TON Strategy Company

Good morning and welcome to Tom's Strategy Company's second quarter 2026 earnings conference call. Joining us today are Chief Executive Officer Kevin Wilson and Chief Financial Officer and Chief Operating Officer Sarah Wilson. Earlier today, the company filed its quarterly report on Form 10Q for the quarter ended June 30th, 2026 and issued a press release with its financial results. Both are available in the investor section of the company's website. An accompanying presentation was posted to the investor section of the company's website before today's call and will be referenced during management's prepared remarks. The press release, quarterly report, presentation, and webcast replay of today's call will be available on the company's website. Following management's prepared remarks, the company will address selected questions submitted in advance by shareholders. Before we begin, I would like to remind everyone that today's call includes forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results that differ materially from those described in these forward-looking statements. Please refer to the company's fines with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2025, and its quarterly report on Form 10-Q for the quarter ended June 30, 2026, for discussion of these risks and uncertainties. The company undertakes no obligation to update any forward-looking statements except as required by law. Today's remarks may also refer to non-GAAP financial measures and supplemental measures that are not defined under GAAP. Any required reconciliations and explanations of these measures are included in the earnings release. With that, I'd like to turn the call over to Tom's Strategy Company CEO, Kevin Wilson. Please go ahead.

Thank you, Operator, and good morning, everyone. For today's call, I'll begin with an overview of our Q2 operating progress and recent developments across Tom. Sarah will then review our financial results and staking performance. I will come back on to discuss our capital allocation framework, our priorities for the second half, and the longer-term opportunity we see developing around Tom and Telegrams. The second quarter demonstrated the productivity of our gram treasury at current scale, while we also made important progress in simplifying the rest of the business around that treasury and the TAM ecosystem. We ended June with approximately 230.5 million grams, including approximately 229.9 million grams deployed in staking. During the quarter, we earned approximately 9.4 million gram compared to approximately 2.2 million in the first quarter and recognized $15 million of staking revenue. The increase in rewards primarily reflected Tom's April network upgrade, which increased the frequency of validation rounds along with the larger amount of gram deployed throughout the quarter. Since staking operations began in August 2025, We estimate the Treasury has earned approximately 13.8 million gram through June 30th, 2026, and generated approximately $22 million of cumulative staking revenue. Those rewards increased our gram holdings without requiring additional capital to purchase the tokens. Once earned, the additional gram can be staked to generate future rewards, creating a simple but powerful compounding effect. In Q2, we also largely completed the actions required to discontinue the inherited VERB legacy operations and focus the business around the Grand Treasury and the TAN ecosystem. During the quarter, we terminated vendor agreements, reduced contractor and personnel expenses, and certain lower margin service contracts. Sarah will discuss the expected cost savings in greater detail. I also want to briefly address the Kingsway Advisory Agreement. As I'm sure you've seen, the company filed a Form 8K on August 10th, announcing that we terminated our advisory services agreement with Kingsway Capital Partners following the previously disclosed efforts to negotiate a settlement. The company stopped making monthly payments under the agreement in March 2026. During the quarter, The TON community approved the rebrand of TON's native digital asset from TON Coin to GRAM with the ticker GRAM. The rebrand took effect on June 8th following a community vote. The token name and ticker changed, but the underlying blockchain, token balances, addresses, and smart contracts were not affected. GRAM was the original name of the currency in Telegram's first TAN white paper. Restoring that identity helps distinguish the open network, or TAN, from gram, the network's native currency. The name change occurred as a series of technical improvements made TAN faster, less expensive, and more useful. Pavel Durov, CEO of Telegram, has publicly described a seven-part initiative for improving TAN. Based on public announcements, four elements have been identified to date. Increasing network speed, reducing transaction fees, expanding Telegram's role in network validation, and restoring the gram name. The remaining three elements have not been publicly detailed, and we will avoid speculating about what those steps may include. The actions announced so far have addressed several hurdles to expanding time use. including by improving network speed, transaction costs, and validator support. And I'd like to take a moment to explain the technical changes in greater detail. Telegram's global platform gives TAN a distribution engine that most blockchains do not have, but that distribution is only valuable if the underlying network is fast and reliable enough for people to use inside everyday applications. Consumer payments can't be slow or uncertain, and small, frequent transactions do not fulfill their value proposition if fees consume a meaningful portion of each transaction. The recent upgrades directly addressed both constraints beginning with speed and followed by transaction costs. On April 9th, Tom deployed the CatChain 2.0 consensus upgrade, reducing blockchain times from approximately 2.5 seconds to approximately 400 milliseconds. Transaction finality improved from approximately 10 seconds to approximately one second, while estimated transaction throughput decreased approximately tenfold. Later in April, the network completed a validator software update that reduced transaction freeze approximately sixfold, bringing the average transaction cost to a small fraction of one cent under a fixed fee model. Tom's strategy supported both updates through its participation in network governance. Additional upgrades implemented in June improved how validators communicate, organize transactions, and reach consensus. A new networking layer reduced network traffic by about two to four times and improved node connectivity. Tom also continued improving the infrastructure used by applications. New APIs expanded support for staking pools, validator operations, and decentralized applications, and data indexing improvements made frequently referenced blockchain information available two to four times faster. The technical upgrades have strengthened Tom's ability to support activities such as payments and emerging AI agent applications inside Telegram, where near instant settlement and negligible transaction costs can make frequent automated transactions more practical. These upgrades matter directly to Tom's strategy. We hold a strategically significant amount of GRAM, substantially all of which is staked. Greater network activity can expand GRAM's utility by creating more reasons for developers, service providers, and users to hold, stake, or use the asset. Over time, more productive use can support demand for GRAM. Separately, the April upgrades also contributed to the staking performance we reported for Q2. I will now turn the call over to Sarah to discuss our financial results and staking performance. Sarah?

