Tron Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This annual report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report. In this annually report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the common stock in our capital stock. As used in this annual report and unless otherwise indicated, the terms “we”, “us”, “our”, “Tron” and the “Company” mean Tron Inc. and its consolidated subsidiary unless the context dictates otherwise. Our Business General Tron Inc. (formerly SRM Entertainment, Inc.), is a publicly traded company pioneering blockchain-integrated treasury strategies. As the public company with the largest TRON (TRX) tokens holdings, the Company is committed to transparency, long-term value creation and the adoption of decentralized financial tools. In addition, through our wholly owned subsidiary, the Company designs, develops, and manufactures custom merchandise which includes toys and souvenirs for the world’s largest theme parks and other entertainment venues. Many of the Company’s products are based on award winning multi-billion-dollar entertainment franchises that are featured in popular movies and books. The products are distributed worldwide at Walt Disney Parks and Resorts, Universal Parks and Destinations, United Parks and Resorts – SeaWorld, Six Flags and other attractions. Tron Inc. is a Nevada corporation that was incorporated on April 22, 2022. SRM Entertainment Limited (“SRM Ltd”), a limited company was incorporated in the Hong Kong Special Administrative Region of the People’s Republic of China on January 23, 1981. The Company acquired SRM Ltd on August 14, 2023. The consolidated companies are collectively referred to as the Company. On June 16, 2025, we entered into the June Securities Purchase Agreement (as defined below) with Bravemorning (as defined below). On August 29, 2025, Bravemorning acquired 220,000,000 shares of the Company’s common stock, par value $0.0001 (the “Common Stock”), via its exercise of June PIPE Warrants (as defined below) with total dollar amount of $110,000,000, and upon such acquisition, Bravemorning became the owner of approximately 86.6% of the Company’s outstanding shares of Common Stock. Upon the August Warrant Exercise (as defined below) in connection with the June Securities Purchase Agreement (as defined below), Bravemorning also held 100,000 Preferred Stock Shares (as defined below), which are convertible into an additional 200,000,000 shares of Common Stock and which vote on an as-converted basis with the Common Stock; and Bravemorning’s ownership of Common Stock and Preferred Stock Shares gave it an aggregate voting power of approximately 92.5%. As of March 18, 2026, Bravemorning holds an aggregate voting power of approximately 88.5%. Mr. Weike Sun, who is a director of the Company, is the sole shareholder of Bravemorning. See “ Recent Developments ” for more information on these transactions and also on the Employment Agreement Amendments, the Name Change, the Symbol Change and the Charter Amendment (all as defined below). These moves reflect the Company’s broader strategic transformation and its commitment to aligning more closely with the TRON blockchain ecosystem, following the launch of its Tron-focused treasury strategy. The Company’s ticker change to “TRON” reinforces its brand identity and positions it as a key corporate player in the rapidly evolving blockchain and digital asset economy. On December 29, 2025, the Company announced an $18 million strategic equity investment from Justin Sun (“December Investment”). The closing of the December Investment occurred on January 8, 2026. See “ Recent Developments ” for more information on this transaction. 42 Table of Contents Basis of Presentation The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of US Securities and Exchange Commission (“SEC”). Company Overview Toy and Souvenir Business The Company is a trusted toy and souvenir designer and developer, selling into the world’s largest theme parks and entertainment venues. Our business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty. We create whimsical, fun and unique products that enable fans to express their affinity for their favorite “something”— whether it is a movie, TV show, favorite celebrity, or favorite restaurant. We infuse our distinct designs and aesthetic sensibility into a wide variety of product categories, including figures, plush, accessories, apparel, and homewares. With our unique style, expertise in pop culture, broad product distribution and highly accessible price points, we have developed a passionate following for our products that has underpinned our growth. We believe we sit at the nexus of pop culture—content providers value us for our broad network of retail customers, retailers value us for our portfolio of pop culture products and pop culture insights, and consumers value us for our distinct, stylized products and the content they represent. Pop culture pervades modern life and almost everyone is a fan of something. Today, more quality content is available and technology innovation has made content accessible anytime, anywhere. As a result, the breadth and depth of pop culture fandom resembles, and in many