Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward- looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our", and the "Company" mean Tron Inc.

General Overview

Tron Inc. (formerly SRM Entertainment, Inc.) is a Nevada corporation, listed and traded on NASDAQ, headquartered in Florida and was incorporated on April 22, 2022. SRM. Entertainment Limited ("SRM Ltd"), a wholly-owned subsidiary, is a limited company incorporated in Hong Kong, on January 23, 1981. The consolidated Tron Inc. and SRM Ltd are collectively referred to as the Company.

On May 21, 2025, the Company entered into a Securities Purchase Agreement (the "May Securities Purchase Agreement") with an institutional investor for a private investment in public equity (the "May 2025 PIPE Offering") and on June 16, 2025, we entered into the June Securities Purchase Agreement (the "June Securities Purchase Agreement") with the investor for a private investment in public equity (the "June 2025 PIPE Offering"). See "Recent Developments" below for more information on these transactions and also on the Employment Agreement Amendments, the Name Change, the Symbol Change and the Charter Amendment (all as defined below). These moves reflect the Company's broader strategic transformation and its commitment to aligning more closely with the TRON blockchain ecosystem, following the launch of its TRON-focused treasury strategy. The Company's ticker change to "TRON" reinforces its brand identity and positions it as a key corporate player in the rapidly evolving blockchain and digital asset economy.

Basis of Presentation

The accompanying financial statements are presented in conformity with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the rules and regulations of US Securities and Exchange Commission ("SEC").

Business

TRX Tokens Treasury

Founded in 2017, TRON is a decentralized blockchain network that supports smart contracts and decentralized applications. TRX token is the governance token of the TRON network, which is used to pay for on-chain transaction fees, participate in network governance and incentivize validators who generate blocks and validate transactions for the network. Users can also stake TRX tokens to vote for validators who facilitate the block generation and transaction validation process and earn staking rewards.

We believe that the TRX token is an attractive digital asset which can create long-term value for our shareholders by capitalizing on the global adoption of blockchain and digital innovation.

The Company has adopted a treasury reserve policy ("Treasury Reserve Policy") which set out our treasury management and capital allocation strategies, under which our treasury reserve assets will consist of:

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cash and cash equivalents and short-term investments ("Cash Assets") held by us that exceed working capital requirements; and

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TRX tokens held by us, as the primary treasury holding asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets.

Our TRX token strategy generally involves from time to time, subject to market conditions, (i) issuing debt or equity securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase TRX tokens, and (ii) acquiring TRX tokens with our liquid assets that exceed working capital requirements. We intend to fund further TRX token acquisitions primarily through issuances of common stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock.

We view our TRX tokens holdings as long-term holdings and expect to continue to accumulate TRX tokens. We have not set any specific target for the amount of TRX tokens we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional financings to purchase additional TRX tokens. This overall strategy also contemplates that we may (i) enter into additional capital raising transactions that are collateralized by our TRX tokens holdings, and (ii) consider pursuing strategies to create income streams or otherwise generate funds using our TRX tokens holdings.

Our TRX Tokens Holdings

We currently hold approximately 94 TRX tokens and approximately 549,676,892 sTRX tokens. We have not yet had any TRX token dispositions.

Toy and Souvenir

The Company is a trusted toy and souvenir designer and developer, selling into the world's largest theme parks and entertainment venues.

Our toy and souvenir business is built on the principle that almost everyone is a fan of something and the evolution of pop culture is leading to increasing opportunities for fan loyalty. We create whimsical, fun and unique products that enable fans to express their affinity for their favorite "something"-whether it is a movie, TV show, favorite celebrity, or favorite restaurant. We infuse our distinct designs and aesthetic sensibility into a wide variety of product categories, including figures, plush, accessories, apparel, and homewares. With our unique style, expertise in pop culture, broad product distribution and highly accessible price points, we have developed a passionate following for our products that has underpinned our growth. We believe we sit at the nexus of pop culture-content providers value us for our broad network of retail customers, retailers value us for our portfolio of pop culture products and pop culture insights, and consumers value us for our distinct, stylized products and the content they represent.

