FG Nexus Inc.

FG Nexus Inc. (FGNX) operates as a holding company primarily focused on digital assets and merchant banking. The company has undergone a significant strategic shift in 2025, transitioning its operations to focus on a digital asset treasury model centered on Ethereum (ETH) and real-world asset tokenization. Ethereum is highlighted as the foundation of digital finance and a settlement layer for stablecoins, Decentralized Finance (DeFi), and tokenized assets. The company's business model now revolves around acquiring and managing ETH as its primary treasury asset, with a strategic focus on commercializing and expanding the tokenization of real-world assets, potentially including affordable housing, reinsurance, and real estate. Revenue is generated from ETH staking rewards, rental income, and merchant banking advisory fees.

The digital assets segment, a new primary operating segment following a private placement in July 2025, focuses on operating as a digital asset treasury with ETH as its initial primary treasury asset. As of December 31, 2025, the digital asset portfolio included 40,093 ETH ¹, with an estimated fair value of $119.4 million ². By March 23, 2026, this portfolio expanded to include ETH and wrapped staked ETH (WSETH), with a combined fair value of approximately $64.6 million ³. The company utilizes third-party custodians like Anchorage Digital Bank N.A. and BitGo Trust Company, Inc., and treasury management services from Galaxy Digital to manage its digital asset strategies. The merchant banking segment provides strategic, administrative, and regulatory support services to newly formed Special Purpose Acquisition Companies (SPACs) through its SPAC platform. It also co-founded FG Merchant Partners, LP (FGMP) to participate as a co-sponsor for SPACs and other merchant banking clients. This division has facilitated the launch of companies such as FG Communities, Inc. (FGC), a self-managed real estate company focused on manufactured housing communities, and Craveworthy LLC, a fast-casual restaurant platform.

For the year ended December 31, 2025, total revenue increased to $2.413 million ⁴ from $0.779 million ⁵ in 2024, representing a 209.8% ⁶ increase. This growth was primarily driven by $1.475 million ⁷ in ETH staking rewards and $0.523 million ⁸ in merchant banking advisory fees in 2025, compared to no ETH staking rewards and $0.075 million ⁹ in merchant banking advisory fees in 2024. Rental income decreased from $0.704 million ¹⁰ in 2024 to $0.415 million ¹¹ in 2025 due to the sale of the Digital Ignition building in early 2024. The company reported a net loss from continuing operations of $67.634 million ¹² in 2025, significantly higher than the $24.277 million ¹³ net loss in 2024. This was largely due to a $38.327 million ¹⁴ unrealized mark-to-market adjustment on ETH digital assets and $5.815 million ¹⁵ in realized losses on ETH sales. Stock-based compensation expense also rose to $7.760 million ¹⁶ in 2025 from $1.618 million ¹⁷ in 2024, primarily due to warrants issued in connection with the Private Placement Offering. General and administrative expenses increased by $5.111 million ¹⁸ to $14.506 million ¹⁹ in 2025, driven by higher compensation, professional fees, and public relations expenses related to the new ETH treasury operations. As of December 31, 2025, cash and cash equivalents stood at $13.395 million ²⁰, with ETH digital assets valued at $119.384 million ²¹. Total assets were $163.844 million ²², and total liabilities were $20.353 million ²³. The company had short-term debt, net of issuance costs, of $1.923 million ²⁴. Net cash used in operating activities from continuing operations was $6.663 million ²⁵ in 2025, compared to $3.940 million ²⁶ in 2024. Net cash used in investing activities from continuing operations was $128.147 million ²⁷ in 2025, primarily due to $138.0 million ²⁸ in net ETH purchases. Net cash provided by financing activities from continuing operations was $136.022 million ²⁹ in 2025, including $168.621 million ³⁰ from the Private Placement Offering and $14.050 million ³¹ from the ATM Offering.

