ONFO

Onfolio Holdings, Inc. - Q1 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended March 31, 2026. Onfolio Holdings, Inc. is a Delaware corporation operating as an emerging growth company and smaller reporting company. The company acquires and manages online businesses across two segments: Business-to-Business (B2B) and Business-to-Consumer (B2C). As of May 13, 2026, there were 6,662,508 shares of common stock outstanding.

Key Financial Metrics

Note: Total Debt includes Notes Payable, Related Party Notes, and Convertible Notes. Derivative Liability is a non-cash fair value adjustment related to convertible notes.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased by 34% ($945,078) year-over-year. This was driven by a 70% drop in product sales (B2C segment) and a 13% drop in service revenue (B2B segment).
• Margin Compression: Gross margin contracted from 61% to 49% due to a shift in revenue mix from high-margin digital product sales to lower-margin B2B services.
• Increased Net Loss: Net loss more than tripled to $2.57M. Significant non-cash charges included a $674,157 loss on the change in fair value of digital assets, a $654,745 liquidated damages penalty for defaulting on Senior Secured Convertible Notes, and a $71,392 loss on derivative liabilities.
• Cash Flow: Net cash used in operating activities increased to $843,404 from $145,049 in the prior year, reflecting lower operating results and a decrease in deferred revenue.

Outlook, Risks, and Contingencies

• Going Concern: The company has incurred recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern. Management relies on future profitable operations or additional financing to meet obligations.
• Debt Default and Waiver: The company triggered events of default on its $6M Senior Secured Convertible Notes due to failure to settle an asset sale and registration statement delays. This resulted in $412,000 in liquidated damages. However, a Limited Waiver and Amendment Agreement was signed on April 10, 2026, granting forbearance on redemption rights until September 17, 2026.
• Capital Raising: Subsequent to quarter-end, the company entered an Equity Purchase Facility Agreement allowing the sale of up to $100 million in common stock to an institutional investor. Proceeds are earmarked for cryptocurrency reserves (25%) and working capital (75%).
• Internal Controls: The company identified a material weakness in internal controls over financial reporting due to a lack of segregation of duties and ineffective controls over revenue recognition.
• Digital Asset Volatility: The company holds significant digital assets (BTC, ETH, SOL) which are marked-to-market, creating volatility in earnings. A $674k unrealized loss was recorded in Q1 2026.

Investor Verification Checklist

• Liquidity Runway: Verify if the $841k cash balance is sufficient to cover operating expenses and debt service given the "substantial doubt" going concern warning.
• Debt Covenants: Confirm the status of the Senior Secured Convertible Notes and whether the April 2026 waiver fully resolves the default risk or if further covenants are at risk.
• Revenue Mix: Assess the sustainability of the shift from high-margin B2C product sales to lower-margin B2B services and its long-term impact on profitability.
• Digital Asset Exposure: Evaluate the risk of further declines in cryptocurrency valuations impacting the balance sheet and income statement.
• Internal Control Remediation: Review the timeline and progress of remediation for the material weakness in internal controls over financial reporting.