Pop culture pervades modern life and almost everyone is a fan of something. Today, more quality content is available and technology innovation has made content accessible anytime, anywhere. As a result, the breadth and depth of pop culture fandom resembles, and in many cases exceeds, the type of fandom previously associated only with sports. Everyday interactions at home, work or with friends are increasingly influenced by pop culture.

We have invested strategically in our relationships with key constituents in pop culture. Content providers value us for our broad network of retail customers and retailers value us for our pop culture products, pop culture insights and ability to drive consumer traffic. Consumers, who value us for our distinct, stylized products, remain at the center of everything we do.

Content Providers:We have licensing relationships with many established content providers, and our products appear in venues such as Walt Disney Parks and Resorts, Universal Studios, SeaWorld, Cedar Fair, Herschend Family Entertainment and Merlin Entertainment. We currently have licenses with Smurfs, The ICEE Company and Zoonicorn LLC, from which we can create multiple products based on each character within. Content providers trust us to design, create and manufacture unique, stylized extensions of their intellectual property that extend the relevance of their content with consumers through ongoing engagement, helping to maximize the lifetime value of their content.

Consumers: Fans are increasingly looking for ways to express their affinity for and engage with their favorite pop culture content. Over time, many of our consumers evolve from occasional buyers to more frequent purchasers, whom we categorize as enthusiasts or collectors. We create innovative products to appeal to a broad array of fans across consumer demographic groups-men, women, boys and girls-not a single, narrow demographic. We currently offer an array of products that sell across several categories. Our products are generally priced between $2.50 and $50.00, which allows our diverse consumer base to express their fandom frequently and impulsively. We continue to introduce innovative products designed to facilitate fan engagement at different price points and styles.

We have developed a nimble and low-fixed cost production model. The strength of our management team and relationships with content providers, retailers and third-party manufacturers allows us to move from product concept to a new product tactfully. As a result, we can dynamically manage our toy and souvenir business to balance current content releases and pop culture trends with timeless content based on classic movies, such as Harry Potter or Star Wars. This has allowed us to deliver significant growth while lessening our dependence on individual content releases.

Recent Developments

May 2025 PIPE Offering

On May 21, 2025, the Company entered into a Securities Purchase Agreement (the "May Securities Purchase Agreement") with an institutional investor for a private investment in public equity (the "May PIPE Offering") of 5,000 shares of its Series A Convertible Preferred Stock par value $0.0001 per share (the "Series A Preferred Stock"), convertible into 8,928,571 shares of Common Stock, at a conversion price of $0.56 per share of Series A Preferred Stock, and an aggregate of 8,928,571 warrants (the "May PIPE Warrants") to acquire up to 8,928,571 shares of Common Stock, subject to beneficial ownership limitations set by the holder. The purchase price for one unit (consisting of one share of Series A Convertible Preferred Stock convertible into approximately 1,785 shares and the same number of warrants) was $1,000. The May PIPE Warrants issued in the May PIPE Offering are exercisable immediately upon issuance at an exercise price of $0.65 per share and will expire two years from the date of issuance. See Item 5. below for additional information regarding the Series A Preferred Stock.

The May PIPE Offering closed on May 27, 2025, with aggregate gross proceeds totaling approximately $5 million, before deducting placement agent fees and other expenses. The Company intends to use the proceeds from the May PIPE Offering for general corporate and working capital purposes.

The exercise price and number of shares of Common Stock issuable upon exercise of the May PIPE Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the exercise price. Subject to limited exceptions, the investor may not exercise any portion of the May PIPE Warrants to the extent that the investor would beneficially own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the outstanding Common Stock after exercise. In the event of certain fundamental transactions, the holder of the May PIPE Warrants will have the right to receive the Black Scholes Value (as defined in the May PIPE Warrants) of its May PIPE Warrants calculated pursuant to a formula set forth in the May PIPE Warrants, payable in cash. There is no trading market available for the May PIPE Warrants on any securities exchange or nationally recognized trading system. The Company does not intend to list the May PIPE Warrants on any securities exchange or nationally recognized trading system.

Pursuant to the May Securities Purchase Agreement, for a period of eighteen (18) months after the closing date, the Investor shall have the right of first refusal to participate with respect to any offering involving (i) future equity or equity-linked securities of the Company or (ii) debt of the Company, which is convertible into equity or in which there is an equity component.