Significant operational developments during the period include a reverse stock split effective February 13, 2026, at a one-for-five ratio, resulting in 6,555,124 ³² shares of Common Stock outstanding. The company signed a non-binding letter of intent in October 2025 to sell its Quebec property for $15.0 million CAD ³³, or approximately $11.0 million USD ³⁴, expected to generate $8.0-$9.0 million USD ³⁵ in net pretax proceeds. The remaining portion of the reinsurance business was agreed to be sold in October 2025, with an initial closing on January 2, 2026, involving the release of $3.3 million ³⁶ in collateral and a 40% ³⁷ equity interest in the purchasing entity, plus a $1.3 million ³⁸ promissory note. An additional closing occurred on March 23, 2026, with a $1.0 million ³⁹ cash payment. The company initiated a common stock repurchase program in September 2025 for up to $200 million ⁴⁰, repurchasing approximately 2.2 million ⁴¹ shares for $34.9 million ⁴² through March 23, 2026. A preferred share repurchase program was also approved in December 2025 for up to 894,580 ⁴³ shares, with approximately 202 thousand ⁴⁴ shares repurchased for $5.0 million ⁴⁵ through March 23, 2026. An At-The-Market (ATM) offering generated $15.5 million ⁴⁶ in gross proceeds from the sale of approximately 0.4 million ⁴⁷ shares through December 31, 2025, but was suspended as of October 13, 2025. A private placement offering in August 2025 generated $176.0 million ⁴⁸ in gross cash proceeds and $24.0 million ⁴⁹ in cryptocurrency. In August 2025, a significant portion of legacy assets, including Strong Technical Services, was transferred to a Contingent Value Rights (CVR) Trust for the benefit of stockholders.

The company plans to reinstate its At-The-Market (ATM) offering to sell additional shares, though no specific timeline for this reinstatement has been provided as of the date of the Form 10-K. The company has filed a Registration Statement on Form S-3 offering up to $5 billion ⁵⁰ of shares through the ATM.

A major growth area for FG Nexus is its digital asset treasury strategy, specifically focusing on ETH and the tokenization of real-world assets. The company's treasury strategy aims to commercialize and expand the tokenization of various asset classes, including affordable housing, reinsurance, and real estate. As of December 31, 2025, the digital asset portfolio comprised 40,093 ETH ⁵¹ with a fair value of $119.4 million ⁵². By March 23, 2026, the portfolio had expanded to include ETH and wrapped staked ETH (WSETH), with an estimated combined fair value of approximately $64.6 million ⁵³. The company is evaluating yield-generation strategies beyond direct staking, such as leveraging institutional lending desks (e.g., Galaxy), liquid staking, re-staking mechanisms, and wrapped instruments. For example, in the first quarter of 2026, the company purchased WSETH to enhance yield while maintaining flexibility and liquidity.

Operationally, the company's shift to an ETH-focused strategy requires specialized employee skillsets and robust operational, technical, and compliance infrastructure to support ETH and related staking activities. This also necessitates implementing different security protocols and treasury management practices. The company acknowledges that the ETH ecosystem rapidly evolves, with frequent upgrades and protocol changes that may require significant adjustments to its operational setup, potentially incurring unanticipated costs and temporary service disruptions. The company may also need to employ third-party service providers, which introduces risks outside of its direct control, including cybersecurity risks. The company currently holds its ETH with institutional custodians Anchorage Digital Bank N.A. and BitGo Trust Company, Inc., and uses Galaxy Digital for discretionary investment management services, pursuing a long-only investment strategy in ETH that may include staking, restaking, and liquid staking to improve returns. The company and Galaxy Digital have agreed to eliminate the minimum asset-based fee of $83,333.33 ⁵⁴ per month (or $1 million ⁵⁵ per annum) for the period of December 1, 2025, through March 31, 2026, and plan to revisit its appropriateness based on the current scale and level of digital assets held.

In terms of capital allocation, the company's Board adopted a common stock repurchase program in September 2025 to acquire up to $200 million ⁵⁶ of its outstanding common stock. Through March 23, 2026, approximately 2.2 million ⁵⁷ shares have been repurchased at a total cost of approximately $34.9 million ⁵⁸, representing about 25.8% ⁵⁹ of common stock outstanding prior to the program. A preferred share repurchase program was also approved in December 2025 to acquire up to 894,580 ⁶⁰ shares of Series A Preferred Stock. As of March 23, 2026, approximately 202 thousand ⁶¹ preferred shares have been repurchased for approximately $5.0 million ⁶², representing about 22.6% ⁶³ of Series A Preferred Stock outstanding prior to the program. The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future, preferring to retain earnings for business development and expansion. However, holders of Series A Preferred Stock are entitled to quarterly cash dividends at an 8.00% ⁶⁴ per annum rate on the $25.00 ⁶⁵ per share liquidation preference, equivalent to $2.00 ⁶⁶ per annum per share, which the company intends to declare regularly.

