UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
Or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
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.
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).
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 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 ☐ | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
number of shares outstanding of the registrant’s common stock as of August 7, 2026 was
Table of Contents
| PART I. FINANCIAL INFORMATION | 3 | |
| ITEM 1. FINANCIAL STATEMENTS | 3 | |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 31 | |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 37 | |
| ITEM 4. CONTROLS AND PROCEDURES | 37 | |
| PART II. OTHER INFORMATION | 38 | |
| ITEM 1. LEGAL PROCEEDINGS | 38 | |
| ITEM 1A. RISK FACTORS | 38 | |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 38 | |
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 39 | |
| ITEM 4. MINE SAFETY DISCLOSURES | 39 | |
| ITEM 5. OTHER INFORMATION | 39 | |
| ITEM 6. EXHIBITS | 39 | |
| SIGNATURES | 40 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FG Nexus Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| June 30, 2026 | December 31, 2025 (1) | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Equity holdings | ||||||||
| Property, plant and equipment, net | ||||||||
| Assets of discontinued operations | - | |||||||
| Receivable from sale of ETH digital assets | - | |||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Short-term debt, net of issuance costs | ||||||||
| Deferred income taxes, net | ||||||||
| Liabilities of discontinued operations | ||||||||
| Other liabilities | - | |||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 13) | - | - | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series A Preferred Shares, $ | ||||||||
| Common stock, $ | ||||||||
| Treasury stock ( | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ |
See accompanying notes to condensed consolidated financial statements.
FG Nexus Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue: | ||||||||||||||||
| Rental income | $ | $ | $ | $ | ||||||||||||
| Merchant banking advisory fees | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Expenses: | ||||||||||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock-based compensation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on impairment and disposal of assets | - | ( | ) | - | ( | ) | ||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income, net | ||||||||||||||||
| (Loss) gain on equity holdings | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on financial instruments | - | - | ||||||||||||||
| Foreign currency transaction gain (loss) | - | ( | ) | |||||||||||||
| Total other (expense) income, net | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net (loss) income from discontinued operations (Note 3) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| (Premium) discount on repurchase of Series A Preferred Shares | ( | ) | - | - | ||||||||||||
| Dividends declared on Series A Preferred Shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income attributable to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Basic and diluted net (loss) income per common share: | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Total | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted (1) |
See accompanying notes to condensed consolidated financial statements.
FG Nexus Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net loss (income) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Adjustment to postretirement benefit obligation | - | - | - | ( | ) | |||||||||||
| Unrealized currency translation (loss) gain of equity method holdings | ( | ) | ( | ) | ||||||||||||
| Currency translation adjustment | ||||||||||||||||
| Total other comprehensive (loss) income | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss (income) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
See accompanying notes to condensed consolidated financial statements.
FG Nexus Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands)
| Shares Outstanding | Amount | Shares Outstanding(1) | Amount | Treasury Stock | Paid-In Capital | Accumulated Deficit | Comprehensive Loss | Stockholders’ Equity | ||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total | ||||||||||||||||||||||||||||||||
| Shares Outstanding | Amount | Shares Outstanding(1) | Amount | Treasury Stock | Paid-In Capital | Accumulated Deficit | Comprehensive Loss | Stockholders’ Equity | ||||||||||||||||||||||||||||
| . | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Repurchase of Series A Preferred Shares | ( | ) | ( | ) | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||
| Repurchase of common stock | - | - | ( | ) | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||||
| Vesting of restricted stock | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Dividends on Series A Preferred Shares ($ | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Net other comprehensive income | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Balance at March 31, 2026 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Repurchase of Series A Preferred Shares | ( | ) | ( | ) | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Repurchase of common stock | - | - | ( | ) | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||||
| Vesting of restricted stock and payment of withholding taxes | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||
| Dividends on Series A Preferred Shares ($ | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Net other comprehensive loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ |
| Preferred Stock | Common Stock | Additional | Accumulated Other | Total | ||||||||||||||||||||||||||||
| Shares Outstanding | Amount | Shares Outstanding(1) | Amount | Paid-In Capital | Accumulated Deficit | Comprehensive Income | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Vesting of restricted stock | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| Dividends on Series A Preferred Shares ($ | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Net other comprehensive loss | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at March 31, 2025 | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Vesting of restricted stock and payment of withholding taxes | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||
| Dividends on Series A Preferred Shares ($ | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Net other comprehensive loss | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | $ |
See accompanying notes to condensed consolidated financial statements.