Pursuant to the May PIPE Offering, on May 22, 2025, the Company filed a Certificate of Designation of Series A Preferred Stock with the Secretary of State of the State of Nevada and subsequently, on May 23, 2025 the Company filed an Amended & Restated Certificate of Designation to correct the conversion price of the Series A Preferred Stock from $0.50 per share to $0.56 per share.

Dominari Securities, LLC acted as placement agent (the "Placement Agent") in connection with the May PIPE Offering, pursuant to that certain Placement Agency Agreement, dated as of May 21, 2025, between the Company and the Placement Agent, pursuant to which the Company paid the Placement Agent (i) a cash fee equal to 6.00% of the aggregate gross proceeds from the sale of the shares of Common Stock in the May PIPE Offering and (ii) reimbursement for certain of out-of-pocket expenses, including for reasonable expenses and legal fees of $100,000. In addition, we issued to the Placement Agent or its designees the placement agent warrants (the "May Placement Agent Warrants") to purchase up to an aggregate of 535,714 shares of Common Stock (6.0% of the Common Stock sold in the May PIPE Offering). The Placement Agent Warrants have identical terms as the May PIPE Warrants.

While the securities offered and sold by the Company in the May PIPE Offering were not registered under the Securities Act prior to issuance, they were registered in a resale registration statement on Form S-3 declared effective by the SEC on June 16, 2025. As of July 24, 2025, all of the Series A Preferred Stock shares sold pursuant to the May Securities Purchase Agreement were converted into shares of Common Stock.

June 2025 PIPE Offering

On June 16, 2025, the Company entered into a Securities Purchase Agreement (the "June Securities Purchase Agreement") with an institutional investor entity (the "Investor") for a private investment in public equity (the "June PIPE Offering") of 100,000 shares of its Series B Convertible Preferred Stock par value $0.0001 per share (the "Series B Preferred Stock"), convertible into 200,000,000 shares of common stock, par value $0.0001 (the "Common Stock"), at a conversion price of $0.50 per share of Common Stock, and warrants (the "June PIPE Warrants") to acquire up to 220,000,000 shares of Common Stock. The June PIPE Warrants issued in the June PIPE Offering are exercisable immediately upon issuance at an exercise price of $0.50 per share and will expire two years from the date of issuance. The 100,000 shares of Series B Preferred Stock are referred to herein as the "Preferred Stock Shares." Item 5. below for additional information regarding the Series B Preferred Stock.

The issuance of the Preferred Stock Shares and the June PIPE Warrants occurred on June 16, 2025.

On June 28, 2025, the Investor paid the $100 million purchase price for the Preferred Stock Shares and Warrants in the form of TRX tokens (the "Consideration Tokens"), based on the closing price of TRX tokens on June 15, 2025. The Consideration Tokens are held in the custodian wallet account ("Treasury Wallet") designated and controlled by the board of directors of Tron Inc. ("Board"). The Treasury Wallet is set up by BiT Global Trust Limited ("BiT Global"), a licensed Trust or Company Service Provider and registered trust company in Hong Kong. BiT Global provides on-chain monitoring services for the Treasury Wallet while the Board has full control and access to the Treasury Wallet. Our director, Mr. Liu (as defined below), is one of the directors of BiT Global.

The Company entered into an Advisory Agreement with Justin Sun along with the issuance of the Preferred Stock Shares and the June PIPE Warrants. Justin Sun's father, Weike Sun is the sole shareholder of the Investor and was appointed as a member of the Board in connection with the June PIPE Offering.

The conversion price and exercise price and number of shares of Common Stock issuable upon conversion or exercise of the Preferred Stock Shares and the June PIPE Warrants, as the case may be is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the conversion price or exercise price. In the event of certain fundamental transactions, the holder of the June PIPE Warrants will have the right to receive the Black Scholes Value (as defined in the June PIPE Warrants) of its June PIPE Warrants calculated pursuant to a formula set forth in the June PIPE Warrants, payable in cash. There is no trading market available for the Preferred Stock Shares or the June PIPE Warrants on any securities exchange or nationally recognized trading system. The Company does not intend to list the Preferred Stock Shares or June PIPE Warrants on any securities exchange or nationally recognized trading system.

