Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our consolidated financial statements and related notes and information included elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report for the year ended December 31, 2025 on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 27, 2026, and in subsequent filings with the SEC.

Unless context denotes otherwise, the terms "Company," "FG Communities Holdings" "we," "us," and "our," refer to FG Communities Holdings Inc. (formerly FG Nexus Inc.), and its subsidiaries.

Cautionary Note about Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements are therefore entitled to the protection of the safe harbor provisions of these laws. These statements may be identified by the use of forward-looking terminology such as "anticipate," "believe," "budget," "can," "contemplate," "continue," "could," "envision," "estimate," "expect," "evaluate," "forecast," "goal," "guidance," "indicate," "intend," "likely," "may," "might," "outlook," "plan," "possibly," "potential," "predict," "probable," "probably," "pro-forma," "project," "seek," "should," "target," "view," "will," "would," "will be," "will continue," "will likely result" or the negative thereof or other variations thereon or comparable terminology. In particular, discussions and statements regarding the Company's future business plans and initiatives are forward-looking in nature. We have based these forward-looking statements on our current expectations, assumptions, estimates, and projections. While we believe these to be reasonable, such forward-looking statements are only predictions and involve a number of risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results, performance, or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements and may impact our ability to implement and execute on our future business plans and initiatives.

Management cautions that the forward-looking statements in this Quarterly Report on Form 10-Q are not guarantees of future performance, and we cannot assume that such statements will be realized or the forward-looking events and circumstances will occur. Factors that might cause such a difference include, without limitation, the Company's ability to execute its business plans which are contemplated to include increasing the Company's scale through acquisition, the acquisition, ownership, operation and financing of manufactured housing communities; the use of cash, debt financing and proceeds from common-stock issuances to fund acquisitions; future share repurchases; the Company's acquisition pipeline and growth strategy; and the anticipated size and long-term characteristics of the manufactured housing market, fluctuations in the real estate industry, the Company's ability to achieve profitable operations, customer acceptance of new products and services, general conditions in the global economy; risks associated with operating in the merchant banking industry; risks of not being able to execute on our asset management strategy and potential loss of value of our holdings; risk of becoming an investment company; fluctuations in our short-term results as we implement our business strategies; risks of not being able to attract and retain qualified management and personnel to implement and execute on our business and growth strategy; failure of our information technology systems, data breaches and cyber-attacks; our ability to establish and maintain an effective system of internal controls; the requirements of being a public company and losing our status as a smaller reporting company or becoming an accelerated filer; and potential conflicts of interest between us and our directors and executive officers.

Our expectations and future plans and initiatives may not be realized. If one of these risks or uncertainties materializes, or if our underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated or projected. You are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements are made only as of the date hereof and do not necessarily reflect our outlook at any other point in time. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect new information, future events or developments.

Overview

FG Communities Holdings is focused on building a portfolio of income-producing real estate, with an emphasis on manufactured housing communities. We also conduct merchant banking activities, including advisory services, capital formation and investments in other businesses.

During 2026, we exited our digital asset business and began allocating capital to our real estate strategy. In September 2026, we invested $10.0 million in FGCI, a separate, privately held owner and operator of manufactured housing communities. In October 2026, we acquired our initial directly owned manufactured housing communities.

Our investment in FGCI and our direct property acquisitions represent separate uses of capital. FGCI remains independently operated, while properties acquired directly by us form part of our real estate operations.

Current Operations and Sources of Earnings

For the three and nine months ended September 30, 2026, our operating revenue from continuing operations consisted of rental income from our Quebec property and merchant banking advisory fees. The manufactured housing communities acquired in October 2026 did not contribute revenue or operating results during the periods presented.

Our results of operations also reflect equity-method earnings and losses, changes in the value of certain investments and financial instruments, and interest income. These items can cause significant fluctuations in reported earnings and may not correspond to cash received or used during the same period.

Real Estate Strategy and Capital Allocation

We intend to expand our directly owned real estate portfolio through acquisitions of manufactured housing communities. Our ability to implement this strategy will depend on the availability of suitable properties, acquisition pricing, financing terms and our available capital.

We expect to fund acquisitions through a combination of cash on hand, property-level debt and proceeds from common stock issuances. The financing structure of each acquisition will depend on the property, market conditions, balance sheet liquidity and other capital requirements.

As our property portfolio grows, rental revenue and property operating expenses are expected to represent a larger portion of our results of operations. Until such time as the portfolio reaches scale, corporate expenses, preferred stock dividends and other obligations will continue to require funding from available cash and other sources of liquidity. We will evaluate these competing sources and uses of capital as we implement our growth strategy.