FG Nexus Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
| 2026 | 2025 | |||||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Net unrealized loss on fair value equity holdings | ||||||||
| (Gain) loss from equity method holdings | ( | ) | ||||||
| Unrealized gain from cost method holdings | ( | ) | - | |||||
| Loss on disposal of fixed assets | - | |||||||
Gain on forward purchase agreement derivative | ( | ) | - | |||||
| Net realized gain on sale of equity holdings | - | ( | ) | |||||
| Depreciation and amortization | ||||||||
| Deferred income taxes | ( | ) | ||||||
| Stock compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other assets | ( | ) | ||||||
| Current income taxes | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash (used in) provided by operating activities from continuing operations | ( | ) | ||||||
| Net cash used in operating activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sales of equity securities | - | |||||||
| Proceeds from sales of ETH digital assets | - | |||||||
| Purchases of equity securities | ( | ) | ( | ) | ||||
| (Issuance) collection of note receivable, net | ( | ) | ||||||
| Net cash provided by investing activities from continuing operations | ||||||||
| Net cash provided by investing activities from discontinued operations | - | |||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Payment of dividends on preferred shares | ( | ) | ( | ) | ||||
| Net repayments on credit facility | ( | ) | ( | ) | ||||
| Purchases of common shares | ( | ) | - | |||||
| Purchases of Series A preferred shares | ( | ) | - | |||||
| Payment of withholding taxes in connection with vesting of RSUs | ( | ) | ( | ) | ||||
| Principal payments on short-term debt | - | ( | ) | |||||
| Net cash used in financing activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash used in financing activities from discontinued operations | - | ( | ) | |||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents from continuing operations | ( | ) | ||||||
| Net increase in cash and cash equivalents from continuing operations | ||||||||
| Net decrease in cash and cash equivalents from discontinued operations | ( | ) | ( | ) | ||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ |
See accompanying notes to condensed consolidated financial statements.
FG Nexus Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Nature of Business
FG Nexus Inc. (“FG Nexus”, the “Company”, “we”, or “us”), a Nevada corporation, operates a merchant banking business and holds real estate and equity holdings.
In 2025, the Company launched its digital asset business and adopted Ether, the native cryptocurrency of the Ethereum blockchain (“Ether” or “ETH”) as its primary treasury asset. In June 2026, the Board of Directors (the “Board”) of the Company authorized management to continue reducing the Company’s exposure to digital assets by exiting the Company’s digital asset business. The Company completed the sale of all of its previously held digital assets prior to June 30, 2026. See Note 3 for additional information.
In April 2026, the Company announced that its Board was reviewing potential strategic alternatives to enhance long-term stockholder value and further the Company’s strategic objectives. As part of this review, the Board discussed a potential business combination transaction with FG Communities, Inc. (“FG Communities”) (the “Potential Transaction”) to establish a durable, income-producing real estate business that addresses critical housing needs. The Board has established a special committee composed solely of independent directors (the “Special Committee”) to evaluate the Potential Transaction or other strategic alternatives. The Special Committee is continuing to evaluate potential transactions and has retained an independent financial advisor to provide a fairness opinion for the Potential Transaction and to assist in the Board’s evaluation and negotiation of the Potential Transaction. In June 2026, the Board also authorized management to reallocate capital to real estate acquisitions in connection with the Company’s exit from its digital asset business. The Company intends to advance its strategy to build a leading platform for tangible assets and believes that the establishment of an in-house real estate division, along with the Potential Transaction with FG Communities would accelerate a strategic expansion into income-producing affordable housing, providing a durable foundation for long-term growth and scalable capital formation.
If the Potential Transaction is completed, the Company expects it would have a material impact on the Company’s future business operations, risks and opportunities, as well as the Company’s overall financial position, results of operations, segment and other financial reporting in future periods. The Board’s discussions with respect to the Potential Transaction are preliminary in nature and no decisions or agreements have been reached. There can be no assurance that the Potential Transaction will ultimately be pursued or consummated.
Business Segments
The Company currently has two primary operating segments, merchant banking and real estate.
Merchant Banking
The Company manages its merchant banking and asset management activities through FG Management Solutions LLC (“FGMS”), which provides strategic, administrative, and regulatory support services to newly formed special purpose acquisition companies (“SPACs”) (our “SPAC Platform”). Additionally, the Company co-founded a partnership, FG Merchant Partners, LP (“FGMP”), to participate as a co-sponsor for newly formed SPACs and other merchant banking clients.
The Company’s merchant banking group provides advisory services, facilitates capital formation and allocates capital to equity holdings. In our SPAC Platform, this also includes launching, sponsoring and providing strategic, administrative, and regulatory support services to newly formed SPACs. Our merchant banking division has facilitated the launch of several new companies, including FG Communities, a self-managed real estate company focused on a growing portfolio of manufactured housing communities that are owned and operated by FG Communities, Craveworthy LLC (“Craveworthy”), an innovative fast casual restaurant platform company, and Saltire Holdings Ltd. (“Saltire”), a Canadian public company that allocates capital to equity, debt and/or hybrid securities of high-quality private companies, among others.
Real Estate
The Company owns real estate in Quebec, Canada that is leased pursuant to a long-term triple net operating lease.
Discontinued Operations
The Company previously reported digital assets, managed services and reinsurance as operating segments. Managed services and reinsurance were reclassified to discontinued operations during 2025 and digital assets was reclassified during 2026. Discontinued operations are more fully described in Note 3.