Dominari Securities, LLC acted as placement agent (the "Placement Agent") in connection with the June PIPE Offering, pursuant to that certain Placement Agency Agreement, dated as of June 16, 2025, between the Company and the Placement Agent, pursuant to which the Company paid the Placement Agent for certain out-of-pocket expenses, including for reasonable expenses and legal fees of $50,000.

In addition, pursuant to an Advisory Agreement with an entity associated with American Ventures (the investor in the previously disclosed May 2025 Series A preferred stock offering and disclosed below), the Company issued a warrant to American Ventures (the "American Ventures Warrants") with substantially the same terms as the June PIPE Warrants except that the American Ventures Warrants are exercisable for five years and do not reference the June Securities Purchase Agreement.

The securities offered and sold by the Company in the June PIPE Offering and the American Ventures Warrants were not registered under the Securities Act, and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements. The securities were offered only to accredited investors.

Pursuant to the June PIPE Offering, on June 16, 2025, the Company filed a Certificate of Designation of Series B Preferred Stock with the Secretary of State of the State of Nevada (the "Series B Certificate of Designation").

The stated value of the Series B Preferred Stock is $1,000 per share.

Holders of the Preferred Stock Shares are entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series B Preferred Stock are convertible on the basis of a conversion price of $0.50. The Holders shall vote together with the holders of shares of Common Stock as a single class.

Holders shall be entitled to receive, and the Company shall pay, dividends on Preferred Stock Shares equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock.

Upon any liquidation, dissolution or winding-up of the Company, the holders of Preferred Stock Shares have a preference for the distribution of the entire remaining assets and funds of the Company legally available for distribution over any holders of other series of preferred stock or of the Common Stock.

On August 27, 2025, the Investor exercised the warrants for $110,000,000 in digital assets consisting of 312,500,100 TRX tokens.

Director Resignations

In connection with the June PIPE Offering, on June 16, 2025, Hans Haywood and Gary Herman resigned as members of the Board. These resignations were not a result of any disagreements with the Company on any matter relating to the Company's operations, policies, or practices.

In connection with the June PIPE Offering, Douglas McKinnon also resigned as a member of the Board. Mr. McKinnon remains the Company's Chief Financial Officer. Mr. McKinnon's resignation as a member of the Board was not a result of any disagreements with the Company on any matter relating to the Company's operations, policies, or practices.

Director Appointments

In connection with the June PIPE Offering, on June 16, 2025, Weike Sun ("Mr. Sun"), Zhihong Liu ("Mr. Liu"), and Zi Yang ("Mr. Yang") were appointed as members of the Board. Mr. Sun was named Chairman of the Board. Messrs. Liu and Yang have been appointed to each of the Audit, Compensation, and Nominating and Corporate Governance Committees of the Board. Mr. Liu serves as chair of the Compensation Committee and Mr. Yang serves as chair of the Nominating and Corporate Governance Committee.

Weike Sun, age 66, began his career in journalism and public infrastructure administration in China. Following his extensive experience in the public sector, Mr. Sun transitioned to the private sector holding senior management and advisory role to several fintech companies since 2016, including Ruibo (Beijing) Technology and Peiwo Huanle (Beijing) Technology. He was the Chairman of Guangzhou Keyhiway Printing Technology, a listed company on China's National Equities Exchange and Quotations (NEEQ) from March 2022 to July 2023. Mr. Sun holds a bachelor's degree from Qinghai Normal College. Mr. Weike Sun is the sole shareholder of the Investor.

Zhihong Liu, age 59, has been the senior advisor to Tron DAO since 2021, leading its strategic investment activities. Previously, Mr. Liu served as the board director of Valkyrie Investment helping to launch one of the first Bitcoin future ETFs in the US. Prior to joining the blockchain industry in 2021, he had held senior positions in the financial industry for over 20 years working for leading global firms including Ant Financial, NOMURA, Salomon Smith Barney and Fidelity Investment. Mr. Liu holds an MBA from Columbia University and a bachelor's degree from Zhejiang University in China.

Zi Yang, age 27, has been active in the blockchain industry for over 5 years. Mr. Yang currently holds senior positions for several leading blockchain projects including Tronscan, the official blockchain explorer for Tron protocol. Mr. Yang holds a bachelor's degree in Human Resource Management from Guangdong University of Foreign Studies in China.

