
on our current business and anticipated future activities as described in this Annual Report, we have one customer that represents 25%
of our 2025 revenue.
Competition
The competitive landscape for the Company is defined by other market participants that provide exposure to Toncoin,
whether through treasury strategies, balance sheet holdings, staking operations, or investment products. This includes publicly traded
digital asset treasury companies that hold Toncoin as part of their reserves, private and public companies that maintain Toncoin on their
balance sheets, validator and staking operators that generate Toncoin yield, and current or future financial products designed to offer
investors direct or indirect exposure to Toncoin. As the TON ecosystem continues to develop, competition is expected to intensify across
these categories, particularly as institutional adoption increases and new vehicles for accessing Toncoin are introduced. Market participants
may differentiate themselves through scale of holdings, access to liquidity, staking infrastructure, yield optimization, or capital markets
strategies. Periods of market volatility or dislocation may create opportunities for well-capitalized participants to expand their Toncoin
exposure or consolidate market position. These competitive dynamics may impact our ability to execute our strategy and may affect the
value and performance of our Toncoin holdings.
Government
Regulation
Our
software and services are subject to certain legal, regulatory and other requirements. These laws are complex and evolving. Various U.S.
federal and state laws govern many of our business activities, including, without limitation, the processing of payments and handling
of consumer information. Despite our significant efforts to comply with all applicable requirements, there can be no guarantee that our
efforts will be sufficient or that existing laws, rules or other requirements will not be interpreted, revised, augmented or rewritten
in a way that adversely affects our regulated business activities, which comprise a significant majority of our overall business. For
additional information related to these risk-related issues, refer to the section entitled “Risk Factors” within this
Annual Report.
Human
Capital Management
As
of December 31, 2025, we had 25 full-time statutory employees, two part-time employees, and eight independent contractors. We engage independent
contractors on an as-needed basis to provide specific expertise in areas of software design, development and coding, content creation,
audio and video editing, video production services, and other business functions, including marketing and accounting. None of our employees
are covered by a collective bargaining agreement. We have had no labor-related work stoppages and believe our relationship with our employees,
both full-time and part-time, consultants, and independent contractors, is satisfactory.
We
believe our people are at the heart of our success and our customers’ success. We endeavor to not only attract and retain talented
employees, but also to provide a challenging and rewarding environment to motivate and develop our valuable human capital. We look to
our talented employees to lead and foster various initiatives that support our company culture including those related to diversity,
equity and inclusion. In addition, we rely heavily on our talented team to execute our growth plans and achieve our long-term strategic
objectives.
We
provide competitive compensation and benefits for our employees. Our compensation packages may include base salary, commission or annual
performance-based bonuses, and share-based compensation. We also offer general employee medical, dental, and vision insurance, health
savings and flexible spending accounts, mental health resources, paid time off, paid family leave, life and disability insurance, and
a 401(k) plan. These programs and our overall compensation packages seek to attract and retain talented employees.
Our
Historical Background
TON
Strategy Company was incorporated in 2012 in the state of Nevada.
On
April 12, 2019, we acquired Sound Concepts Inc. pursuant to an agreement and plan of merger. As a result of the merger, Sound Concepts
merged with and into our wholly owned subsidiary, NF Acquisition Company, LLC. Upon completion of the merger, NF Acquisition Company,
LLC changed its name to Verb Direct, LLC (“Verb Direct”).
On
September 4, 2020, Verb Acquisition Co., LLC (“Verb Acquisition”), a subsidiary of Verb Technology, entered into a membership
interest purchase agreement with Ascend Certification, LLC, dba SoloFire.
On
October 18, 2021, we established verbMarketplace, LLC (“Market LLC”), a Nevada limited liability company. Market LLC is a
wholly owned subsidiary established for our MARKET.live platform.
On
June 13, 2023, the Company disposed of all of its operating SaaS assets of Verb Direct and Verb Acquisition, (referred to collectively
as the “SaaS Assets”) pursuant to an asset purchase agreement in consideration of the sum of $6.5 million, $4.75 million
of which was paid in cash by the buyer at the closing of the transaction. An additional payment in the aggregate of $0.75 million will
be paid by the buyer if certain profitability and revenue targets are met during the second year following the closing date as set forth
more particularly in the asset purchase agreement. A similar payment would have been due and payable to the Company after the first year
following the closing if the buyer had met certain profitability and revenue targets specified in the asset purchase agreement, which
it failed to meet. The sale of the SaaS Assets was undertaken to allow the Company to focus its resources on its burgeoning MARKET.live
business unit which it expects over time will create greater shareholder value.