Recent Developments and Transactions
Exit From Digital Asset Business to Focus on Real Estate
In June 2026, the Board approved a strategic decision to formally establish a new real estate operating subsidiary and authorized management to continue reducing the Company’s exposure to digital assets by exiting the Company’s digital asset business. Discontinued operations are more fully described in Note 3.
Reverse Stock Split
On
January 21, 2026, our Board approved a reverse stock split of the authorized, issued and outstanding shares of our common stock, par
value $
Agreement to Sell Reinsurance Business
In
October 2025, the Company entered into an agreement to sell the remaining portion of its reinsurance business. Pursuant to the agreements,
the Company received (1) the release of $
Letter of Intent to Sell Quebec Real Estate
In
October 2025, the Company signed a non-binding letter of intent to sell its Quebec property for $
Asset Transfer and CVR Trust
In August 2025, the Company transferred a significant portion of its legacy assets (the “Asset Transfer”) to a trust (the “CVR Trust”) established in connection with the creation of contingent value rights (“CVRs”) for the benefit of the Company’s stockholders as of August 8, 2025. The CVRs represent the contractual right to receive a pro rata portion of the net proceeds received by the CVR Trust upon the future disposition, if any, of the assets transferred to the CVR Trust by the Company.
Note 2. Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the accounts of the Company and all majority-owned and controlled domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Unless specifically indicated otherwise, references to the “Company” include the Company and its majority-owned and controlled domestic and foreign subsidiaries.
The condensed consolidated financial statements included in this report are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America (also referred to as “GAAP”) for annual reporting purposes or those made in the Company’s Annual Report on Form 10-K. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
In
addition, the current and historical financial results of managed services, reinsurance and digital assets are presented as discontinued
operations and are excluded from results from continuing operations in the accompanying condensed consolidated financial statements.
The proceeds received from the sale of ETH have been presented as inflows from continuing operations as those funds are expected to be
used to fund the Company’s ongoing operations. In addition, the $
The condensed consolidated balance sheet as of December 31, 2025, was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary to present a fair statement of the financial position and the results of operations and cash flows for the respective interim periods. Certain prior period balances have been reclassified to conform to current period presentation. The results for interim periods are not necessarily indicative of trends or results expected for a full year.
Unless otherwise indicated, all references to “dollars” and “$” in this Form 10-Q are to, and amounts are presented in, U.S. dollars.
Use of Management Estimates
The preparation of consolidated financial statements in conformity with 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined.
Our business and the businesses of our equity holdings are subject to general political and economic risks, including the adverse impact of changes to international trade and tariff policies, which we are closely monitoring. The uncertainty as to the extent and duration of additional tariffs that have or may be imposed could impact estimates we have made, including those for credit losses and valuation of our equity securities and other holdings.
Consolidation Policies
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation.
The condensed consolidated financial statements include the accounts of the Company and entities in which it is required to consolidate under either the Variable Interest Entity (“VIE”) or Voting Interest Entity (“VOE”) models. Both models require the reporting entity to identify whether it has a controlling financial interest in a legal entity and is therefore required to consolidate the legal entity. Under the VOE model, a reporting entity with ownership of a majority of the voting interest of a legal entity is generally considered to have a controlling financial interest. The VIE model was established for situations in which control may be demonstrated other than by the possession of voting rights in a legal entity and instead focuses on the power to direct the activities that most significantly impact the legal entity’s economic performance, as well as the rights to receive benefits and obligations to absorb losses that could potentially be significant to the legal entity.
The determination of whether a legal entity is consolidated under either model is reassessed where there is a substantive change in the governing documents or contractual arrangements of the entity, to the capital structure of the entity or in the activities of the entity. Management continuously reassesses whether it should consolidate under either model. There have been no changes to the legal entities that are consolidated during the six months ended June 30, 2026. The Company does not have any non-consolidated VIEs as of June 30, 2026.
Digital Assets
As discussed above, the Company sold all of its digital assets prior to June 30, 2026. Prior to the sale of the digital assets and exiting the digital asset business, the Company held ETH and wrapped staked ETH (“wstETH”). ETH and wstETH were presented separately on the condensed consolidated balance sheets under the captions “ETH digital assets” and “Digital intangible assets, at cost less impairment” respectively. The Company had ownership of and control over its digital assets which were held through custodial arrangements with qualified third-party custodians.
ETH Digital Assets
The Company’s ETH digital assets fell within the scope of Accounting Standards Codification (“ASC”) 350-60, Intangible – Goodwill and Other – Crypto Assets. The Company elected to measure its ETH digital assets at fair value, with changes in fair value recognized in earnings.
In determining the fair value of the ETH in accordance with ASC 820, Fair Value Measurement, the Company utilized Coinbase as the principal market. The activity from remeasurement of ETH at fair value was reflected in the condensed consolidated statements of operations within Unrealized measurement of fair value of ETH digital assets. The Company used a first-in, first-out methodology to assign costs to digital assets for purposes of the digital assets held and realized gains and losses. Sales and purchases of digital assets were reflected as cash flows from investing activities in the condensed consolidated statements of cash flows.