Amendments to Employment Agreements with Officers

In connection with the June PIPE Offering, on June 16, 2025, the Company entered into amendments to the employment agreements of each of Richard Miller (the Company's Chief Executive Officer), Mr. McKinnon (the Company's Chief Financial Officer), Taft Flittner (the Company's President), and Deborah McDaniel-Hand (the Company's Vice President of Production, Development, and Operations) (collectively, the "Employment Agreement Amendments").

Pursuant to each of the Employment Agreement Amendments, the executives agreed (a) not to terminate their employment and not to seek any compensation for any termination of their employment in connection with the June PIPE Offering and (b) that any incentive or bonus payments related to the Company's performance would only be measured against the Company's business of developing and marketing licensed consumer products, including children's toys and entertainment merchandise. Such compensation would not be related to the Company's TRON (TRX) tokens-related operations.

In addition, Messrs. Miller and McKinnon agreed that equity awards issued to them pursuant to the Company's Equity Incentive Plans would, going forward, be solely determined by the Compensation Committee of the Board. The foregoing description of the Employment Agreement Amendments does not purport to be a complete description and is qualified in its entirety by reference to the individual Employment Agreement Amendments which are filed with the Form 8-K of the Company filed with the SEC on June 16, 2025 as Exhibits 10.4 (Miller), 10.5 (McKinnon), 10.6 (Flittner), and 10.7 (McDaniel-Hand) and incorporated by reference into Item 5.02 therein.

Name change and Amendment to the Company's Articles of Incorporation

On July 11, 2025, the Board approved the change in the name of the Company to "Tron Inc." (the "Name Change") and the change in the trading symbol of the Company to "TRON" on the Nasdaq Capital Market (the "Symbol Change") to align with its major transformation into a TRON treasury strategy company.

On July 11, 2025, to effectuate the Name Change, the Company filed a Certificate of Amendment to the Articles of Incorporation of the Company, as amended (the "Charter Amendment") with the Secretary of State of the State of Nevada. The Name Change and the Symbol Change took effect on the Nasdaq Capital Market on July 17, 2025. See Item 5. below for additional information.

These moves reflect the Company's broader strategic transformation and its commitment to aligning more closely with the TRON blockchain ecosystem, following the launch of its TRON-focused treasury strategy. The Company's ticker change to "TRON" reinforces its brand identity and positions it as a key corporate player in the rapidly evolving blockchain and digital asset economy.

Increase in the authorized number of shares of common stock and Change of Control

On June 15, 2025, our Board of Directors approved and recommended the approval by our stockholders of (i) the possible change in control of the Company (as defined by the Nasdaq Stock Market LLC's Listing Rules) via the issuance to an institutional investor (the "Investor"), at a price below the Minimum Price (as defined by the Nasdaq Stock Market LLC's Listing Rules), of more than 20% of the shares of the Company's common stock, par value $0.0001 per share (the "Common Stock") outstanding with the Investor being the largest shareholder while holding over 20% of the shares of Common Stock (the "Change of Control and 20% Issuance") in accordance with The Nasdaq Stock Market LLC's Listing Rule 5635(b) and (d) ("Nasdaq Rule 5635"), in connection with the $100,000,000 private investment in public equity (the "PIPE Offering") entered into between the Company and the Investor pursuant to which the Company issued 100,000 shares of its Series B Convertible Preferred Stock par value $0.0001 per share (the "Series B Preferred Stock"), convertible into 200,000,000 shares of Common Stock, and warrants (the "PIPE Warrants") to acquire up to 220,000,000 shares of Common Stock, to the Investor; and (ii) an amendment to our Articles of Incorporation to increase the total number of authorized shares of common stock from 100,000,000 to 1,000,000,000 (the "Charter Amendment").

Certain of our stockholders, holding a majority of our voting power on June 15, 2025, approved the Change of Control and 20% Issuance and the Charter Amendment by the Written Consent. The required consent of at least a majority of the votes allocated to our voting shares was given for each of the actions listed above.

Under Section 78.320 of the Nevada Revised Statutes, the written consent of stockholders holding a majority of votes outstanding may be substituted for a special meeting of the stockholders. Based on the foregoing and in order to eliminate the costs involved in holding a special meeting, the Board has determined not to call a special meeting of stockholders.

