ONFO

NASDAQ Listing Compliance Progress

• Two compliance deficiencies were addressed during and after the quarter: the minimum stockholders' equity requirement and the $1 minimum bid price requirement
• After falling below the $2.5 million minimum equity threshold, the full conversion of the senior secured convertible note into common stock post-quarter-end added enough equity to resolve the deficiency, and official confirmation from NASDAQ is pending
• A 1-for-50 reverse stock split was executed in August 2026 to raise the closing bid price above the $1 NASDAQ requirement, after organic recovery failed to hold earlier in the year
• Management confirms all required actions to maintain the listing have been completed, allowing full focus to return to core business growth

Core Operational Update

• Total Q2 2026 revenue was $1.5 million, down 52% year-over-year and 20% sequentially, which missed management's original expectations
• The parent company remains cash constrained, creating a cycle where lower cash distributions from the portfolio limit capital available to invest in portfolio growth; management identifies new funding and accretive cash-positive acquisitions as the core solution
• For the B2B segment: Eastern Standard is facing client hesitation to commit to full project fees due to AI disruption of agency services. Management has launched a new AI-inclusive marketing services line that currently has single-digit client engagements (not yet a material revenue driver) and is consolidating agency operations. Revenue Zen and Eastern Standard Management have shown early growth green shoots in recent weeks
• For the B2C segment: Media buying, ad creative, and email operations have been consolidated across all B2C properties, with AI integrated into workflows to improve efficiency. Paid acquisition spend will only be redeployed once sustainable positive unit economics are confirmed

Strategic Priorities

• The overarching near-term goal remains closing the gap between subsidiary distributions and parent company operating costs to reach parent-level self-funding, which will open future capital allocation options including more acquisitions, debt paydown, and eventual capital return to shareholders
• Acquisition strategy remains focused on immediately accretive purchases of cash-generative digital businesses aligned with the company's core B2B/B2C focus
• The company holds a renegotiated LOI for a target with $1 million trailing 12-month EBITDA, with upfront cash requirement reduced from $3.5 million to $1.3 million, potentially fundable via the company's SPV structure
• The company has signed a LOI for a large 'game-changing' acquisition with $4 million trailing 12-month adjusted EBITDA, structured as 100% seller-financed, targeting an October 1, 2026 close
• Early stage discussions are ongoing for two additional acquisitions that would be funded mostly or entirely with stock, providing cash flow positive contribution from day one without requiring upfront cash
• Management committed to publish a public progress scorecard in late October 2026, including setbacks, against prior public commitments

• Gross margin: Prior guidance of reaching the mid-60% range in 2026 is withdrawn. Gross margin will remain near the current 49% level until B2C revenue stabilizes, as faster-than-expected contraction of higher-margin B2C revenue has shifted the overall revenue mix toward lower-margin B2B services, offsetting B2B operational efficiency gains
• Parent-level profitability and self-funding: Management reaffirms that closing the profitability gap is expected to depend primarily on closing the current acquisition pipeline, rather than organic portfolio improvements alone
• The large 100% seller-financed acquisition targets a close date of October 1, 2026
• Management expects the Q3 2026 balance sheet to be structurally improved compared to the end of Q2, with the derivative liability from the senior secured notes fully removed after conversion
• The next earnings call for Q3 2026 results is scheduled for mid-November 2026

Onfolio operates two core segments: B2B Marketing Agencies and B2C Online Education. For Q2 2026:

• B2B Segment: Revenue declined 41% year-over-year to $1.22 million, contributing 81% of total company revenue. The segment swung from a prior-year operating income of $70,000 to an operating loss of $103,000 in the quarter. The decline was primarily driven by slowdowns in new sales at Eastern Standard, the company's largest agency, partially offset by improved results at Revenue Zen and new revenue from Pace Generative.
• B2C Segment: Revenue declined 74% year-over-year to $279,000, contributing 19% of total company revenue. Operating income for the segment fell from $150,000 in the prior year period to $43,000 in Q2 2026. The revenue decline was intentional, driven by reduced paid acquisition spend at Proofread Anywhere to protect unit economics, and the exit of underperforming businesses.

• The parent company faced severe liquidity constraints at the end of Q2 2026, with only $251,000 in cash on hand, and the company's 10-Q includes going concern disclosures; while the balance sheet has improved post-quarter-end, the liquidity issue is not yet confirmed as fully resolved
• Eastern Standard (the company's largest B2B business) is facing ongoing market disruption from AI, which has increased client hesitation to commit to large project fees and driven the segment's year-over-year revenue decline
• Acquisition execution risk remains: deals in the pipeline have not closed, definitive agreements are not yet finalized, and prior acquisitions and financing transactions have underperformed expectations
• While NASDAQ compliance actions have been completed, formal confirmation of compliance has not yet been received from NASDAQ
• The full conversion of the senior secured note resulted in significant share dilution for existing common shareholders
• $127,000 of dividends on Series A preferred stock are accrued and unpaid as of quarter end

Q: Post the full senior note conversion, is total stockholder equity now positive, and what went wrong with the prior financing structure that led to significant dilution, and what safeguards are in place for future financing? / A: As of Q2 end, equity was still negative, but it became positive after the post-quarter-end note conversions. Management notes the prior structure relied on crypto collateral that declined in value after closing, and 50% of the raised capital had to be held as collateral rather than usable for operations. Downward stock price pressure also led to larger dilution than initially expected. Going forward, management will pursue financing with better terms that leave 100% of capital available for operations and avoid unnecessary downward pressure on the stock.

Q: The proposed $4 million EBITDA seller-financed acquisition sounds similar to prior underperforming acquisition structures; what margin of safety safeguards are in place to avoid repeating past mistakes? / A: Management has spent nearly two years reviewing prior mistakes after the last acquisition. First, the company is now targeting higher-quality underlying businesses than prior targets. Second, future acquisitions will use more performance-based earn-out structures, so purchase price declines if the business underperforms expectations. Third, prior deals had two-year interest-only terms ending in a large balloon payment that created forced liquidity crunches; future seller financing will amortize gradually with cash flow, rather than requiring a large lump-sum payment on a fixed deadline.

Q: Does this acquisition pipeline mean the company will be more active in pursuing acquisitions moving forward? / A: Management's explicit intention is to be more active and more intentional with acquisitions after two years of being stuck in a catch-22 where lack of acquisitions kept profits low, which blocked ability to fund new acquisitions. The company will not pursue blind, unvetted acquisitions to avoid repeating past underperformance, but the current pipeline removes prior funding constraints, allowing more frequent, accretive acquisitions.