Digital Intangible Assets, at Cost Less Impairment
Digital intangible assets, at cost less impairment are recognized at fair value on the date received, which represented their cost basis. Digital intangible assets, at cost less impairment, such as wstETH, do not fall in the scope of ASC 350-60 for subsequent measurement. wstETH represents a receipt token, which in general and by design, grants the holder an enforceable right to redeem ETH for which it was exchanged. Therefore, it fails the ‘other goods and services criterion’ in ASC 350-60-15-1(b) and is outside the scope of ASC 350-60. Digital intangible assets, at cost less impairment were therefore subsequently measured at cost, net of any impairment losses incurred since acquisition, in accordance with ASC 350-30, Intangibles—Goodwill and Other—General Intangibles Other Than Goodwill.
The Company performed an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices in the Company’s principal market, indicated that it is more likely than not that any of the assets are impaired. The quoted (unadjusted) prices on the Coinbase exchange, the active exchange that the Company determined as its principal market, were used in the analysis. In determining if an impairment has occurred, the Company considered the lowest price of one wstETH quoted on the Coinbase exchange, at any time since acquiring the specific wstETH held by the Company. If the carrying value of a wstETH exceeded that lowest intraday price, an impairment loss occurred with respect to that wstETH in the amount equal to the difference between its carrying value and such lowest price. Impairment losses were recognized in the period in which the impairment occurs and are reflected within Impairment of digital assets in the Company’s condensed consolidated statements of operations. The impaired digital assets were written down to their fair value at the time of impairment, which became the new cost basis for those assets. The cost basis of wstETH was not adjusted upward for any subsequent increase in fair value.
Staking
Native Staking
Beginning in the third quarter of 2025, the Company used the proceeds from its capital raising activities to acquire and deploy ETH in native staking activities. The Company has entered into separate contractual agreements with various third-party entities to facilitate its ETH staking activities. The Company commenced native staking in August of 2025, which continued through December 2025. The Company did not engage in native staking activities during the six months ended June 30, 2026.
The Company utilized a third-party asset manager to manage and stake ETH on its behalf. Through its agreement with the asset manager, the Company’s ETH was held by qualified custodians, staked in the Ethereum protocol, and the stake is delegated to third party validators. When chosen as validators by the Ethereum network, these validators earned staking rewards and transaction fees proportional to the amount of stake delegated to them. The Company recognized rewards from native staking as revenue in accordance with ASC 606, Revenue from Contracts with Customers. However, since the amount of rewards were not known by the Company until a validation activity is completed, and the Company received rewards in their custodial account, the staking rewards were constrained under the Topic 606 guidance on variable consideration until such time.
Because the Company was not the principal to the block validation service, it did not control the full output of the reward-generating activity, and instead receives net staking rewards, after validator commissions are deducted. As such, the Company presented staking revenue on a net basis, reflecting only the portion of protocol rewards to which it was entitled. Asset management and other fees were presented as separate operating expenses within General and administrative expenses on the condensed consolidated statements of operations.
Liquid Staking
The Company also participated in liquid staking through a liquid staking protocol. One key difference and intended benefit of liquid staking versus native staking is that it allowed the Company to earn staking rewards, like native staking, but provides liquidity and the ability to enter into other transactions through the use of receipt token. Instead of directly locking ETH into Ethereum’s staking deposit contract, the Company deposited ETH through its custodian into the liquid staking protocol’s smart contract. The liquid staking protocol then controlled the ETH for deposit into the Ethereum’s staking deposit contract and further delegation to its chosen validators. In exchange for staking its ETH, the Company received wstETH, a freely transferable ERC-20 liquid staking receipt token, which enables participation in decentralized finance (DeFi) and other crypto markets while the underlying ETH remained staked on Ethereum. Upon staking ETH through the liquid staking protocol, the ETH was derecognized because the liquid staking protocol obtains the ability to deploy and direct its use, and the wstETH token received concurrently was then recognized. Any gain or loss on the derecognition of ETH and the recognition of the wstETH was recognized in accordance with ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”) based on the difference between the carrying amount of the ETH staked and the fair value of the wstETH received; and included in Realized loss on digital assets in the Company’s condensed consolidated statements of operations.
The liquid staking protocol uses a floating conversion rate, or protocol conversion rate, between the receipt token and staked tokens, reflecting the value of accrued network rewards, penalties, and fees associated with the staked ETH. The conversion rate between wstETH and ETH increases over time as staking rewards accrue to the protocol; no new wstETH are received. Staking rewards in the form of ETH are only received upon redemption of wstETH.