As such, a Schedule 14C Information Statement was being mailed on or about July 23, 2025, by the Board of Directors (the "Board") of Tron Inc. to the holders of record of our outstanding Common Stock and our outstanding shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the "Series A Preferred Stock"), as of the close of business on the Record Date, pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

The Charter Amendment was effective August 29, 2025.

Emerging Growth Company Status

The Company is an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart our Business Startups Act of 2012, (the "JOBS Act"), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Significant Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements for the nine months ended September 30, 2025 and 2024 and audited financial statements for the year ended December 31, 2024, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity of three months or less when purchased to be cash and equivalents for purposes of the statement of cash flows. There were no cash equivalents as of September 30, 2025 or December 31, 2024.

Net Loss per Common Share

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants, convertible securities and preferred stock, unless the effect is to reduce a loss or increase earnings per share. As such, options, warrants, convertible securities and preferred stock are not considered in the calculations for the 2024 fully diluted shares.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
Numerator:
Net income (loss)		$	12,174,266			$	(1,128,872	)		$	12,995,535			$	(3,359,847	)
Denominator:
Denominator for basic earnings per share - Weighted-average of shares of Common Stock issued and outstanding during the period			110,045,018				10,581,558				48,948,051				10,389,770
Denominator for diluted earnings per share			317,763,232				10,581,558				256,666,265				10,389,770
Net income (loss) per share
Basic		$	0.11			$	(0.11	)		$	0.27			$	(0.32	)
Diluted		$	0.04			$	(0.11	)		$	0.05			$	0.32	)

Revenue Recognition

SRM Ltd generates its revenue from the sale of its products directly to the end user or distributor (collectively the "customer").

The Company recognizes revenues by applying the following steps in accordance with FASB Accounting Standards Codification 606 "Revenue from Contracts with Customers" ("ASC 606"). Under ASC 606, revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

●	identify the contract with a customer;

●	identify the performance obligations in the contract;

●	determine the transaction price;

●	allocate the transaction price to performance obligations in the contract; and

●	recognize revenue as the performance obligation is satisfied.

The Company's performance obligations are satisfied when goods or products are shipped on an FOB shipping point basis as title passes when shipped. Our product is generally paid in advance of shipment or standard net 30 days and we offer no specific right of return, refund or warranty related to our products except for cases of defective products of which there have been none to date.

Inventory

Inventories are stated at the lower of cost or market. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. Inventory is based upon the average cost method of accounting.

Income Taxes

We account for income taxes under ASC 740 Income Taxes ("ASC 740"). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on our evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Since we were incorporated on October 24, 2018, the evaluation was performed for 2018 tax year, which would be the only period subject to examination. We believe that our income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to our financial position. Our policy for recording interest and penalties associated with audits is to record such items as a component of income tax expense.

The Company's deferred tax liability at September 30, 2025, consisted primarily of unrealized gains on its investments in digital assets and income derived from staking digital assets calculated using the effective tax rate (21% US rate) equating to approximately $3,454,510. The Company's deferred tax assets at December 31, 2024 consisted of net operating loss carry forwards calculated using effective tax rates (20.6% average of China and US rates) equating to $1,377,232, less a valuation allowance in the amount of approximately $1,377,232 for the year ended December 31, 2024.

Related parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Recent Accounting Pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, enhancing segment reporting requirements under ASC 280. This ASU aims to provide investors with more detailed information about a public entity's reportable segments, including those with a single reportable segment. The Key Provisions include:

1.

Enhanced Expense Disclosures: Public entities must now disclose significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included in each reported measure of segment profit or loss.

2.

Disclosure of Other Segment Items: Entities are required to disclose an amount for "other segment items" by reportable segment, representing the difference between reported segment revenues and the sum of significant segment expenses and the reported measure of segment profit or loss. A qualitative description of the composition of these other segment items is also required.

3.

Interim Reporting Requirements: All annual disclosures about a reportable segment's profit or loss and assets, including the new disclosures introduced by ASU 2023-07, must now be provided in interim periods as well.

4.

Single Reportable Segment Entities: Public entities with a single reportable segment are explicitly required to provide all segment disclosures mandated by ASC 280, including those introduced by ASU 2023-07. This clarification ensures that users receive comprehensive information about the entity's operations and performance.

5.