Thank you, Kevin, and good morning, everyone. Our second quarter results reflect a strong quarter of staking performance and productive treasury operations. Before I walk through the results, I want to note that our first and second quarter results reflect the VERB businesses as discontinued operations. Total revenue was $15 million compared with $3 million in the first quarter. The increase was driven by higher staking rewards generated by our grant holdings. Gross profit was $14.3 million or 95% of revenue compared with $2.8 million or 95% of revenue in the first quarter. Total costs and expenses were $13.8 million compared with $6.5 million in the first quarter. During the quarter, we resolved a historical equity plan issue, the predated DonX, which resulted in the surrender of certain legacy RSUs. Under GAAP, this required us to recognize immediately the remaining $5.5 million of unrecognized compensation expense associated with those awards. Therefore, this charge was non-cash and had no effect on cash flows or stockholders' equity. The results also included approximately $2.9 million of non-cash expense associated with the one-time setup fee under the Kingsway Advisory Agreement. This charge reflects the write-off of the remaining prepaid asset following the termination of the agreement on August 10th. Operating income from continuing operations was approximately $0.5 million compared with an operating loss of $3.7 million in the first quarter. The improvement reflected the increase in staking revenue, and we generated positive operating income despite recognizing the $5.5 million accelerated stock compensation charge and the approximately $2.9 million non-cash Kingsway-related charge I just described. Net income from continuing operations before income taxes was approximately $83.5 million, compared with a net loss of approximately $91.3 million in the first quarter. The second quarter included an $82.8 million net gain from changes in the fair value of our gram holdings, while the first quarter included an approximately $87.9 million net loss. As mentioned on prior earnings calls, we account for gram at fair value, so changes in its market price can create significant non-cash gains or losses between reporting periods. Operating income, therefore, provides a clear view of the performance of our staking activities and the operating cost base. Our digital assets had a fair value of approximately $369.5 million at June 30th, compared with approximately $272 million at March 31st. The increase reflected both the additional Graham earned through staking and the increase in Graham's market value during the quarter. We ended the quarter with approximately $29 million of cash in restricted cash and no debt. We continue to take a conservative approach to managing U.S. dollar liquidity as our revenues are generated in Graham while our operating obligations are denominated in U.S. dollars. As Kevin mentioned, we also substantially wound down the legacy VERB operations during the quarter. Those actions are expected to remove approximately $4 million of inherited annual operating costs from our existing cost base. Turning to staking, we earned approximately 9.4 million grams during the second quarter, bringing our total holdings to approximately 230.5 million grams at June 30th. Our growth staking yield was approximately 17% on an annualized basis during the quarter. As TAN is a blockchain, staking economics are determined by the network, not by us. Our focus is positioning the treasury to efficiently capture those economics as they evolve. In April, a change to the network's consensus mechanism increased the frequency of block production with substantially all of our eligible grants staked. That translated directly into greater block production and higher staking rewards for us during the quarter. Our grant remains unlevered and is staked with institutional partners through segregated nominator pools. We remain focused on institutional-grade custody and staking infrastructure with the goal of keeping our grant secure, productively deployed, and compounding the Treasury over time. I will now turn the call back to Kevin.