Since wstETH is accounted for under ASC 350-30, increases in wstETH fair value while the Company remains staked with the liquid staking protocols, were not recognized. There was no ongoing performance obligation following the staking of ETH through the liquid staking protocol. Additionally, wstETH is a non-rebasing token, meaning its quantity remains fixed over time. Staking rewards are not continuously reflected in token balances but are instead realized separately. Staking rewards are therefore recognized only when the wstETH is redeemed, measured at the fair value of ETH at contract inception, which is when the ETH were staked. The Company redeemed its wstETH during the three months ended June 30, 2026. Accordingly, the Company recognized any revenue from staking rewards on its wstETH during the three and six months ended June 30, 2026, which is included as part of net loss from discontinued operations.
Derivatives – Option Contracts
During the first quarter of 2026, the Company began entering into ETH-denominated option contracts, primarily through the sale of put and call options, as part of its digital asset treasury strategy. These contracts meet the definition of derivative instruments under ASC 815, Derivatives and Hedging. The Company does not designate any derivative instruments as hedging instruments for accounting purposes.
Upon execution of an option contract, premiums received are recorded as a derivative liability on the condensed consolidated balance sheet. Derivative assets and liabilities are subsequently measured at fair value at each reporting date, with changes in fair value recognized in earnings. If an option is exercised, the derivative liability is derecognized upon settlement. If an option expires unexercised, the related derivative liability is derecognized, with the resulting premium recorded in income.
Gains and losses related to ETH option contracts, including the effects of fair value remeasurement and settlements, are recorded within Loss on financial instruments on the condensed consolidated statements of operations.
The fair value of ETH option contracts is determined using observable market inputs where available, including quoted prices for similar instruments, ETH spot prices, implied volatility, time to expiration, and counterparty credit considerations. These inputs are classified within Level 2 of the fair value hierarchy.
As
of June 30, 2026, the Company did not have any outstanding ETH option contracts. For the three and six months ended June 30, 2026, the
Company recognized a net realized gain of $
Holdings in Equity Securities
Prior
to the distribution of assets to the CVR Trust, the Company’s equity and other holdings consisted, in part, of equity holdings
made in privately held companies accounted for under the equity method. The Company utilizes the equity method to account for holdings
when it possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee.
The ability to exercise significant influence is presumed when the holder possesses more than
In applying the equity method, the Company records the holding at cost and subsequently increases or decreases the carrying amount of the holding by our proportionate share of the net earnings or losses and other comprehensive income of the investee. The Company records dividends or other equity distributions as reductions in the carrying value of the holding. Should net losses of the investee reduce the carrying amount of the holding to zero, additional net losses may be recorded if other holdings in the investee are at-risk, even if the Company has not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value.
When the Company receives distributions from its equity method holdings, it utilizes the cumulative earnings approach. When classifying the related cash flows under this approach, the Company compares the cumulative distributions received, less distributions received in prior periods, with the Company’s cumulative equity in earnings. Cumulative distributions that do not exceed cumulative equity in earnings represent returns on holdings and are classified as cash inflows from operating activities. Cumulative distributions in excess of cumulative equity in earnings represent returns on holdings and are classified as cash inflows from investing activities.
In addition to holdings accounted for under the equity method of accounting, other holdings also consist of equity we have purchased in a corporation for which there does not exist a readily determinable fair value. The Company accounts for these holdings at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar holdings by the same issuer. When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date. Once the Company records such an adjustment, the holding is considered an asset measured at fair value on a nonrecurring basis. Any profit distributions the Company receives on these holdings are included in net holdings income.
See Note 4 for additional information regarding the Company’s equity holdings.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term, highly liquid financial instruments with original maturities of 90 days or less.
Revenue Recognition
The Company accounts for revenue for rental income and merchant banking advisory services using the following steps:
| ● | Identify the contract, or contracts, with a customer; | |
| ● | Identify the performance obligations in the contract; | |
| ● | Determine the transaction price; | |
| ● | Allocate the transaction price to the identified performance obligations; and | |
| ● | Recognize revenue when, or as, the Company satisfies the performance obligations. |
The Company combines contracts with the same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services are considered a single performance obligation. If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. Management estimates the amount of total contract consideration the Company expects to receive for variable arrangements by determining the most likely amount we expect to earn from the arrangement based on the expected quantities of services the Company expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is subsequently resolved. Management considers the sensitivity of the estimate, the Company’s relationship and experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement.
As discussed in more detail below, revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for providing services. The Company typically does not have any material extended payment terms, as payment is due at or shortly after the time of the sale. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.
The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when we have an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when we invoice clients, or receive cash, in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when we have satisfied the related performance obligation.
The Company defers costs to acquire contracts, including commissions, incentives and payroll taxes, if they are incremental and recoverable costs of obtaining a customer contract with a term exceeding one year. Deferred contract costs are reported within other assets and amortized to selling expense over the contract term, which generally ranges from one to five years. The Company has elected to recognize the incremental costs of obtaining a contract with a term of less than one year as a selling expense when incurred. The Company did not have any deferred contract costs as of June 30, 2026 or December 31, 2025.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit).
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentrations of credit risk include holdings in equity securities, cash, and ETH digital assets.