Disclosure of CODM Information: Entities must disclose the title and position of the CODM and explain how the CODM uses the reported measure(s) of segment profit or loss in assessing performance and allocating resources.

These amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the ASU for the year ended December 31, 2024.

The company evaluated issued pronouncements and did not identify any additional recent pronouncements that apply to the company.

Accounting for Crypto Assets

In December 2023, the FASB issued ASU 2023-08, Accounting for and Disclosure of Crypto Assets, which establishes accounting guidance for crypto assets meeting certain criteria. The Company holds crypto assets that meet the scope criteria of ASU 2023-08. The pronouncement requires crypto assets which meet the criteria to be recognized at fair value with changes recognized in net income each reporting period. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. The Company adopted ASU 2023-08, effective January 1, 2025.

Results of Operations

The following table provides selected financial data about us for the three and nine months ended September 30, 2025 and 2024, respectively.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
Revenue
Sales		$	1,104,293			$	876,392			$	3,536,856			$	3,390,676
Cost of Sales			806,395				679,874				2,680,220				2,705,945
Gross profit			297,898				196,518				856,636				684,731
Operating expense
General and administrative expenses			954,646				1,328,851				2,904,962				4,058,546
Total operating expenses			954,646				1,328,851				2,904,962				4,058,546
Operating loss			(656,748	)			(1,132,333	)			(2,048,326	)			(3,373,815	)
Other income / (expense)
Unrealized gain on digital asset investment			13,959,967				-				16,144,038
Unrealized Income from digital assets			2,258,770								2,303,539
Interest income			71,497				12,377				96,822				22,884
Interest expense			(4,710	)			(8,916	)			(16,028	)			(8,916	)
Total other income (expense)			16,285,524				3,461				18,498,371				13,968
Pre-tax net income (loss)		$	15,628,776			$	(1,128,872	)		$	16,450,045			$	(3,359,847	)
Deferred income tax			3,454,510				-				3,454,510				-
Net income (loss)		$	12,174,266			$	(1,128,872	)		$	12,995,535			$	(3,359,847	)

For the three months ended September 30, 2025 and 2024

Revenues and Cost of Sales

We generated $1,194,293 in revenues for the three months ended September 30, 2025 compared to $876,392 revenues for the three months ended September 30, 2024. The increase is primarily due to the expansion of a major theme park opening in Orlando in 2025. Our business benefited from the publicity and enthusiasm that typically surrounds new theme park openings. Additionally, we have been able to increase our margins.

Operating Expenses and Other Income

(iii) Operating expenses for the three months ended September 30, 2025 and 2024 were $954,646 and $1,328,851, respectively. The operating expenses for the three months ended September 30, 2025, consisted of (i) marketing expense of $42,202, (ii) legal and professional fees of $117,191, (iii) amortization and depreciation of $84,906, (iv) rent and utilities of $39,635, (v) general and administrative expense of $482,769 and (vi) $187,969 of Nasdaq and other related fees, versus the operating expenses for the three months ended September 30, 2024, consisting of (i) marketing expense of $7,083, (ii) legal and professional fees of $656,900, amortization and depreciation of $28,908, (iv) rent and utilities of $16,885, (v) general and administrative expense of $388,147, (vii) $28,428 in Nasdaq and other related fees and (vi) $202,500 of stock based compensation.

The Company had an unrealized gain on its digital asset investment of $13,959,967 due to the increase in market value of the digital asset, unrealized income from digital assets of $2,258,770 from revenue generated from the digital assets and net interest income and expense of $66,787.

The Company had deferred income tax expense related to the unrealized gains and income related to its digital assets resulting in a deferred tax provision of $3,454,510.

Income/Losses

Net income was $12,174,266 for the three months ended September 30, 2025 and the net loss was $1,128,872 for the three months ended September 30, 2024.

For the nine months ended September 30, 2025 and 2024

Revenues and Cost of Sales

We generated revenues of $3,536,856 for the nine months ended September 30, 2025 compared to revenues of $3,390,676 for the nine months ended September 30, 2024. The increase is primarily due to expansion of a major theme park opening in Orlando in 2025, our business also benefited from the publicity and enthusiasm that typically surrounds new theme park openings. Additionally we have been able to increase our margins.

