Silo Pharma, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.

Overview

We are a diversified developmental-stage biopharmaceutical and cryptocurrency company. Our therapeutic focus is on developing novel therapeutics that address underserved conditions including PTSD, stress-induced anxiety disorders, fibromyalgia, and central nervous system (CNS) diseases. We are focused on developing novel therapies that include conventional drugs and psychedelic formulations. Our lead program, SPC-15, is an intranasal drug targeting PTSD and stress-induced anxiety disorders. SP-26 is a time-release ketamine-based loaded implant for fibromyalgia and chronic pain relief. Silo’s two preclinical programs are SPC-14, an intranasal compound for the treatment of Alzheimer’s disease, and SPU-16, a CNS-homing peptide targeting the central nervous system with initial research indication in multiple sclerosis (MS).

Therapeutics

We seek to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, ketamine, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. We are focused on developing traditional therapeutics and psychedelic medicine. The company concentrates on the development and commercialization of therapies for unmet needs from indications such as depression, post-traumatic stress disorder (“PTSD”), and other rare neurological disorders. Our mission is to identify assets to license and fund the research which we believe will be transformative to the well-being of patients and the health care industry.

Psilocybin is considered a serotonergic hallucinogen and is an active ingredient in some species of mushrooms. Recent industry studies using psychedelics, such as psilocybin, have been promising, and we believe there is a large unmet need with many people suffering from depression, mental health issues and neurological disorders. While classified as a Schedule I substance under the Controlled Substances Act (“CSA”), there is an accumulating body of evidence that psilocybin may have beneficial effects on depression and other mental health conditions. Therefore, the U.S. Food and Drug Administration (“FDA”) and U.S. Drug Enforcement Agency (“DEA”) have permitted the use of psilocybin in clinical studies for the treatment of a range of psychiatric conditions.

The potential of psilocybin therapy in mental health conditions has been demonstrated in a number of academic-sponsored studies over the last decade. In these early studies, it was observed that psilocybin therapy provided rapid reductions in depression symptoms after a single high dose, with antidepressant effects lasting for up to at least six months for a number of patients. These studies assessed symptoms related to depression and anxiety through a number of widely used and validated scales. The data generated by these studies suggest that psilocybin is generally well-tolerated and may have the potential to treat depression when administered with psychological support.

We have engaged in discussions with a number of world-renowned educational institutions and advisors regarding potential opportunities and have formed a scientific advisory board that is intended to help advise management regarding potential acquisition and development of products.

In addition, as more fully described below, we have entered into a license agreement with the University of Maryland, Baltimore, and developing a Ketamine polymer implant. In addition, we into a sponsored research agreement Columbia University for the study of ketamine in combination with other drugs for treatment of Alzheimer’s and depression disorders and we have also entered into an exclusive license agreement with Columbia under which we have rights to certain patents and inventions relating to the treatment of Alzheimer’s disease and stress-induced affective disorders using Ketamine in combination with certain other compounds.

We plan to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand our business to focus on this new line of business.

Product Candidates

We are currently focusing on four product candidates:

1. SPC-15 for stress-induced psychiatric disorders, including PTSD and anxiety;

2. SP-26 for treatments of fibromyalgia and chronic pain;

3. SPC-14 for treatment of Alzheimer’s disease; and

4. SPU-16 for CNS disorders, initially targeting multiple sclerosis.

SPC-15: Intranasal Treatment for PTSD and Anxiety Disorders

Our lead product candidate, SPC-15, is designed as a novel serotonin 4 (5-HT4) receptor agonist that utilizes biomarkers for treatment of stress-induced psychiatric disorders such as PTSD and anxiety disorders. This innovative treatment is administered via an intranasal formulation, potentially qualifying for the FDA’s streamlined 505(b)(2) regulatory pathway, which could expedite its approval process. We are actively collaborating with Columbia University, holding exclusive global rights to develop and commercialize SPC-15, pursuant to and that certain exclusive license agreement entered into with Columbia on July 1, 2024. See “----License Agreements between the Company and Vendor—Exclusive License Agreement with Columbia University.”