On
November 15, 2024, the Company formed Go Fund Yourself Show LLC (“Go Fund Yourself”), a Nevada limited liability company.
Go Fund Yourself is a subsidiary of the Company established for the Go Fund Yourself show.
On
January 15, 2025, the Company formed Good Girl LLC, a majority-owned Nevada limited liability company, and subsequently sold this subsidiary
during the year ended December 31, 2025. There was no consideration paid or received in this sale transaction.
On
July 28, 2025, the Company formed VERB Subsidiary 1, Corp., VERB Subsidiary 2, Corp., and VERB Subsidiary 3, Corp., all Nevada corporations,
to operate the digital asset business.
Effective September 2, 2025, we
changed our name from Verb Technology Company, Inc. to TON Strategy Company and changed our trading symbol on the Nasdaq Capital Market
for the Company’s common stock from “VERB” to “TONX.”
Available Information
Our
common stock trades on The Nasdaq Capital Market under the symbol “TONX”. Our Internet website address is https://www.tonstrat.com/shareholders/.
The information contained on our website is not included as a part of,
or incorporated by reference into, this Annual Report on Form 10-K. Other than an investor’s own internet access charges, we make
available free of charge through our investor relations website (https://ir.tonstrat.com/) our Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we have electronically
filed such material with, or furnished such material to, the SEC.
ITEM
1A. RISK FACTORS
Our
short and long-term success is subject to numerous risks and uncertainties, many of which involve factors that are difficult to predict
or beyond our control. As a result, investing in the Company’s common stock involves substantial risk. The Company’s stockholders
should carefully consider the risks and uncertainties described below, in addition to the other information contained in or incorporated
by reference into this Annual Report, as well as the other information we file with the SEC from time to time. The risks described below
are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also impair
our business operations and financial results. If any of the following risks actually occurs, our business, financial condition or results
of operations could be adversely affected. In such case, the trading price of our common stock could decline and you could lose all or
part of your investment. Our filings with the SEC also contain forward-looking statements that involve risks or uncertainties. Our actual
results could differ materially from those anticipated or contemplated by these forward-looking statements as a result of a number of
factors, including the risks we face described below, as well as other variables that could affect our operating results. Past financial
performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
Risks
Related to Our TON Treasury Strategy and Toncoin Holdings
Our
financial results and the market price of the common stock may be affected by the price of Toncoin.
Toncoin
is a highly volatile asset, and fluctuations in the price of Toncoin, like fluctuations experienced in prior years, are likely to
influence our financial results and the market price of our common stock. Our financial results and the market price of our common
stock has in the past been and would in the future be adversely affected, and our business and financial condition would be
negatively impacted, if the price of Toncoin decreased substantially (as it has in the past) or entirely, including as a result
of:
The
Company’s Toncoin holdings will be less liquid than existing cash and cash equivalents and may not be able to serve as a source
of liquidity for it to the same extent as cash and cash equivalents.
The
Toncoin market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign
currencies markets and certain other digital assets, relative anonymity, a developing regulatory landscape, potential susceptibility
to market abuse and manipulation, compliance and internal control failures at exchanges, and various risks inherent in its entirely electronic,
virtual form and decentralized network. During times of market instability or due to contractual arrangements, we may not be able to
sell our Toncoin at favorable prices, for a certain period of time, or at all. For example, a wholly owned subsidiary of the Company
entered into a purchase agreement on July 31, 2025, pursuant to which the purchased Toncoins are subject to a lock-up period. As a result,
our Toncoin holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Furthermore,
Toncoin we hold with our custodians and transact with our trade execution partners will not enjoy the same protections as are available
to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation
or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions
collateralized by our unencumbered Toncoin or otherwise generate funds using our Toncoin holdings, including in particular during times
of market instability or when the price of Toncoin may have experienced significant decline. If we are unable to sell our Toncoin, enter
into additional capital raising transactions, including capital raising transactions using Toncoin as collateral, or otherwise generate
funds using our Toncoin holdings, or if we are forced to sell our Toncoin at a significant loss, in order to meet our working capital
requirements, our business and financial condition could be negatively impacted.
We
have recently announced our new TON treasury strategy, and we may be unable to successfully implement it.
We
have announced a significant change in strategy to our new TON treasury strategy. There is no assurance that we will be able to
successfully implement this new strategy or operate Toncoin-related activities at the scale or profitability currently anticipated.
TON operates with a Proof-of-Stake (“PoS”) consensus mechanism. This strategic shift requires specialized employee
skillsets and operational, technical and compliance infrastructure to support Toncoin and related staking activities. Our new
strategy also requires that we implement different security protocols and treasury management practices. Errors by the
Company could result in significant loss of funds and reduced rewards. Further, there is ongoing scrutiny and limited formal
guidance from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company cryptocurrency
treasury strategies. As a result, our shift to our TON treasury strategy could have a material adverse effect on our business and
financial condition.