cases exceeds, the type of fandom previously associated only with sports. Everyday interactions at home, work or with friends are increasingly influenced by pop culture. We have invested strategically in our relationships with key constituents in pop culture. Content providers value us for our broad network of retail customers and retailers value us for our pop culture products, pop culture insights and ability to drive consumer traffic. Consumers, who value us for our distinct, stylized products, remain at the center of everything we do. Content Providers : We have licensing relationships with many established content providers, and our products appear in venues such as Walt Disney, United Parks and Resorts (f/k/a SeaWorld), Universal Studios, Six Flags, Herschend Family Entertainment and Merlin Entertainment. We currently have licenses with Smurfs and Zoonicorn LLC, from which we can create multiple products based on each character within. Content providers trust us to create unique, stylized extensions of their intellectual property that extend the relevance of their content with consumers through ongoing engagement, helping to maximize the lifetime value of their content. Consumers : Fans are increasingly looking for ways to express their affinity for and engage with their favorite pop culture content. Over time, many of our consumers evolve from occasional buyers to more frequent purchasers, whom we categorize as enthusiasts or collectors. We create products to appeal to a broad array of fans across consumer demographic groups—men, women, boys and girls—not a single, narrow demographic. We currently offer an array of products that sell across several categories. Our products are generally priced between $2.50 and $50.00, which allows our diverse consumer base to express their fandom frequently and impulsively. We continue to introduce innovative products designed to facilitate fan engagement at different price points and styles. We have developed a nimble and low-fixed cost production model. The strength of our management team and relationships with content providers, retailers and third-party manufacturers allows us to move from product concept to a new product tactfully. As a result, we can dynamically manage our business to balance current content releases and pop culture trends with timeless content based on classic movies, such as Harry Potter or Star Wars. This has allowed us to deliver significant growth while lessening our dependence on individual content releases. 43 Table of Contents TRX Tokens Treasury The TRX token is the governance token of the TRON network, which is used to pay for on-chain transaction fees, participate in network governance and incentivize validators who generate transaction blocks for the network. Users can also stake TRX tokens to vote for validators who facilitate the block validation process and receive staking rewards. We believe that the TRX token is an attractive digital asset which can create long-term value for our shareholders by capitalizing on the global adoption of blockchain and digital innovation. The Company has adopted a Treasury Reserve Policy (“Treasury Reserve Policy”) which set out our treasury management and capital allocation strategies, under which our treasury reserve assets will consist of: ● cash and cash equivalents and short-term investments (“Cash Assets”) held by us that exceed working capital requirements; and ● TRX tokens held by us, as the primary treasury holding asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets. The TRX token is the native token of the TRON blockchain. As of March 18, 2026, the TRX token ranked number 6 by market valuation among all non-stablecoin crypto tokens globally. The Company’s plan is to accumulate and hold TRX tokens in its treasury and stake substantially all TRX tokens to earn yield. The Company has been engaging primarily in liquid staking activities by staking TRX tokens in its treasury through JustLend DAO (“JustLend”), the leading decentralized finance (“DeFi”) protocol on the TRON blockchain, whereby it stakes its digital assets (TRX tokens) into the JustLend protocol to support network operations and, in return, accrued network rewards. The JustLend platform generates yield through a combination of standard staking rewards (i.e. token rewards derived from delegating to super representative nodes) and “energy” rental income on the TRON blockchain (i.e. renting to other users the idle TRON “energy” resources entitled by TRX staking). Under standard TRX staking mechanism, TRX stakers are able to participate in community governance by voting for super representatives. Yield from standard TRX staking generally refers to (1) energy and bandwidth obtained by users after staking TRX on the TRON blockchain and (2) the voting rewards in the form of TRX tokens obtained by users after voting for the super representatives. Energy rental generally refers to users earning rent by renting out the energy that is obtained by staking TRX on the TRON blockchain. According to the mechanism of the TRON blockchain, deploying or triggering smart contracts consumes energy; and if energy is insufficient, TRX token(s) will be burned to make up for