On November 15, 2023, we entered an exclusive license agreement with Medspray Pharma BV for its proprietary patented soft mist nasal spray technology, as the delivery mechanism for SPC-15, which agreement has an effective date of October 31, 2023. Preclinical and formulation studies were completed in the first half of 2024 and on June 4, 2024 the Company submitted a pre-Investigational New Drug (pre-IND) briefing package and meeting request to the U.S. Food and Drug Administration (FDA) for SPC-15, Silo’s intranasal prophylactic treatment for post-traumatic stress disorder (PTSD) and stress-induced anxiety disorder. In September 2024, we had a pre-IND meeting with the FDA to align on the 505(b)(2) regulatory pathway for approval of SPC-15 and review our proposed plan to support opening an IND.

Currently, we are conducting GLP-compliant pharmacokinetic and pharmacodynamic studies and in March 2025 we completed first dosing in an IND-enabling GLP-compliant toxicology and toxicokinetics, and we are aiming for an IND submission in 2026. The preclinical data suggests additional applications for eating disorders and anorexia, as well as enhanced efficacy when combined with an NMDA receptor antagonist for major depressive disorder and other severe stress-related conditions.

We believe our patented intranasal nose-to-brain drug dispersion technology provides a competitive advantage by increasing brain drug concentration, ensuring a faster onset of therapeutic effects with optimized safety.

SP-26: Ketamine Implant for Fibromyalgia

SP-26 represents a novel approach to treating chronic pain and fibromyalgia through a ketamine-based injectable dissolvable polymer implant. Designed for subcutaneous insertion, SP-26 focuses on regulating dosage and time release to provide sustained relief from chronic pain, offering a potentially safer alternative to opioids. Presently, our SP-26 product is in preclinical research. Initial animal studies, which began in early 2025, are evaluating the implant’s dosage, time release, and absorption.

In March 2023, we filed a provisional patent application with the USPTO to use SP-26 for treatment of chronic pain, including fibromyalgia We intend to develop SP-26 following the Section 505(b)(2) regulatory pathway of the FDA rules. Section 505(b)(2) of the FDCA was enacted to enable sponsors to seek NDA approval for novel repurposed drugs without the need for such sponsors to undertake time consuming and expensive pre-clinical safety studies and Phase 1 safety studies. Proceeding under this regulatory pathway, we will be able to rely upon publicly available data with respect to our active ingredient in our NDA submission to the FDA for marketing approval.

Fibromyalgia affects approximately 4 million U.S. adults (2% of the population). We believe SP-26’s implant design provides a compelling non-opioid alternative to traditional pain management, improving dosage control compared to intravenous delivery.

SPC-14: Treatment for Alzheimer’s Disease

SPC-14 targets glutamate receptor NDMAR and serotonin 5-HT4 to address cognitive and neuropsychiatric symptoms in Alzheimer’s disease. Given the global Alzheimer’s therapeutics market is projected to exceed $30.8 billion by 2033, SPC-14 presents a promising opportunity. SPC-14 was developed under a sponsored research agreement with Columbia University See “Investigator-Sponsored Study Agreements between the Company and Vendors---Sponsored Research Agreement with Columbia University for the Study of Ketamine in Combination with Other Drugs for Treatment of Alzheimer’s and Depression Disorders,” and we have exclusive global rights to develop and commercialize SPC-14, pursuant to and that certain exclusive license agreement entered into with Columbia on July 1, 2024. See “----License Agreements between the Company and Vendor—Exclusive License Agreement with Columbia University”. On October 13, 2022, we extended the term of the sponsored research agreement with Columbia to conduct further research studies into the mechanism of action of SPC-14 in the treatment of Alzheimer’s disease. In addition, we have been granted an option to license certain assets currently under development, including SPC-14 for the treatment of Alzheimer’s disease.

We believe our SPC-14 product has shown efficacy against luteinizing hormone (LH) in attenuating learned helplessness, preservative behavior and hyponeophagia (a measure of anxiety).