Our
TON treasury strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.
Consensus
on the TON network is accomplished through a Proof-of-Stake mechanism in which validators stake Toncoin to participate in block production
and validation. Validators are selected through periodic election rounds, and the frequency at which a validator participates in consensus
is generally proportional to its staked Toncoin. Validators earn rewards derived from transaction fees and network-generated Toncoin
for successfully validating blocks. We may choose to operate our own validator node or delegate our Toncoin to third-party validators
through nominator pools. If we delegate to third-party validators, those validators typically retain a commission from staking rewards,
which would reduce our returns. The TON network automatically imposes slashing penalties on validators that experience significant downtime,
commit consensus faults such as double-signing, or produce invalid blocks, and so would require that we maintain consistent up time to
ensure that we are eligible for staking rewards and to avoid slashing penalties. If we delegate our Toncoin through a nominator pool,
our delegated stake would also be subject to slashing proportionally if the underlying validator is penalized, which would be outside
of our control.
Staked
Toncoin is also subject to lock-up periods tied to election cycles, during which it cannot be withdrawn or sold. This lack of liquidity
could limit our ability to respond to market changes or meet our financial needs. We may seek to mitigate this risk through liquid staking
protocols, where we deposit Toncoin into a smart contract and receive a liquid staking token in exchange. While we anticipate that the
price of liquid staking tokens will generally correlate to Toncoin, prices could diverge, particularly if the validators utilized by
the liquid staking protocol are subject to slashing penalties, in which case we may be able to withdraw fewer Toncoin than we originally
deposited.
The TON ecosystem continues to evolve,
with protocol upgrades and changes that may require adjustments to our or our validators’ operational setup. Technical failures, slashing
events, or operational errors could impact our ability to obtain staking rewards, which could result in our failure to meet our financial
projections. Any of these operational risks could materially and adversely affect our ability to execute our TON treasury strategy and
may prevent us from realizing positive returns and could severely hurt our financial condition.
Digital
assets do not pay interest, dividends or other returns and must be used in staking or decentralized finance activities to generate revenue,
which involves additional risks.
Digital
assets such as Toncoin do not pay interest, dividends, or other returns and we can only generate revenue from our digital asset holdings
if we sell our digital assets or implement strategies to create revenue streams or otherwise generate cash by using our digital asset
holdings. For example, the Toncoin we purchase can be deployed in profit-making activities by operating a validator, staking to other
validators, or engaging in yield-generating activities in decentralized financing.
Even
if we pursue any strategies such as staking or decentralized finance transactions, we may be unable to create revenue streams or otherwise
generate cash from our digital asset holdings, and any such strategies may subject us to additional risks. All trading and investment
activity involves risk, which is heightened in the case of decentralized finance due to the irrevocable nature of blockchain transactions
and the possibility of errors in smart contracts. Decentralized finance protocols also attract hackers and persons looking to exploit
flaws in or the ability to misuse smart contracts, which may result in loss of our digital assets. We also may incur losses in connection
with our decentralized finance activity due to human error or our inability to predict future price movements, or due to “slashing”
in connection with our staking activities. Any losses we sustain in connection with decentralized finance activities or staking could
cause an adverse impact on our financial condition, results of operations, and the market price of our common stock.
In
connection with our TON treasury strategy, we expect to interact with various smart contracts deployed on TON, which may expose us to
risks and technical vulnerabilities.
In
connection with our TON treasury strategy, including staking, restaking, liquid staking, and other decentralized finance activities,
we expect to interact with various smart contracts deployed on TON in order to optimize our strategy. Smart contracts are self-executing
code that operate without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit
contracts, liquid staking protocols, restaking platforms, and decentralized finance applications, they are subject to many known risks
such as technical vulnerabilities, coding errors, security flaws, and exploits. Any vulnerability in a smart contract we interact with
could result in the loss or theft of Toncoin or other digital assets, which could have a materially adverse impact on our business. A
vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such
as the inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended
or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.
A
significant decrease in the market value of our Toncoin holdings could adversely affect our ability to satisfy our financial obligations
under any future debt financings.
Our
ability to make scheduled payments on or to refinance any indebtedness and financial commitments we incur depends on our financial condition
and operating performance, which are subject to prevailing economic and competitive conditions including financial, business and other
factors beyond our control. If the market value of Toncoin decreases significantly, we may be unable to generate sufficient cash flow
to permit us to pay the principal, premium, if any, and interest on any indebtedness.
