INVESTMENTS AND FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2026

Investments And Fair Value Measurements

4. INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company invests its surplus funds in excess of operational and capital requirements in a diversified portfolio of marketable securities, with the objectives of delivering competitive returns while maintaining a high degree of liquidity.

A summary of our long-term investments are as follows:

SCHEDULE OF LONG TERM INVESTMENT

	March 31, 2026		December 31, 2025

Equity securities	$	650	$	714
Bifurcated embedded derivative asset		1,022		890
Long-term investments	$	1,672	$	1,604

Fair Value Measurements

The Company’s financial instruments include cash, prepaid expenses, accounts payable, and accrued liabilities. The fair value of cash, prepaid expenses, accounts payable and accrued liabilities approximate their carrying values due to their short-term nature, which are all considered Level 1.

The Company’s financial instruments measured at fair value on a recurring basis consisted of U.S. treasury securities and corporate bonds. U.S. treasury securities are classified within Level 1 of the fair value hierarchy as they are valued based on quoted market price in an active market. Corporate bonds are valued based on quoted prices in markets that are less active and are generally classified within Level 2 of the fair value hierarchy.

The Company’s financial instruments include investment in equity securities and contingent consideration which are valued based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy.

As disclosed in Note 2 – Summary of Significant Accounting Policies and Supplemental Disclosures, the Company purchased digital assets held at fair value in August of 2025. The fair value of the Company’s digital assets is disclosed in Note 3 – Digital Asset Holdings. The digital assets are measured at fair value on a recurring basis using observable prices (Level 1).

Valuation Techniques

Bifurcated Embedded Derivative Assets

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date. The fair value of the embedded derivative was calculated using a with and without method at issuance and revalued at the end of the reporting period using a Monte Carlo simulation model that used various assumptions related to term of the underlying agreement, equity value of the issuer, expected volatility, risk-free interest rate, credit risk adjusted rate, and the probability, timing, size of the future qualified financing or non-qualified financing rounds. Because the embedded conversion features are initially and subsequently carried at fair values, the Company’s condensed consolidated statements of operations will reflect the volatility in these estimate and assumption changes. The bifurcated embedded derivative net asset was $1,022 and $890 as of March 31, 2026 and December 31, 2025, respectively. Refer to Note 6 – Promissory Convertible Notes for further details.

SCHEDULE OF DERIVATIVE ASSETS

Issuer of Promissory Convertible Note	Measurement Date	Principal		Weighted- Average			Derivative Value		Valuation Technique

Customer A	September 30, 2025		45		38.2	%		17.19	Monte Carlo Simulation
Customer B	September 30, 2025		60		21.8	%		13.08	Monte Carlo Simulation
Customer C	June 30, 2025		60		26.8	%		16.08	Monte Carlo Simulation
Weighted-Average Calculation			165		28.1	%		46.35

Asset

Fair Value

Valuation Technique

Significant Unobservable Input

Input Value / Range

Weighted Average

Bifurcated Embedded Derivative —Promissory Convertible Notes

1,022

Monte Carlo Simulation

Discount Rate (Rd)

Sale Multiplier

3.0x

Conversion Price Factor (Discount to Price)

72% of next-round price

Time to Maturity

24 months (from issuance)

Varied

Risk-Free Interest Rate / Credit Spread

6% coupon; contract rate

N/A

Date

Total Transactions

Principal

Accrued Interest

Principal plus Accrued Interest

Valuation Technique

March 31, 2026

3,505

119

3,624

Monte Carlo Simulation

Financial instruments measured at fair value on a recurring basis as of March 31, 2026 are classified based on the valuation technique in the table below:

Fair Value Measurements Using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Digital assets
TON - unrestricted	$	72,446	$	-	$	-	$	72,446
TON - restricted		199,580		-		-		199,580
Total digital assets	$	272,026	$	-	$	-	$	272,026
Non-marketable equity securities
Non-marketable equity securities	$	-	$	-	$	650	$	650
Total non-marketable equity securities	$	-	$	-	$	650	$	650
Derivative assets
Bifurcated embedded derivative asset	$	-	$	-	$	1,022	$	1,022
Total derivative assets	$	-	$	-	$	1,022	$	1,022

Financial instruments measured at fair value on a recurring basis as of December 31, 2025 are classified based on the valuation technique in the table below:

Fair Value Measurements Using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Digital assets
TON - unrestricted	$	89,628	$	-	$	-	$	89,628
TON - restricted		267,181		-		-		267,181
Total digital assets	$	356,809	$	-	$	-	$	356,809
Non-marketable equity securities
Non-marketable equity securities	$	-	$	-	$	714	$	714
Total non-marketable equity securities	$	-	$	-	$	714	$	714
Derivative assets
Bifurcated embedded derivative asset	$	-	$	-	$	890	$	890
Total derivative assets	$	-	$	-	$	890	$	890

Assets and liabilities that are measured at fair value on a nonrecurring basis as of December 31, 2025 are classified based on the valuation technique in the table below:

Fair Value Measurements Using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Property and equipment, net	$	-	$	-	$	258	$	258
Definite-lived intangible assets, net	$	-	$	-	$	169	$	169
Indefinite-lived intangible assets	$	-	$	-	$	10	$	10

TON Strategy Co 10-Q