SPU-16: Treatment for CNS Disorders, Initial Indication for Multiple Sclerosis

SPU-16 is a promising candidate targeting central nervous system (CNS) disorders, with an initial indication for multiple sclerosis. On February 12, 2021, we entered into a Master License Agreement (the “UMB License Agreement”) with the University of Maryland, Baltimore (“UMB”) pursuant to which UMB granted us an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, sell, offer to sell, and import certain licensed products and (ii) to use the invention titled “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology,” or SPU-16. See “License Agreements between the Company and Vendors--Vendor License Agreement with the University of Maryland, Baltimore for CNS Homing Peptide” for additional details.

On April 11, 2023 certain intellectual property under the UMB License Agreement described above were issued a patent from the U.S. Patent & Trademark Office (USPTO) for “Peptide-Targeted Liposomal Delivery For Treatment, Diagnosis, and Imaging of Diseases and Disorders” (US 11,766,403, B2).

On July 8, 2025, we entered into July 2025 Termination and Option Agreement with UMB which terminates the UMB License Agreement, previously in effect between us and UMB, and provides us with an exclusive, non-transferable evaluation license, as well as an exclusive option to negotiate a new exclusive commercial license, with respect to certain intellectual property related to central nervous system-homing peptides (the “Invention” and related “Patent Rights”) that were previously licensed under the UMB License Agreement.

Pursuant to the July 2025 Termination and Option Agreement, we were granted Option, exercisable during the term of the July 2025 Termination and Option Agreement, to negotiate and obtain an exclusive, sublicensable, royalty-bearing license to the Invention and Patent Rights for the therapeutic treatment of neuroinflammatory disease worldwide. The Option may be exercised by (i) providing written notice and submitting an acceptable commercialization plan to UMB, and (ii) paying a $1,000 option fee, which is creditable against certain future expenses if a commercial license is executed. The July 2025 Termination and Option Agreement was effective as of July 8, 2025, and will expire on March 31, 2026, unless earlier terminated or superseded by a new definitive license agreement upon exercise of the Option.

We believe SPU-16 provides a competitive advantage by using homing peptides to reduce toxicity while enhancing therapeutic payload delivery.

Cryptocurrency Treasury Strategy

Our strategy changed to include cryptocurrency treasury strategy in August 2025 to focus on the acquisition of leading digital assets. Management focused a portion of its resources in this cryptocurrency strategy. Our crypto assets primarily include Bitcoin (BTC), Ethereum (ETH) and Solana (SOL), and liquid staked tokens consisting of Liquid Staked ETH (LsETH) and Marinade Solana (mSOL), tokens received when ETH and SOL was staked through a third-party protocol. We have ownership of and control over our crypto assets which are held through custodial arrangements with qualified third-party custodians. These custodians provide secure storage and safeguarding of our crypto assets. We participate in both native and liquid staking of our digital assets to generate yield. Our role is that of a Delegator (a staker who does not run a validation node).

We have staked $68,673 and $98,584 of crypto assets, at cost as of March 31, 2026 and December 31, 2025, respectively. Our ability to sell or transfer staked digital assets is subject to restrictions related to unbonding periods, which are based on network traffic on the respective blockchains. As of March 31, 2026, all staked crypto assets could be unbonded within 2 to 3 days. As of March 31, 2026, our staked assets have near immediate terms. In exchange for staking the crypto assets on blockchain networks, we are entitled to a fractional share of the fixed digital asset award a third-party validator node receives for successfully validating or adding a block to the blockchain. As of March 31, 2026 and December 31, 2025, we held $173,462 and $221,817 of crypto assets comprised of BTC, ETH, SOL, RSC and XRP, at fair value, respectively. We reflect these assets held at fair value on the unaudited consolidated balance sheets within the “crypto assets” line item. In determining the fair value of the crypto assets in accordance with ASC 820, we utilize coinmarketcap.com or Coinbase as the principal market.

Recent Developments

On March 30, 2026, we entered into an asset purchase agreement (the “Many Ads Agreement”) with Many Ads Inc. (“Many Ads”), pursuant to which we acquired certain software of the web-based application currently marketed as “qwikagents.com” and the related domain names. In consideration, we issued to Many Ads 2,100,000 shares of our common stock, valued at $714,000 or $0.34 per share, based on the quoted closing stock price on March 30, 2026. The acquired assets did not meet the definition of a business under ASC 805, were obtained for a particular research and development project with no alternative future uses, and the entire $714,000 consideration was recorded as research and development expense for the three months ended March 31, 2026.