Operating Expenses and Other Income

Operating expenses for the nine months ended September 30, 2025 and 2024 were $2,904,962 and $4,058,546, respectively. The operating expenses for the three months ended September 30, 2025, consisted of (i) marketing expense of $93,410, (ii) legal and professional fees of $371,559, (iii) amortization and depreciation of $244,447, (iv) rent and utilities of $69,773, (v) general and administrative expense of $1,387,921, (vi) Nasdaq and related fees of 248,912 and (vii) $488,966 of stock based compensation, versus the operating expenses for the three months ended September 30, 2024, consisting of (i) marketing expense of $39,334, (ii) legal and professional fees of $1,374,547, (iii) amortization and depreciation of $36,154, (iv) rent and utilities of $34,466, (v) general and administrative expense of $1,144,553, (vi) Nasdaq and related fees of $64,954, and (vii) stock based compensation of $1,364,548.

The Company had an unrealized gain on its digital asset investment of $16,114,038 due to the increase in market value of the digital asset, unrealized income from digital assets of $2,303,539 from revenue generated from the staking of digital assets and net interest income and expense of $80,794.

The Company had deferred income tax expense related to the unrealized gains and income related to its digital assets resulting in a deferred tax provision of $3,454,510.

Income/Losses

Net income was $12,995,535 for the nine months ended September 30, 2025 and the net loss was $3,359,847 for the nine months ended September 30, 2024.

Impact of Inflation

We believe that inflation has had a negligible effect on operations since inception. We believe that we can offset inflationary increases in the cost of operations by increasing sales and improving operating efficiency.

Off Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "variable interest entities."

Liquidity and Capital Resources

As of September 30, 2025, we had approximately $10,603,681 in cash and cash equivalents, an increase of $9,251,308 from the $1,352,373 we had as of December 31, 2024. As of September 30, 2025, we had approximately $11,928,163 in working capital, an increase of $9,482,058 from the $2,446,105 we had at December 31, 2024.

Operating Activities:

Net cash used in our operating activities during the nine months ended September 30, 2025, totaled $1,015,685 compared to $1,681,081 used during the nine months ended September 30, 2024.

Financing Activities:

On May 21, 2025, the Company entered into the May Securities Purchase Agreement with a single institutional investor (the "May investor") for a private investment in public equity. The "May PIPE Offering" of 5,000 shares of its Series A Convertible Preferred Stock par value $0.0001 per share, convertible into 8,928,571 shares of Common Stock, at a conversion price of $0.56 per share of Series A Preferred Stock, and an aggregate of 8,928,571 May PIPE Warrants to acquire up to 8,928,571 shares of Common Stock, subject to beneficial ownership limitations set by the holder. The May PIPE Offering closed on May 27, 2025, with aggregate proceeds totaling $4,592,344 net of associated costs and fees. See Part II. Item 5. below for more information.

On June 16, 2025, the Company entered into the June Securities Purchase Agreement with an institutional investor entity (the "June Investor") for a private investment in public equity. The "June PIPE Offering" of 100,000 shares of its Series B Convertible Preferred Stock, convertible into 200,000,000 shares of common stock at a conversion price of $0.50 per share of Common Stock, and June PIPE Warrants to acquire up to 220,000,000 shares of Common Stock. On June 28, 2025, the Investor paid the $100 million purchase price for the Preferred Stock Shares and Warrants in the form of TRX tokens, based on the closing price of TRX tokens on June 15, 2025. See Part II. Item 5. below for more information.

During July through September 2025, the May Investor in the May PIPE Offering exercised all 8,928,571 of the May PIPE Warrants for aggregate proceeds of $5,803,571.

On August 27, 2025, the June Investor in the June PIPE Offering exercised the June PIPE Warrants for 312,500,100 TRX tokens valued at $110,000,000. See Part II.

During the nine months ended September 30, 2025, a total of 1,270,000 shares of common stock were issued in connection with options exercised. Total proceeds from the exercises were $696,007.

During the nine months ended September 30, 2025, we paid $500,000 on a promissory note to a related party issued in connection with our purchase of the movie entitled "The Kid" leaving a zero balance at September 30, 2025, on the original principal of $1,500,000.

Additionally, during the nine months ended September 30, 2025, we paid a total of $325,000 in legal fees related to the June 2025 PIPE transaction.