Recent Developments

During September 2026, we invested $10.0 million in FGCI following a review of strategic alternatives by our Board of Directors and a special committee composed of independent directors. The special committee retained an independent financial advisor to assist with its evaluation.

During October 2026, we acquired two separate manufactured housing communities located in North Carolina, with a combined total of 78 homesites for rental.

We completed the exit from our digital asset business during the second quarter of 2026 and the sale of our remaining reinsurance business during the first quarter of 2026. Results of these businesses are presented as discontinued operations. See Note 3.

Results of Operations

Management's discussion and analysis of financial condition and results of operations reflects the continuing operations of the Company as they existed as of September 30, 2026.

Three Months Ended September 30, 2026 Compared with Three Months Ended September 30, 2025

Revenue during each of the three months ended September 30, 2026 and September 30, 2025 included $0.1 million of merchant banking advisory fees and $0.1 million of rental income.

Loss from operations decreased to $1.7 million during the three months ended September 30, 2026 as compared to $10.0 million during the three months ended September 30, 2025. Stock-based compensation expense decreased from $7.4 million during the three months ended September 30, 2025 to $0.1 million in the current year period with the prior year expense primarily attributable to warrants issued in connection with the Private Placement Offering in 2025. General and administrative expenses decreased $1.1 million during the three months ended September 30, 2026 as compared to the prior year period primarily due to reduced spending on legal fees, professional fees and public relations expenses incurred in the prior year period.

Gain on equity holdings during the three months ended September 30, 2026 included an equity method gain on the shares of Saltire of $0.8 million and a reversal of the $0.5 million unrealized loss on our previous fair value method equity holding recorded during the second quarter of 2026 due to the redemption of our shares at our original purchase price, which was partially offset by a $0.4 million equity method loss on our Devondale equity ownership. Loss on equity holdings during the three months ended September 30, 2025 included a $6.6 million equity method loss from Saltire, partially offset by $0.8 million of dividend income from the Saltire preferred shares. The remainder of the net loss on equity holdings and other holdings during the three months ended September 30, 2025 related to holdings distributed to the CVR Trust in August 2025.

Net loss from continuing operations decreased to $0.2 million during the three months ended September 30, 2026 compared to $17.4 million during the three months ended September 30, 2025 due to a reduction in stock-based compensation, general and administrative expenses, equity holdings losses and income taxes in the current year period, as well as higher interest income and a gain on financial instruments during the current year.

Nine Months Ended September 30, 2026 Compared with Nine Months Ended September 30, 2025

Revenue of $0.7 million during each of the nine months ended September 30, 2026 and September 30, 2025 included $0.4 million of merchant banking advisory fees and $0.3 million of rental income.

Loss from operations decreased to $7.0 million during the nine months ended September 30, 2026 as compared to $13.9 million during the nine months ended September 30, 2025. Stock-based compensation expense decreased to $0.4 million from $7.8 million, primarily because the prior-year period included expense related to warrants issued in connection with the August 2025 private placement. General and administrative expenses increased $0.5 million during the nine months ended September 30, 2026 as compared to the prior year period primarily due to higher professional fees and public relations expenses incurred as we operated our ETH treasury operations.

The nine months ended September 30, 2026 included an equity method loss on the shares of Saltire of $8.8 million, which included an other-than-temporary write down of the carrying value of $11.2 million, as compared to a $4.6 million equity method loss on the shares of Saltire in nine months ended September 30, 2025. The remainder of the net loss on equity holdings and other holdings during the nine months ended September 30, 2026 included a $0.6 million gain related to our USFM cost method equity holding. The remainder of the net loss on equity holdings and other holdings during the nine months ended September 30, 2025 related to holdings distributed to the CVR Trust in August 2025.

Net loss from continuing operations decreased to $13.6 million during the nine months ended September 30, 2026 compared to $21.6 million during the nine months ended September 30, 2025 primarily due to a reduction in stock-based compensation as well as higher interest income and a gain on financial instruments during the current year, which was partially offset by higher general and administrative expenses and losses on equity holdings in the current year period.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual results may differ materially from these estimates. Set forth below is qualitative and quantitative information necessary to understand the estimation uncertainty and the impact the critical accounting estimate has had or is reasonably likely to have on financial condition or results of operations, to the extent the information is material and reasonably available.

Equity Holdings

The valuation of the Company's equity holdings requires management judgment, particularly for holdings accounted for under the equity method and cost method without readily determinable fair values. Judgment regarding the level of influence over each equity method holding includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. Management evaluates equity method holdings for indicators of other-than-temporary impairment and evaluates cost method holdings for observable price changes and impairment indicators. These assessments involve judgment regarding quoted market prices, recent transactions, issuer-specific developments, market conditions and the expected recoverability of carrying amounts. During the nine months ended September 30, 2026, the Company recorded an $11.2 million impairment charge related to its Saltire equity method holding and a $0.6 million gain related to an observable price change in its USFM cost method holding.