If
our cash flows and capital resources are insufficient to fund debt and other obligations, we may be forced to reduce or delay capital
expenditures, sell assets, seek additional capital or restructure our indebtedness. Our ability to restructure or refinance indebtedness
will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of indebtedness could be
at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our operations. The terms
of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to service
our debt would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. If we
face substantial liquidity problems, we might be required to sell assets to meet debt and other obligations. Future indebtedness may
restrict our ability to dispose of assets and dictates our use of the proceeds from such disposition.
We
may not be able to consummate dispositions, and the proceeds of any such disposition may be inadequate to meet obligations. We may be
unable to access adequate funding as a result of a decrease in lender commitments due to an unwillingness or inability on the part of
lending counterparties to meet their funding obligations and the inability of other lenders to provide additional funding to cover a
defaulting lender’s portion. As a result, we may be unable to execute our plan of operations, make acquisitions or otherwise conduct
operations, which would have a material adverse effect on our financial condition and results of operations.
Unrealized
fair value gains on our Toncoin holdings could cause us to become subject to the corporate alternative minimum tax.
Unless
an exemption applies, the Internal Revenue Code imposes a 15% corporate alternative minimum tax (“CAMT”) on certain corporations.
In general, CAMT applies to corporations with respect to their initial tax year and subsequent tax years if the average annual adjusted
financial statement income for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. However, the
determination of CAMT applicability is computationally and administratively complex and limited guidance has been provided by the Internal
Revenue Service (the “IRS”). In June 2025, the Internal Revenue Service released a notice covering CAMT, which included an
optional simplified method for determining CAMT applicability and announced its intention to revise regulations addressing CAMT that
were proposed in September 2024.
The
Company may be required to adopt ASU 2023-08, under which the Company’s Toncoin holdings must be measured at fair value in the
Company’s statement of financial position, with gains and losses from changes in the fair value of Toncoin recognized in net income
each reporting period. When determining whether the Company is subject to CAMT and when calculating any related tax liability for an
applicable tax year, although the September 2024 proposed regulations provide that, among other adjustments, the Company’s adjusted
financial statement income must include any unrealized gains or losses reported in the applicable tax year, the June 2025 notice indicated
that the IRS intends to issue additional interim guidance addressing how unrealized gains and losses on certain investment assets, such
as the Company’s Toncoin holdings, which are reported for financial statement purposes, are taken into account for purposes of
determining the application of CAMT, and that the revised CAMT regulations will incorporate such interim guidance.
Accordingly,
although the exact approach that any guidance from the IRS or revised CAMT regulations would take is unclear, it is possible that if
the Company adopted ASU 2023-08, the Company could become subject to CAMT. If the Company becomes subject to CAMT, it could result in
a material tax obligation that the Company would need to satisfy in cash, which could materially affect the Company’s financial
results, including its earnings and cash flow, and its financial condition.
Future
developments regarding the treatment of crypto assets for U.S. and non-U.S. tax purposes could adversely impact the Company’s business
and liquidity.
Due
to the evolving nature of cryptocurrencies and the absence of comprehensive legal and tax guidance with respect to digital asset products
and transactions, many significant aspects of the U.S. and non-U.S. tax treatment of transactions involving cryptocurrencies are uncertain,
and it is unclear whether, when and what guidance may be issued in the future. In 2014, the IRS released Notice 2014-21, discussing certain
aspects of “virtual currency” for U.S. federal income tax purposes and, in particular, stating that such virtual currency
(i) is “property,” (ii) is not “currency” for purposes of the rules relating to foreign currency gain or loss,
and (iii) may be held as a capital asset. In 2019, the IRS released Revenue Ruling 2019-24 and a set of “Frequently Asked Questions”
(which have been periodically updated), that provide additional guidance, including guidance to the effect that, under certain circumstances,
hard forks of digital currencies are taxable events giving rise to ordinary income and guidance with respect to the determination of
the tax basis of virtual currency. However, this guidance does not address other significant aspects of the U.S. federal income tax treatment
of cryptocurrencies and related transactions.
There
continues to be uncertainty with respect to the timing, character and amount of income inclusions for various digital asset transactions.
Although we believe our treatment of digital asset transactions for U.S. federal income tax purposes is consistent with existing guidance
provided by the IRS and existing U.S. federal income tax principles, because of the rapidly evolving nature of digital asset innovations
and the increasing variety and complexity of digital asset transactions and products, it is possible the IRS and various U.S. states
may disagree with our treatment of certain digital asset transactions for U.S. tax purposes, which could adversely affect our business.
There can be no assurance that the IRS, the U.S. state revenue agencies or other non-U.S. tax authorities, will not alter their respective