On April 15, 2026, we formed Qwikagentsai Inc. (“Qwikagentsai”), a Nevada corporation, as a wholly-owned subsidiary. We acquired 1,000,000 shares of Qwikagentsai’s common stock, par value $0.0001 per share, for aggregate consideration of $100. Qwikagentsai was formed to diversify the Company’s business into AI technology including the development and commercialization of web-based AI agent platforms.

Stock Repurchase Plan

On February 20, 2026, our Board of Directors approved a stock repurchase program authorizing the purchase of up to $1 million of our issued and outstanding common stock, from time to time, with such plan to be in place until December 31, 2026. As of March 31, 2026, no shares have been repurchased under this plan.

Results of Operations

Comparison of Our Results of Operations for the Three Months Ended March 31, 2026 and 2025

The following table summarizes the results of operations for the three months ended March 31, 2026 and 2025 and were based primarily on the comparative unaudited consolidated financial statements, footnotes and related information for the periods identified and should be read in conjunction with the unaudited consolidated financial statements and the notes to those statements that are included elsewhere in this report.

Revenues

During the three months ended March 31, 2026 and 2025, we generated minimal revenues from operations. For the three months ended March 31, 2026 and 2025, revenues amounted to $18,026 and $18,026, respectively. Such revenues are related to the Aikido License and Sublicense Agreement and are recognized over the estimated 15-year term of the UMB license agreement.

Cost of Revenues

During the three months ended March 31, 2026 and 2025, cost of revenues amounted to $20,688 and $1,460, respectively, an increase of $19,228, or 1,317.0%. Cost of revenues consisted of license fees related to the UMB License and Sublicense Agreement, which are being amortized into cost of revenues. Effective July 8, 2025, the estimated useful lives of the unamortized license and sublicense fees were changed to reflect the termination of the Master License Agreement and the expiration of the subsequent Option Agreement on March 31, 2026, resulting in accelerated amortization expense during the three months ended March 31, 2026.

Operating Expenses

For the three months ended March 31, 2026 and 2025, total operating expenses consisted of the following:

• Compensation Expense:

For the three months ended March 31, 2026 and 2025, compensation expense was $242,633 and $178,469, respectively, an increase of $64,164, or 36.0%. This increase primarily resulted from an increase in stock-based compensation of $56,619, health insurance of $8,963 offset by a decrease in payroll expense and related benefits of $1,418.

• Professional Fees:

For the three months ended March 31, 2026 and 2025, professional fees were $255,293 and $273,824, respectively, a decrease of $18,531, or 6.8%. The decrease was primarily attributable to a decrease in investor relations of $77,334, and a decrease in other consulting fees of $2,212, offset by an increase in stock-based consulting fees of $26,712, an increase in accounting and auditing fees of $19,113, and an increase in legal fees of $15,190.

• Research and Development:

For the three months ended March 31, 2026 and 2025, we incurred research and development expense of $1,013,265 and $593,962, respectively, an increase of $419,303, or 70.6%.

This increase was attributable to an increase in acquired software applications of $714,000 and an increase in research related consulting fees of $78,057, offset by a decrease in research and development expense associated with our various studies of $372,754. On March 30, 2026, we entered into an asset purchase agreement (the “Many Ads Agreement”) with Many Ads Inc. (“Many Ads”). Pursuant to the Many Ads Agreement, Many Ads agreed to sell, and we agreed to purchase, certain software of the web-based application currently marketed as “qwikagents.com” and the domain names qwikagents.com, qwikagents.ai, and qwikagents.co (the “Many Ads Purchased Assets”). In consideration for the Many Ads Purchased Assets, we issued to Many Ads 2,100,000 shares of its common stock, which were valued at $714,000 or $0.34 per share, based on the quoted closing stock price on March 30, 2026. Due to the nature of the Many Ads Purchased Assets and their lack of an established alternative future use, the fair value of the common stock issued was recorded as research and development expense of $714,000 during the three months ended March 31, 2026.