the missing resources. Energy could be obtained by either staking TRX tokens or burning TRX tokens. Given the market demands, there are energy rental protocols in the market (such as JustLend Energy Rental), such that users can borrow energy without staking nor burning TRX tokens. Users who already have staked their TRX tokens on the TRON blockchain have the ability to lend their energy out to earn additional income. The use cases of the TRX token include (but are not limited to): (i) Governance of TRON blockchain : By staking their TRX token holdings, TRX token holders will be able to vote for super representative candidates. The top 27 super representative candidates with the highest votes will become the super representative nodes (the “SR”) and be able to participate in validation and block production. The super representative candidates who rank 28th to 127th are called super representative partners (the “SR Partners”). Each of the SRs, SR Partners and other super representative candidates may initiate community proposals, but only SRs are entitled to vote for the proposals. As of March 18, 2026, the SRs of TRON blockchain include, among others, Google Cloud, Binance, HTX, Kraken, OKX, OKCoin Japan, Kiln, P2P.org, Nansen, and Abra Capital. (ii) Transaction fees on TRON blockchain : TRX token is primarily used to pay transaction fees on the TRON blockchain. Generally speaking, users of the TRON blockchain are required to utilize token resources (namely “bandwidth” and “energy”) in their wallets to process transactions. Users can obtain such resources by either burning or staking TRX tokens. (iii) Incentivizing SRs to maintain security and functionality of TRON blockchain: Block generation rewards and voting rewards on the TRON blockchain are issued in the form of TRX token. An SR is entitled to block generation rewards, and voting rewards are distributed to both SRs and SR Partners. The genesis supply of the TRX token was 100 billion. New tokens are generated currently at the rate of approximately 1.5% per annum as governance and block validation rewards. On the offsetting side, TRX token is burned by the users to pay transaction fees for on-chain activities. Consequently, the supply change of TRX token depends on how active the blockchain is. During the period from January 1, 2022 to March 18, 2026, TRX token has been in deflation at approximately 1.7% per annum. As of March 18, 2026, the supply of TRX token is approximately 94.8 billion. Currently there is no lock-up, and substantially all the TRX tokens are in circulation. The TRON protocol, one of the largest blockchain-based operating systems in the world, offers public blockchain support of high throughput, high scalability, and high availability for all decentralized applications (DApps) in the TRON ecosystem. The TRON mainnet was launched in June 2018. It marked the transition of TRX token from being an ERC-20 token on the Ethereum blockchain to the native governance token of TRON blockchain, an independent and standalone network. Through years of development, TRON blockchain has been uniquely positioned as the dominant settlement protocol for on-chain stablecoin payment. As of March 18, 2026, TRON had over 371 million in total user wallets globally, hosting approximately 86.4 billion in TRC-20 USDT (Tether) accounting for approximately 46.9% of total USDT circulation. TRON block generation is secured and validated by a diverse group of super representative nodes globally including major industry players such as Google Cloud, Binance, HTX, Kraken, OKX, OKCoin Japan, Kiln, P2P.org, Nansen, and Abra Capital. The Company holds the treasury tokens in a self-managed hardware wallet (the “Treasury Wallet”). The board of directors of the Company (the “Board”) has full control and access to the Treasury Wallet, which was set up by BiT Global Trust Limited (“BiT Global”). BiT Global is a licensed Trust or Company Service Provider under the licensing regime administered by the Companies Registry of Hong Kong and a trust company registered under section 78(1) of the Trustee Ordinance (Cap. 29) of Hong Kong, and is therefore a regulated custodian. 44 Table of Contents The Treasury Wallet is safely kept in a secure location in Hong Kong controlled by BiT Global. It utilizes the proprietary technology and on-chain compliance monitoring services provided by BiT Global. Pursuant to the Self-Managed Wallet Services Agreement (the “BiT Global Services Agreement”) entered into by the Company and BiT Global on June 26, 2025, BiT Global has set up the Treasury Wallet for the Company, licenses certain BiT Global technology to the Company, and provides monitoring services to the Company relating to on-chain wallet activities. The Company retains sole control of the Treasury Wallet and private keys in Hong Kong. Mr. Weike Sun and Mr. Zi Yang, our Directors, are authorized by the Board to make the arrangement for safeguarding and operating the private keys of the Treasury Wallet. Due to security considerations, the details of the private key arrangement are highly confidential and not for public disclosure. The Board is primarily responsible for verifying the existence of treasury token holdings. The