The company is evaluating its obligations regarding a guarantee for a previously sold entity that has not met its obligations, and a third party has requested the company satisfy these obligations. The company has recorded a loss contingency reserve of approximately $0.9 million ⁶⁷ for potential losses related to various open proceedings and claims. The company also signed a non-binding letter of intent to sell its Quebec property for $15.0 million CAD ⁶⁸, or approximately $11.0 million USD ⁶⁹, with net pretax proceeds expected to be $8.0-$9.0 million USD ⁷⁰. This transaction is expected to close in the first half of 2026, subject to definitive agreements and customary closing conditions. The company's revolving line of credit was terminated in January 2026, and the installment loan will be repaid from the proceeds of the Quebec property sale.

The company faces significant risks related to its cryptocurrency focus, including the inherent volatility of ETH prices, which can be adversely affected by factors such as competition from other crypto assets, changes in consumer demographics, government regulation, and the development of the open-source Ethereum protocol. The digital asset trading platforms are largely unregulated, exposing the company to risks of fraud, business failure, cyberattacks, and market manipulation, which could lead to significant price declines in ETH and impact the valuation of its holdings. A disruption of the internet could also affect the operation of cryptocurrency networks, potentially impacting the company's ability to transact ETH. The company's common stock may trade at a substantial premium or discount to the value of its ETH holdings due to corporate-level expenses, taxes, financing activities, and market dynamics, leading to higher stock price volatility. There is a risk that ETH could be classified as a "security" by regulators, which would subject the company to additional regulatory restrictions and potentially require registration as an investment company under the Investment Company Act of 1940, making its current business model impractical. The company's ETH holdings are not fully insured, with custodian insurance policies ranging from $100 million to $250 million ⁷¹ shared among all clients, potentially being insufficient to cover total losses. The shift to an ETH-focused strategy introduces operational risks related to validator node operation, secure key management, slashing protection, and maintaining constant uptime, as well as exposure to smart contract vulnerabilities and high "gas fees" that can fluctuate and impact transaction costs. The introduction of central bank digital currencies (CBDCs) could also reduce demand for private-sector cryptocurrencies. Operational risks include the potential for unsuccessful capital allocation strategies, risks associated with future acquisitions or divestitures, and the high degree of risk involved in SPAC investments, where the entire investment may be lost if a SPAC fails to complete a business combination. The company's brand and reputation could be harmed by negative incidents, and its insurance coverage may not fully cover all potential exposures. Unfavorable global economic conditions and adverse developments in financial markets could also materially affect the company's business and access to capital. As a public company, FGNX faces increased compliance costs and demands on management, and failure to maintain effective internal controls could lead to inaccurate financial reporting. The company's status as a smaller reporting company, while offering reduced disclosure requirements, might make its stock less attractive to some investors, and losing this status would increase costs. Holders of the 8.00% Cumulative Preferred Stock, Series A, have senior dividend and liquidation rights, with an aggregate liquidation preference of approximately $17.3 million ⁷² and annual dividends of approximately $1.4 million ⁷³, which could reduce assets available to common shareholders.

Management's message to shareholders emphasizes a significant strategic pivot in 2025 towards a digital asset treasury model, with a primary focus on Ethereum (ETH) and the tokenization of real-world assets. This shift is seen as aligning the corporate treasury with the future of programmable finance and decentralized infrastructure. Key strategic priorities include commercializing and expanding real-world asset tokenization, managing the ETH treasury, and optimizing yield generation through various strategies such as staking, liquid staking, and leveraging institutional lending desks. Management has also highlighted its commitment to capital allocation strategies, including significant share repurchase programs for both common and preferred stock, with up to $200 million ⁷⁴ authorized for common stock and up to 894,580 ⁷⁵ shares for preferred stock. While the ATM offering was suspended as of October 13, 2025, management plans to reinstate it and sell additional shares. The company has also been actively divesting legacy assets, such as the Quebec property and the reinsurance business, to streamline operations and generate proceeds. Management acknowledges the evolving nature of the ETH ecosystem and the need for specialized skillsets and infrastructure to support its new strategy, while also recognizing the inherent volatility and regulatory uncertainties associated with digital assets.