TON Strategy Company Common Stock 2026 Q2 Earnings Call

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 TON. 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 TON and Telegram. 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 TON ecosystem. We ended June with approximately 230.5 million Gram, including approximately 229.9 million Gram 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 TON'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 Gram treasury and the TON 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 8-K 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 Toncoin to Gram with the ticker G-R-A-M. 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 envisaged in Telegram's first TON whitepaper. Restoring that identity helps distinguish the open network, or TON, from Gram, the network's native currency.

The name change occurred as a series of technical improvements made TON faster, less expensive, and more useful. Pavel Durov, CEO of Telegram, has publicly described a seven-part initiative for improving TON. 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 TON use, including by improving network speed, transaction costs, and validator support. I'd like to take a moment to explain the technical changes in greater detail. Telegram's global platform gives TON a distribution engine that most blockchains do not have.

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, TON 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 1 second, while estimated transaction throughput increased approximately tenfold. Later in April, the network completed a validator software update that reduced transaction fees approximately sixfold, bringing the average transaction cost to a small fraction of 1 cent under a fixed fee model. TON 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 2 to 4 times and improved node connectivity. TON 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 2 to 4 times faster. The technical upgrades have strengthened TON'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 TON Strategy Company. 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 business 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 Gram 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 that predated TONX, 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.