Company’s auditors also have inspected and verified the Treasury Wallet operations and the existence of the treasury token holdings. There currently is no insurance coverage on the treasury tokens. The BiT Global Services Agreement contains customary provisions relating to fees, confidentiality, compliance with applicable law, indemnification, limitations of liability, and termination. The foregoing description of the BiT Global Services Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the BiT Global Services Agreement, which is incorporated herein by reference as Exhibit 10.30. The Company has staked and plans to continue to stake TRX tokens in its treasury into Staked TRX (sTRX) tokens through JustLend, the leading DeFi protocol on the TRON blockchain which executes transactions through smart contracts, to accrue enhanced staking yield from both standard TRX staking and energy rental. JustLend is the DeFi staking platform designated by the Company to generate enhanced staking yield via the staked TRX token (sTRX). The Company has currently staked nearly 100% of the TRX tokens in its treasury into sTRX tokens. See “Our TRX Tokens Holdings” below. By holding sTRX tokens, the Company is able to accrue enhanced yields from both standard TRX staking and energy rental. The staking rewards generated from staking TRX tokens into sTRX via JustLend are distributed according to the protocol’s rules. Currently, 20% of the rewards are retained by the JustLend protocol as protocol revenue, while the remaining 80% are allocated to sTRX token holders on a pro-rata basis. BiT Global does not receive any portion of the staking rewards. The staking of TRX tokens into sTRX tokens through JustLend was executed on the JustLend webpage. JustLend is a decentralized finance protocol, and the staking is governed by the Terms of Service of JustLend. There is no separate agreement between the Company and JustLend. The Company has not engaged in offline staking. The TRX token is the native token of the TRON blockchain, and it serves as the utility token for various scenarios. The staked TRX token (sTRX) is a derivative token issued by the JustLend DAO protocol that represents the “staked” TRX tokens, and provides holders exposure to automatically accruing yield through standard TRX staking rewards and energy renting. Users can obtain sTRX tokens by staking TRX tokens on JustLend. The sTRX token is not fixed at a 1:1 conversion ratio with the TRX token; instead, the number of TRX tokens which can be exchanged from one sTRX token increases over time as rewards accumulate in the overall pool of staked tokens. As the voting rewards and energy rent accrue, the conversion ratio of the TRX token to the sTRX token increases gradually, so that the number of TRX tokens which can be obtained by users by unstaking and swapping from sTRX tokens back to TRX tokens increases accordingly. By holding sTRX tokens, the Company is able to accrue enhanced yields from both standard TRX staking and energy rental. For the avoidance of doubt, the sTRX token does not generate discrete staking rewards. Instead, the economic benefit of staking is reflected through a floating conversion rate between TRX and sTRX, which increases over time based on accrued protocol rewards. For comparison, the TRX token remains the native token of the TRON blockchain, and which can be used directly for transaction fee payments and community governance; whereas the sTRX token functions as a staking and yield-bearing certificate. On June 28, 2025 and August 28, 2025, 365,096,800 and 312,500,000 TRX tokens were converted into approximately 297,543,246 and approximately 252,133,646 sTRX tokens respectively, based on the real-time conversion ratio according to the JustLend webpage. According to the JustLend DAO documentation, users who unstake their sTRX must wait 14 days before they can withdraw the unstaked TRX by clicking “Withdraw” on the same page. As of the date of this Form 10-K, the Company does not have any material agreements with counterparties relating to the purchase or sale of TRX tokens. To date, the TRX tokens held in the Company’s treasury were received (i) as payment in kind from the Company’s controlling shareholder in connection with the issuance of Series B Preferred Stock and warrant shares in connection with the June Securities Purchase Agreement (as defined below); and (ii) as a result of the token sale and purchase transactions under the BGDL Token S&P Agreement (as defined below). Our TRX token strategy generally involves from time to time, subject to market conditions, (i) issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase TRX tokens, and (ii) acquiring TRX tokens with our liquid assets that exceed working capital requirements. We intend to fund further TRX token acquisitions primarily through issuances of Common Stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock. We view our TRX tokens holdings as long-term holdings and expect to continue to accumulate TRX tokens. We have not set any specific target for the amount of TRX tokens we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional financings to purchase additional TRX tokens. This overall strategy also