The
Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation
(“FDIC”) for up to $
Stock-Based Compensation
The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes valuation model using assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate along with multiple Monte Carlo simulations to determine a derived service period as the options vest based upon meeting certain performance conditions. The fair value of each stock option award is recorded as compensation expense on a straight-line basis over the requisite service period, which is generally the period in which the stock options vest, with a corresponding increase to additional paid-in capital.
The Company has also issued restricted stock units (“RSUs”) to certain of its employees and directors which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest.
Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of June 30, 2026.
Fair Value of Financial Instruments
The carrying values of certain financial instruments, including cash, accounts receivable, short-term holdings, deposits held, accounts payable, other accrued expenses, and short-term debt, approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s short-term debt is recorded at historical cost. See Note 5 for further information on the fair value of the Company’s financial instruments.
Income (Loss) Per Common Share
Basic income (loss) per common share is computed using the weighted average number of shares outstanding during the respective period.
Diluted income (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted income (loss) per share if their effect is anti-dilutive.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. ASU 2024-03 also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of ASU 2024-03 can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the consolidated financial statements. While early adoption is permitted, the Company does not plan to adopt ASU 2024-03 early. ASU 2024-03 will likely result in additional disclosures being included in the Company’s financial statements once adopted. The Company is currently evaluating the provisions of ASU 2024-03.
Note 3. Discontinued Operations
Digital Assets
Following the private placement in July 2025, the Company previously transitioned its operations to focus primarily on the tokenization of real-world assets supported by a digital asset treasury model with ETH currently as the Company’s initial primary treasury asset. The Company’s treasury strategy was focused on commercializing and expanding the tokenization of real-world assets, potentially including affordable housing, reinsurance, real estate and other asset classes. The Company’s digital asset portfolio was comprised of a combination of ETH and wrapped staked ETH (“wstETH”).
In June 2026, the Company’s Board authorized management to exit the Company’s digital asset business. As of June 30, 2026, the Company no longer holds any cryptocurrency assets.
Reinsurance
The Company’s former wholly owned reinsurance subsidiary, FG Reinsurance Ltd (“FGRe”), a Cayman Islands limited liability company, provides specialty property and casualty reinsurance. During the fourth quarter of 2024, the Board approved a plan to evaluate the potential sale of the Company’s reinsurance business. As a result, management evaluated the classification of its reinsurance business as a discontinued operation as of December 31, 2024 and determined the reinsurance business is a component of an entity and represented a discontinued operation. Accordingly, the reinsurance business has been included as part of discontinued operations for all periods presented.
On
March 14, 2025, the Company entered into an agreement for the sale of the entire issued share capital of FG RE Corporate Member Limited
and for the planned commutation of its Lloyds of London reinsurance treaties UHA 251 22, B1868HT2300259, and B1868HT2400259. The transaction
closed during the second quarter of 2025, and the Company received consideration of $
In
October 2025, the Company entered into an agreement to sell the remaining portion of its reinsurance business, which closed during the
first quarter of 2026. Pursuant to the agreements, the Company received (1) the release of $
During
the first quarter of 2026, the Company recorded a $
Strong Technical Services, Inc.
On August 8, 2025, the Company transferred its ownership of Strong Technical Services, Inc. (its managed services operating segment) to the CVR Trust, as described above. Management evaluated the classification of Strong Technical Services as a discontinued operation and determined it is a component of an entity and represented a discontinued operation. Accordingly, the managed services segment is included as part of discontinued operations in the accompanying consolidated financial statements.
The major line items constituting the net (loss) income from discontinued operations during the three and six months ended June 30, 2026 and June 30, 2025 are as follows (in thousands):
Schedule of Net Loss From Discontinued Operation
Digital Assets | Reinsurance | Total | ||||||||||
| Three Months Ended June 30, 2026 | ||||||||||||
Digital Assets | Reinsurance | Total | ||||||||||
| Staking rewards | $ | $ | - | $ | ||||||||
| Total revenue | ||||||||||||
| General and administrative expenses | ( | ) | - | ( | ) | |||||||
| Cost of products and services revenues | ||||||||||||
| Net losses and loss adjustment expenses | ||||||||||||
| Amortization of deferred policy acquisition costs | ||||||||||||
| Selling and administrative expenses | ||||||||||||
| Impairment of assets | ||||||||||||
| Gain on sale of reinsurance business | ||||||||||||
| Loss on ETH digital assets | ( | ) | - | ( | ) | |||||||
| Gain on digital intangible assets | - | |||||||||||
| Impairment of digital intangible assets | ( | ) | - | ( | ) | |||||||
| Total expenses | ( | ) | - | ( | ) | |||||||
| Loss from operations | ( | ) | - | ( | ) | |||||||
| Other expense | - | - | - | |||||||||
| Loss from discontinued operations before taxes | ( | ) | - | ( | ) | |||||||