We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

• fees related to in-licensed products and technology;
• expenses incurred under agreements with CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our pre-clinical activities;
• the cost of acquiring and manufacturing clinical trial materials; and
• costs associated with non-clinical activities and regulatory approvals.
• Other Selling, General and Administrative Expenses:

Other selling, general and administrative expenses include advertising and promotion, insurance expenses, patent related expenses, public company expenses, custodian fees, bank service charges, travel, and other office expenses.

For the three months ended March 31, 2026 and 2025, other selling, general and administrative expenses were $80,807 and $64,432, respectively, an increase of $16,375, or 25.4%. The increase was primarily attributed to a net increase in other general and administrative expenses of $26,895, offset by a decrease in filing fees of $10,520.

Loss from Operations

For the three months ended March 31, 2026 and 2025, loss from operations amounted to $1,594,660 and $1,094,121, respectively, an increase of $500,539, or 45.7%. The increase was primarily a result of the changes in operating expenses discussed above.

Other Income

For the three months ended March 31, 2026 and 2025, other income (expense), net amounted to $(52,457) and $62,684, respectively, a negative change of $115,141, or 183.7%. The negative change in other income (expense) was primarily due to an increase in unrealized loss on crypto assets of $53,348, an increase in impairment loss on crypto assets of $29,911, decrease in interest and dividend income of $23,110, a decrease in net realized gain on short-term debt investments of $2,922, an increase in foreign currency transaction loss of $2,674, an increase in unrealized loss on short-term tokenized investment funds of $2,060, and an increase in interest expense of $1,307, offset by an increase in staking income on crypto assets of $191.

Net Loss

For the three months ended March 31, 2026, net loss amounted to $1,647,117 or $0.12 per common share (basic and diluted), as compared to net loss of $1,031,437 or $0.23 per common share (basic and diluted) for the three months ended March 31, 2025, an increase of $615,680, or 59.7%.

The change was primarily a result of the changes discussed above.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had working capital of $6,098,849, $2,129,659 in short-term investments, and $3,902,514 in cash and cash equivalents as of March 31, 2026, and working capital of $6,737,542, $2,110,065 in short-term investments and $4,748,700 in cash and cash equivalents as of December 31, 2025, respectively.

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The decrease in working capital of $638,693 was primarily attributable to a decrease in current assets of $584,031 primarily due to a decrease in cash and cash equivalents of $846,186, a decrease in crypto assets, at fair value of $48,355, a decrease in crypto assets, at cost of $29,911, offset by an increase in prepaid expenses and other current assets of $320,827 and an increase in short-term investments, at fair value of $19,594, and an increase in current liabilities of $54,662 attributable to accounts payable and accrued expenses.

Cash Flows

A summary of cash flow activities is summarized as follows:

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 and 2025 were $822,623 and $1,640,300, respectively, a decrease of $817,677, or 49.8%.

• Net cash used in operating activities for the three months ended March 31, 2026 primarily reflected a net loss of $1,647,117, adjusted for non-cash items such as amortization expense of $2,937, amortization of prepaid stock-based professional fees of $26,712, unrealized loss on short-term tokenized investment funds of $2,060, staking income on crypto assets of $191, unrealized loss on crypto assets, at fair value of $53,348, impairment loss on crypto assets, at cost of $29,911, stock-based compensation of $56,619, and common stock issued for acquired technology expensed of $714,000, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $97,539, an increase in accounts payable and accrued expenses of $54,662, and a decrease in deferred revenue of $18,025.
• Net cash used in operating activities for the three months ended March 31, 2025 primarily reflected a net loss of $1,031,437, adjusted for non-cash items such as amortization expense of $3,092, and net realized gain on short-term debt investments of $2,922, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $120,314, a decrease in accounts payable and accrued expenses of $470,693, and a decrease in deferred revenue of $18,026.

Net Cash (Used in) Provided by Investing Activities

Net cash (used in) provided by investing activities for the three months ended March 31, 2026 and 2025 were $(23,563) and $871,381, respectively, a negative change of $894,944 or 102.7%.