contemplates that we may (i) enter into additional capital raising transactions that are collateralized by our TRX tokens holdings, and (ii) consider pursuing strategies to create income streams or otherwise generate funds using our TRX tokens holdings. The primary focus of the business of the Company is the accumulation of TRX tokens with the goal to realize long-term value creation through price appreciation and staking yield. The sTRX token, being a derivative token that represents the “staked” TRX token, provides exposure to additional yield from standard TRX staking rewards and energy renting. The Company currently has no intention to use its TRX token reserve to support or finance its operating activities. However, the Company will not rule out the possibility of doing so in the future, subject to its business or financing needs. Further, save for the USDT (Tether) stablecoins received by the Company under the December Investment (as defined below), the Company currently does not plan to hold any crypto assets other than TRX tokens and sTRX tokens which were obtained from TRX staking. 45 Table of Contents TRON Blockchain Founded in 2017 by Justin Sun, TRON is an open blockchain network that supports smart contracts and decentralized applications. Justin Sun oversaw development of the TRON blockchain prior to the establishment of TRON DAO in 2021. The TRON blockchain is a public blockchain with high throughput, cost-efficient capacity which is widely used as decentralized infrastructure by stablecoins, decentralized finance (DeFi), and other decentralized applications (DApp). The TRON Virtual Machine (TVM) supports the deployment and execution of smart contracts, with the network operating under a Delegated Proof-of-Stake (DPoS) consensus mechanism which allows the holders of the blockchain’s native tokens to participate in community governance by staking, voting and election of validators. The latest major developments of the TRON blockchain include: - In August 2025, the TRON community voted and approved the energy price amendment proposal, lowering the unit price of energy from 0.00021 TRX to 0.00010 TRX in August 2025 (Proposal #104), further reducing the transaction fees of the TRON blockchain. See “ Recent Developments – Lowering of Transaction Fees ” and “ Risk Factors - The price decrease of energy, a type of system resources on the TRON blockchain, could negatively affect the Company. ” - In May 2025, TRON blockchain completed the GreatVoyage-v4.8.0 (Kant) upgrade. It aims at enhancing the blockchain’s compatibility with Ethereum (following the Cancun upgrade) to make it easier for developers to migrate applications from Ethereum to TRON blockchain. Justin Sun does not serve as an executive officer of the Company. More specifically, Justin Sun does not hold any officer position for the Company or any subsidiary thereof, he is not in charge of any business unit, and he does not perform any policy making functions. He acts solely in an advisory role as an independent contractor, pursuant to the terms of the Sun Advisory Agreement, as defined and further described below. Our TRX Tokens Holdings Upon completion of the June PIPE Offering (as defined below), the Company received 365,096,845 TRX tokens, being part of the Consideration Tokens (as defined below) from Bravemorning (as defined below). Upon completion of the August Warrant Exercise (as defined below), the Company received an additional 312,500,100 TRX tokens, being the Warrant Exercise Tokens (as defined below) from Bravemorning. As of March 18, 2026, the Company holds approximately 9,769,626 TRX tokens and approximately 549,676,892 sTRX tokens. An aggregate of 365,096,800 TRX tokens of the Consideration Tokens held by the Company have been “staked” on JustLend, a decentralized finance (DeFi) protocol, on June 28, 2025 in exchange for approximately 297,543,246 Staked TRX (sTRX) tokens. 312,500,000 TRX tokens of the Warrant Exercise Tokens held by the Company have been “staked” on JustLend on August 28, 2025 in exchange for approximately 252,133,646 sTRX tokens. “Staking” is a process commonly used in the blockchain industry that allows network participants to earn rewards by locking their tokens in wallets. The sTRX token is a derivative token that represents the “staked” TRX tokens, which can automatically generate yield (through the combination of standard TRX staking rewards and energy renting) for the token holders. The sTRX token does not generate discrete staking rewards. Instead, the economic benefit of staking is reflected through a floating conversion rate between TRX and sTRX, which increases over time based on accrued protocol rewards. Therefore, out of the 677,596,945 TRX tokens received by the Company from the June PIPE Offering and the August Warrant Exercise, the Company has staked 677,596,800 TRX tokens (which is nearly 100% of the TRX tokens received) into approximately 549,676,892 sTRX tokens. It is necessary for the Company to retain a small portion of TRX tokens for the on-chain transaction fees payment. As of March 18, 2026, the Company has not yet had any TRX token dispositions. The Company intends to substantially utilize its excess cash to