| Income tax expense | - | - | - | |||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | - | $ | ( | ) |
Managed Services | Reinsurance | Total | ||||||||||
| Three Months Ended June 30, 2025 | ||||||||||||
Managed Services | Reinsurance | Total | ||||||||||
| Net product and services revenue | $ | $ | - | $ | ||||||||
| Net premiums earned | - | |||||||||||
| Total revenue | ||||||||||||
| Cost of products and services revenues | ( | ) | - | ( | ) | |||||||
| Net losses and loss adjustment expenses | - | ( | ) | ( | ) | |||||||
| Amortization of deferred policy acquisition costs | - | ( | ) | ( | ) | |||||||
| Selling and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Total expenses | ( | ) | ( | ) | ( | ) | ||||||
| Income from operations | ||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ||||||
| Income from discontinued operations before taxes | ||||||||||||
| Income tax expense | - | - | - | |||||||||
| Net income from discontinued operations | $ | $ | $ |
Digital Assets | Reinsurance | Total | ||||||||||
| Six Months Ended June 30, 2026 | ||||||||||||
Digital Assets | Reinsurance | Total | ||||||||||
| Staking rewards | $ | $ | - | $ | ||||||||
| General and administrative expenses | ( | ) | - | ( | ) | |||||||
| Loss on ETH digital assets | ( | ) | - | ( | ) | |||||||
| Gain on digital intangible assets | - | |||||||||||
| Impairment of digital intangible assets | ( | ) | - | ( | ) | |||||||
| Gain on sale of reinsurance business | - | |||||||||||
| Total expenses | (45,351 | ) | 1,625 | (43,726 | ) | |||||||
| (Loss) income from operations | ( | ) | ( | ) | ||||||||
| Other expense | - | - | - | |||||||||
| (Loss) income from discontinued operations before taxes | ( | ) | ( | ) | ||||||||
| Income tax expense | - | - | - | |||||||||
| Net (loss) income from discontinued operations | $ | ( | ) | $ | $ | ( | ) |
Managed Services | Reinsurance | Total | ||||||||||
| Six Months Ended June 30, 2025 | ||||||||||||
Managed Services | Reinsurance | Total | ||||||||||
| Net product and services revenue | $ | $ | - | $ | ||||||||
| Net premiums earned | - | |||||||||||
| Total revenue | ||||||||||||
| Cost of products and services revenues | ( | ) | - | ( | ) | |||||||
| Net losses and loss adjustment expenses | - | ( | ) | ( | ) | |||||||
| Amortization of deferred policy acquisition costs | - | ( | ) | ( | ) | |||||||
| Selling and administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Impairment of assets | - | ( | ) | ( | ) | |||||||
| Total expenses | ( | ) | ( | ) | ( | ) | ||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||
| Other (expense) income | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations before taxes | ( | ) | ( | ) | ||||||||
| Income tax expense | - | - | - | |||||||||
| Net income (loss) from discontinued operations | $ | $ | ( | ) | $ | ( | ) |
The liabilities of discontinued operations as of June 30, 2026 relate to obligations in connection with exiting the digital asset business. The major line items constituting the assets and liabilities of discontinued operations as of December 31, 2025 are as follows (in thousands):
Summary of Discontinued Operations Constituting The Asset And Liabilities
Digital Assets | Reinsurance | Total | ||||||||||
| December 31, 2025 | ||||||||||||
Digital Assets | Reinsurance | Total | ||||||||||
| ETH digital assets | $ | $ | - | $ | ||||||||
| Reinsurance balance receivable | - | |||||||||||
| Funds deposited with reinsured companies | - | |||||||||||
| Total assets of discontinued operations | $ | $ | $ | |||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | |||||||||
| Loss and loss adjustment expense reserves | - | |||||||||||
| Present value of future profits | - | |||||||||||
| Total liabilities of discontinued operations | $ | $ | $ |
Note 4. Equity Holdings
As of June 30, 2026 and December 31, 2025, the Company’s equity holdings consisted of the following ($ in thousands):
Schedule of Equity Holdings
| June 30, 2026 | Deember 31, 2025 | |||||||||||||||
Carrying Amount | Economic Interest | Carrying Amount | Economic Interest | |||||||||||||
| Equity Method Holdings | ||||||||||||||||
| Saltire Capital Ltd. | $ | % | $ | % | ||||||||||||
| Devondale Holdings LLC | % | - | ||||||||||||||
| Fair Value Method Holding | ||||||||||||||||
| FG Merger II Corp. | n/a | - | ||||||||||||||
| Cost Method Holding | ||||||||||||||||
| USFM Corporation | n/a | - | ||||||||||||||
| Total | $ | $ |
(Loss) gain on equity holdings for the three and six months ended June 30, 2026 and June 30, 2025 were as follows (in thousands):
Schedule of Net Holdings Loss
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Realized (loss) gain on common stock holdings | $ | - | $ | ( | ) | $ | - | $ | ||||||||
| Unrealized gain (loss) in value on common stock holdings | ( | ) | ( | ) | ( | ) | ||||||||||
| (Loss) gain on equity method holdings | ( | ) | ( | ) | ||||||||||||
| Gain on cost method holdings | - | - | ||||||||||||||
| Other | - | - | ||||||||||||||
| Net (loss) gain on equity holdings and other holdings | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) |
During
the three and six months ended June 30, 2026, the Company recorded an equity method gain on the shares of Saltire of $
During
the three and six months ended June 30, 2025, the Company recorded an equity method gain on the shares of Saltire of $
Equity Method Holdings
Saltire
As
of June 30, 2026, the Company held approximately
Devondale Holdings LLC
As
discussed in Note 3, the Company entered into an agreement for the sale of its reinsurance business to Devondale. As a result of the
transaction, the Company received a
Fair Value Method Holding
In May 2026, the Company entered into an Assignment and Novation Agreement with Atsion Opportunity Fund LLC – Series 2 (“Atsion”), FG Merger II Corp. (“FGMC”) and BOXABL, Inc. (“BOXABL”) (the “Forward Purchase Agreement”) pursuant to which the Company assumed 50% of certain rights and obligations under an OTC Equity Prepaid Forward Transaction originally entered into between Atsion, FGMC and BOXABL. Prior to its merger with BOXABL in July 2026, FGMC was a SPAC.