Valuation of Net Deferred Income Taxes

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company's consolidated financial statements. In determining its provision for income taxes, the Company interprets tax legislation in a variety of jurisdictions and makes assumptions about the expected timing of the reversal of deferred income tax assets and liabilities and the valuation of net deferred income taxes.

The ultimate realization of the deferred income tax asset balance is dependent upon the generation of future taxable income during the periods in which the Company's temporary differences reverse and become deductible. A valuation allowance is established when it is more likely than not that all or a portion of the deferred income tax asset balance will not be realized. In determining whether a valuation allowance is needed, management considers all available positive and negative evidence affecting specific deferred income tax asset balances, including the Company's past and anticipated future performance, the reversal of deferred income tax liabilities, and the availability of tax planning strategies. To the extent a valuation allowance is established in a period, an expense must be recorded within the income tax provision in the consolidated statements of income and comprehensive income.

Revenue Recognition

The Company accounts for revenue for rental income and merchant banking advisory services using the following steps:

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 September 30, 2026 or December 31, 2025.

Stock-Based Compensation Expense

The Company uses the fair-value method of accounting for stock-based compensation awards granted. The Company has determined the fair value of its outstanding stock options on their grant date using the Black-Scholes option pricing model along with multiple Monte Carlo simulations to determine a derived service period as the options vest based upon meeting certain performance conditions. The Company determines the fair value of restricted stock units ("RSUs") on their grant date using the fair value of the Company's common stock on the date the RSUs were issued (for those RSUs which vest solely based upon the passage of time). The fair value of these awards is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest, with a corresponding increase to additional paid-in capital. When the stock options are exercised, or correspondingly, when the RSUs vest, the amount of proceeds together with the amount recorded in additional paid-in capital is recorded in stockholders' equity.

Recent Accounting Pronouncements

See Note 2, Significant Accounting Policies, to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recently issued accounting pronouncements.

Liquidity and Capital Resources

As of September 30, 2026, we had cash and cash equivalents of $35.1 million.

The purpose of liquidity management is to ensure that there is sufficient cash to meet all financial commitments and obligations as they become due. The liquidity requirements of the Company and its subsidiaries have been met primarily by funds generated from operations, proceeds from capital raises, sales of ETH digital assets and certain equity holdings and credit facilities.

Cash Flows

The following table summarizes the Company's consolidated cash flows for the nine months ended September 30, 2026 and 2025 (in thousands).

For the first nine months of 2026, net cash used in operating activities from continuing operations was approximately $9.0 million compared to $1.7 million for the first nine months of 2025. Cash used in operations increased during the first nine months of 2026 despite improved loss from operations as a result of increased general and administrative expenses in the first nine months of 2026 along with the timing of payments of accounts payable and accrued expenses.

For the first nine months of 2026, net cash provided by investing activities from continuing operations was approximately $64.2 million, compared with cash used in investing activities from continuing operations of $161.9 million during the first nine months of 2025. Cash provided by investing activities during the first nine months of 2026 primarily included $75.8 million of ETH sales, partially offset by $11.5 million outflow for the FGCI and USFM investments and $0.2 million related to the issuance of a note receivable. Cash used in investing activities during the first nine months of 2025 primarily included $171.7 million of ETH purchases and $0.9 million of purchases of equity securities, partially offset by $3.2 million of proceeds from sales of equity securities and $7.5 million received from the redemption of Saltire preferred shares.

For the first nine months of 2026, net cash used in financing activities from continuing operations was approximately $31.1 million compared to cash provided by financing activities of $162.4 million during the first nine months of 2025. Cash used in financing activities during the first nine months of 2026 included $30.0 million of purchases under our common and preferred share buyback programs, $0.1 million of principal payments on debt, $1.0 million of payments of dividends on our Series A Preferred Shares, and $0.1 million of withholding taxes paid related to the net settlement of the vesting of RSUs. Cash provided by financing activities during the nine months ended September 30, 2025 included $168.1 million of net proceeds received as part of the Private Placement Offering, $14.1 million of net proceeds received under our at-the-market offering, partially offset by $18.0 million of cash distributed to the CVR Trust, $0.2 million of principal payments on debt, $1.3 million of payments of dividends on our Series A Preferred Shares and $0.3 million of withholding taxes paid related to the net settlement of the vesting of RSUs.