accumulate TRX tokens, and execute the relevant transactions (including potential future disposals) through a variety of leading global trading platforms to ensure the execution quality. The Company’s digital asset treasury (DAT) strategy is to buy and hold TRX tokens without hedging, as we believe that market timing generally is counter productive longer term. 46 Table of Contents The Company and the TRON Ecosystem While there are crossover relationships between certain directors of the Company and the TRON blockchain ecosystem (Weike Sun is the father of Justin Sun, the founder of TRON, Zhihong Liu has been a senior advisor to TRON DAO, and Zi Yang is associated with Tronscan, the official internet explorer for the TRON blockchain), there is no direct relationship between the Company and the TRON DAO. The Company’s name merely recognizes that it has adopted a treasury strategy focused on TRX, the native token of the TRON blockchain. The TRON DAO, by contrast, is the decentralized autonomous organization that, since 2021, facilitates the development of the TRON blockchain network. Justin Sun, our advisor, founded TRON in 2017 and oversaw its development prior to the establishment of TRON DAO in 2021. Super Representatives, elected by the community of TRX holders and acting by consensus are the sole decision makers for TRON DAO. While it is possible that developments to the TRON blockchain, as directed and agreed by TRON DAO, could affect consumer use of or market perception about TRX, and thus impact our business, the relationship to the Company is incidental. Critical Accounting Policies Our management’s discussion and analysis of our financial condition and results of operations is based on our audited financial statements for the year ended December 31, 2025 and 2024, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below: Revenue Recognition The Company generates its revenue from the sale of its products directly to the end user or distributor (collectively the “customer”). The Company recognizes revenues by applying the following steps in accordance with FASB Accounting Standards Codification 606 “Revenue from Contracts with Customers” (“ASC 606”). Under ASC 606, revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: ● identify the contract with a customer; ● identify the performance obligations in the contract; ● determine the transaction price; ● allocate the transaction price to performance obligations in the contract; and ● recognize revenue as the performance obligation is satisfied. The Company’s performance obligations are satisfied when goods or products are shipped on an FOB shipping point basis as title passes when shipped. Our product is generally paid in advance of shipment or standard net 30 days, and we offer no specific right of return, refund or warranty related to our products except for cases of defective products of which there have been none to date. Inventory Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Earnings (Loss) Per Share Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants, convertible securities and preferred stock, unless the effect is to reduce a loss or increase earnings per share. Warrants are not considered in the calculations for the years ended December 31, 2025 and 2024, as the impact of the potential shares of common stock would be to decrease the loss per share. 47 Table of Contents For the Years Ended December 31, 2025 2024 Numerator: Net (loss) $ (16,811,267 ) $ (4,339,345 ) Denominator: Denominator for basic earnings per share - Weighted-average shares of common stock issued and outstanding during the period 102,635,573 11,623,191 Denominator for diluted earnings per share 102,635,573 11,623,191 Basic (loss) per share $ (0.16 ) $ (0.37 ) Diluted (loss) per share $ (0.16 ) $ (0.37 ) Cash We consider all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows. There were no cash equivalents as of December 31, 2025 and 2024. Foreign Currency Translation Assets and liabilities in foreign currencies are translated using the exchange rate at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the period. Equity accounts are translated at historical exchange rates. Gains and losses from foreign currency transactions and translation for the years ended December 31, 2025 and 2024 and the cumulative translation gains and losses as of December 31, 2025 and 2024 were not material. Accounts Receivable Accounts receivable are generated from sales of the Company’s products. The Company provides an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. During the years ended December 31, 2025 and 2024, the Company recognized no allowance for doubtful collections. Fair Value of Financial Instruments The fair value of our assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature. Income Taxes We account for income taxes under ASC 740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Since we were incorporated on April 22, 2022, the evaluation was performed for 2022 tax year, which would be the only period subject to examination. We believe that our income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to our financial position. Our policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense. The Company’s deferred tax asset at December 31, 2025 and 2024 consists of net operating loss carry forwards calculated using effective tax rates equating to approximately $3,253,925 and $1,377,232, respectively. Due to the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance of $3,253,925 and $1,377,232 for the years ended December 31, 2025 and 2024. 