The Forward Purchase Agreement relates to shares of
FGMC’s Class A common stock prior to the consummation of the business combination with BOXABL and, following consummation of the business
combination, shares of Class A common stock of the combined company. The maximum number of shares subject to the Forward Purchase Agreement
allocated to the Company is
During
the second quarter of 2026, pursuant the Forward Purchase Agreement the Company purchased approximately
Following consummation of the business combination, the Forward Purchase Agreement is subject to cash settlement based principally on the daily volume-weighted average price of the underlying shares during the applicable valuation period, subject to the contractual settlement amount adjustment and other provisions of the Forward Purchase Agreement.
The Forward Purchase Agreement is accounted for
as a derivative financial instrument under ASC 815 and is measured at fair value with changes in fair value recognized in earnings.
The Company evaluates the derivative at each reporting date and recognizes changes in fair value in its condensed consolidated
statement of operations. During the three and six months ended June 30, 2026, the Company recorded a $
Cost Method Holding without Readily Determinable Fair Value
In addition to our equity method holdings, other holdings which do not have a readily determinable fair value are accounted for at their cost, subject to any adjustment from time to time due to impairment or observable price changes in orderly transactions. When the Company observes an orderly transaction of an investee’s identical or similar equity securities, the Company adjusts the carrying value based on the observable price as of the transaction date. Any profit distributions the Company receives on these holdings are included in Gain (loss) on equity holdings.
During
the first quarter of 2026, the Company entered into a subscription agreement with USFM Corporation (“USFM”) pursuant to which
the Company purchased
Impairment
For equity securities without readily determinable fair values, impairment is determined via a qualitative assessment which considers indicators to evaluate whether the holding is impaired. Some of these indicators include a significant deterioration in the earnings performance or asset quality of the investee, a significant adverse change in regulatory, economic or general market conditions in which the investee operates, or doubt over an investee’s ability to continue as a going concern. If the holding is deemed to be impaired after conducting this analysis, management would estimate the fair value of the holding to determine the amount of impairment loss.
For equity method holdings, evidence of a loss in value might include a series of operating losses of an investee, the absence of an ability to recover the carrying amount of the holding, or a deterioration in the value of the investee’s underlying assets. If these, or other indicators, lead to the conclusion that there is a decrease in the value of the holding that is other than temporary, the Company would recognize that decrease in value even though the decrease may be in excess of what would otherwise be recognized under the equity method of accounting.
The risks and uncertainties inherent in the assessment methodology used to determine impairment include, but may not be limited to, the following:
| ● | the opinions of professional appraisers could be incorrect; | |
| ● | the past operating performance and cash flows generated from the investee’s operations may not reflect their future performance; and | |
| ● | the estimated fair values for holdings for which observable market prices are not available are inherently imprecise. |
As
discussed above, the Company recorded an $
Note 5. Fair Value Measurements
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The FASB has issued guidance that defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the inputs employed in the measurements, as follows:
| ● | Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets providing the most reliable measurement of fair value since it is directly observable. | |
| ● | Level 2 – inputs to the valuation methodology which include quoted prices for similar assets or liabilities in active markets. These inputs are observable, either directly or indirectly, for substantially the full-term of the financial instrument. | |
| ● | Level 3 – inputs to the valuation methodology which are unobservable and significant to the measurement of fair value. |
The Company applies ASC 825 in the valuation of the derivative related to the Forward Purchase Agreement for financial statement purposes. The fair value of the derivative asset was determined using a valuation model that incorporates the following (i) the probability of the consummation of the FGMC and BOXABL merger, (ii) the closing price of FGMC common stock as of June 30, 2026, and (iii) the projected volatility of FGMC common stock both before and after the expected merger with BOXABL. Accordingly, the asset is classified within Level 3 of the fair value hierarchy.