48 Table of Contents Stock Based Compensation We recognize compensation costs to employees under FASB Accounting Standards Codification 718 “Compensation - Stock Compensation” (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. On April 22, 2022, the inception date (“Inception”), we adopted ASU No. 2018-07 “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, enhancing segment reporting requirements under ASC 280. This ASU aims to provide investors with more detailed information about a public entity’s reportable segments, including those with a single reportable segment. The Key Provisions include : 1. Enhanced Expense Disclosures: Public entities must now disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. 2. Disclosure of Other Segment Items: Entities are required to disclose an amount for “other segment items” by reportable segment, representing the difference between reported segment revenues and the sum of significant segment expenses and the reported measure of segment profit or loss. A qualitative description of the composition of these other segment items is also required. 3. Interim Reporting Requirements: All annual disclosures about a reportable segment’s profit or loss and assets, including the new disclosures introduced by ASU 2023-07, must now be provided in interim periods as well. 4. Single Reportable Segment Entities: Public entities with a single reportable segment are explicitly required to provide all segment disclosures mandated by ASC 280, including those introduced by ASU 2023-07. This clarification ensures that users receive comprehensive information about the entity’s operations and performance. 5. Disclosure of CODM Information: Entities must disclose the title and position of the CODM and explain how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and allocating resources. These amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU for the year ended December 31, 2024. 49 Table of Contents Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on our financial statements. Results of Operations The following table provides selected financial data about us for the year ended December 31, 2025 and 2024, respectively. 2025 2024 Sales $ 4,740,551 $ 4,311,382 Cost of Sales 3,542,890 3,456,151 Gross Profit 1,197,661 855,231 Total (expenses) (3,579,816 ) (5,194,576 ) Other Income (loss) (14,429,112 ) - Net Income (Loss) $ (16,811,267 ) $ (4,339,345 ) Revenues We generated $4,740,551 in revenues for the year ended December 31, 2025 compared to $4,311,382 revenues for the year ended December 31, 2024. The decrease can be attributed to our largest theme park orders were down due to major expansion resulting in a decrease in attendance at their Orlando facility, timing delays for orders from another theme park operator and an election year in which retailers were very cautious in buying. We believe with the new theme park opening in Orlando in 2025, our business should benefit from the publicity and enthusiasm that typically surrounds new theme park openings. Operating Expenses and other income/expenses We had total operating expenses and other income/expense of $3,579,816 for the year ended December 31, 2025 compared to $5,194,576 for the year ended December 31, 2024. Operating expenses for the year ended December 31, 2025 totaled $3,579,816 were in connection with our daily operations as follows: (i) marketing expenses of $118,939; (ii) legal and professional expenses of $483,335 including board of director fees, auditing and accounting fees, investor relations and public awareness campaigns, legal services, corporate advisory services, registration statement preparation fees, general corporate governance fees; (iii) rent of $145,323; (iv) depreciation and amortization of $334,522; (v) salary and wages of $1,255,713; (vi) general and administrative expenses of $584,311, consisting of travel, meals and entertainment, office supplies and expense and other normal office and administration expenses; (vii) stock based compensation of $488,966 consisting primarily of investor relations and public awareness campaign and the fair value of stock options granted to officers, directors and employees; (viii) stock transfer and SEC fees of $304,118; and (ix) net interest income of $135,411. Other income (loss) for the year ended December 31, 2025 of $14,429,112 consisted of: (i) an unrealized loss of $15,223,891 and a realized loss of $2,135,357 on the fair value of our Digital Assets; (ii) unrealized income of $5,437,403 accrued from our Digital Asset liquid staking activities; and (iii) the impairment of an intangible asset of $2,507,267. The Company had no other income (loss) for the year ended December 31, 2024. Operating expenses for the year ended December 31, 2024 totaled $5,194,576 were in connection with our daily operations as follows: (i) marketing expenses of $55,803; (ii) legal and professional expenses of $1,432,537 including board of director fees, auditing and accounting fees, investor relations and public awareness campaigns, legal services, corporate advisory services, registration statement preparation fees, general corporate governance fees; (iii) rent of $55,417; (iv) depreciation and amortization of $116,880; (v) salary and wages of $1,074,014; (vi) general and administrative expenses of $593,535, consisting of travel, meals and entertainment, office supplies and expense and other normal office and administration expenses; (vii) stock based compensation of $1,861,743 consisting primarily of investor relations and public awareness campaign and the fair value of stock options granted to officers, directors and employees; and (viii) net interest expense of $4,548. Expenses during 2025 were lower than the same period in 2024 due primarily to decreased stock-based compensation related to investor relations and public awareness campaign and the fair value of stock options granted to officers, directors and employees and other costs associated with our company being listed and traded on Nasdaq. In addition, during 2024 we launched new product lines as well as increased marketing, promotional and social media efforts. Income/Losses Net loss for the year ended December 31, 2025 and 2024, was $16,811,267 and $4,339,345, respectively. 50 Table of Contents Impact of Inflation We believe that inflation has had a negligible effect on operations since inception. We believe that we can offset inflationary increases in the cost of operations by increasing sales and improving operating efficiencies. Off Balance Sheet Arrangements We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “variable interest entities.” Liquidity and Capital Resources The Company is in commercialization mode, while continuing to pursue the development of its next generation products as well as new products that are being developed. We generally require cash to: ● launch sales initiatives, ● fund our operations and working capital requirements, ● develop and execute our product development and market introduction plans, ● fund research and development efforts, and ● pay any expense obligations as they come due. As of December 31, 2025, we had working capital of $11,757,517 and approximately $10,455,360 in cash and cash equivalents, an increase in cash and cash equivalents of $9,102,987 from the $1,352,373 as of December 31, 2024. During the year ended December 31, 2025, we raised net proceeds of $11,440,137 from the sale of securities and exercise of warrants and options. Additionally, the Company received a total of $210,000,000 in Digital Assets from the combination of sales of common and preferred stock. Operating Activities: Net cash used in our operating activities of $ 1,443,401during the year ended December 31, 2025, was primarily due to our operating loss of $2,527,567 offset by $488,966 of stock-based (non-cash) compensation. Net cash used in our operating activities of $2,856,359 during the year ended December 31, 2024, was primarily due to our operating loss of $4,334,797 offset by $1,861,743 of stock-based (non-cash) compensation. Financing Activities: During the year ended December 31, 2025, the net cash provided by financing activities of $ 10,615,208 included (i) proceeds of $4,940,559 from a private placement and proceeds of $5,803,571 from the exercise of warrants related to the private placement; (ii) a $500,000 payment on a promissory note; and (iii) proceeds of $696,007 from the exercise of options. In addition to the cash provided as describe above, the Company entered into a Securities Purchase Agreement under the terms of which the Company received $100,000,000 in digital assets and issued 100,000 shares of its Series B Preferred Stock convertible into 200,000,000 shares of common stock and warrants convertible into 220,000,000 shares of the Company’s common stock with an exercise price of $0.50 per share in return for the issuance of 100,000 Series B Preferred shares. Subsequently, the 220,000,000 warrants were exercised with the payment of $110,000,000 in digital assets for 220,000,000 shares of the Company’s common stock. During the year ended December 31, 2024, the net cash provided by financing activities of $1,501,255 included the $2,501,255 proceeds of our sale of common stock in from our registered direct offerings under our Shelf S-3 less the $1,000,000 payment on a promissory note. Investing Activities: The Company paid $68,820 in cash for fixed assets during the year ended December 31, 2025. During the year ended December 31, 2024, net cash used in investing activities of $273,264 consisted of a $250,000 cash payment as part of the asset purchase agreement related to our purchase of intangible assets and $23,264 paid for fixed assets. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable to a smaller reporting company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our financial statements and corresponding notes thereto called for by this item may be found beginning on page F-1 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. 51 Table of Contents