• Net cash used in investing activities for the three months ended March 31, 2026 was $23,563 which consisted of aggregate payments for the purchase of short-term debt investments of $18,761 and purchase of crypto assets of $49,990, offset by proceeds from sale of crypto assets of $45,188.
• Net cash provided by investing activities for the three months ended March 31, 2025 was $871,381 which consisted of proceeds from sale of short-term investments of $905,353, offset by aggregate payments for the purchase of short-term debt investments of $33,972.

Net Cash Provided by Financing Activities

We did not have any net cash provided by financing activities for the three months ended March 31, 2026 and 2025.

Cash Requirements

We believe that our current cash and cash equivalent amount and short-term investment amount will provide sufficient cash required to meet our obligations for a minimum of twelve months from the date of this filing.

Other than cash requirements pursuant to research and development agreements, we currently have no other material commitments for any capital expenditures.

Liquidity

As reflected in the accompanying unaudited consolidated financial statements, we generated a net loss of $1,647,117 and used cash in operations of $822,623 during the three months ended March 31, 2026. Additionally, we have an accumulated deficit of $21,139,506 on March 31, 2026. As of March 31, 2026, we had working capital of $6,098,849, $2,129,659 in short-term investments, and $3,902,514 in cash and cash equivalents.

On September 29, 2025, pursuant to the October 2025 Offering, we received net proceeds of $2,146,000, net of placement agent fees and offering costs of $303,450 and legal and other fees of $50,550.

The positive working capital serves to mitigate the conditions that historically raised substantial doubt about our ability to continue as a going concern. We believe that we have sufficient cash to meet our obligations for a minimum of twelve months from the date of this filing.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates

Crypto Assets

Our crypto assets primarily include Bitcoin (BTC), Ethereum (ETH) and Solana (SOL), and liquid staked tokens consisting of Liquid Staked ETH (LsETH) and Marinade Solana (mSOL), tokens received when ETH and SOL was staked through a third-party protocol. We have ownership of and control over our crypto assets which are held through custodial arrangements with qualified third-party custodians. These custodians provide secure storage and safeguarding of our crypto assets.

We distinguish between crypto assets which fall within the scope of ASC 350-60, Accounting for and Disclosure of Crypto Assets, and those which do not. We refer to crypto assets which fall within the scope of ASC 350-60 (BTC, ETH, USDC, SOL, XRP and RSC) as “crypto assets, at fair value.” Crypto assets which do not fall within the scope of ASC 350-60 (LsETH and mSOL) are referred to as “crypto assets, at cost.”

Crypto Assets, at Fair Value

Crypto assets that fall within the scope of ASC 350-60, such as BTC, ETH, SOL, native staked SOL, RSC and XRP, which are actively traded on public exchanges, are initially recorded at cost, which represents the cash, cash equivalents, or other financial assets paid to acquire the asset, including transaction fees.

Crypto assets are subsequently measured in accordance with ASC 350-60, at fair value in the statements of operations with unrealized gains and losses resulting from changes in fair value recognized in net income or loss. We determine and record at each reporting period the fair value of our crypto assets in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices on the coinmarketcap.com or Coinbase exchange, the active exchange that we have determined is our principal market (Level 1 inputs). Changes in the fair value are recognized in net income (loss) within “Unrealized gain (loss) on crypto assets”, while realized gains and losses from the derecognition of crypto assets are included in “Realized gain (loss) on crypto assets, net” in our unaudited consolidated statements of operations and comprehensive loss. We apply a weighted average cost methodology to assign costs for purposes of determining crypto assets held and realized gains and losses.

Purchases and sales of crypto assets are reflected as cash flows from investing activities in the unaudited consolidated statements of cash flows. Contributions of crypto assets received in connection with deposits of ETH and SOL into a liquid staking protocol are presented as non-cash investing and financing activites.

Crypto Assets, at Cost

Crypto assets, at cost are recognized at fair value on the date received, which becomes their cost basis. Crypto assets, at cost, such as LsETH and mSOL, do not fall in the scope of ASC 350-60 for subsequent measurement. LsETH and mSOL represent receipt tokens, which in general and by design, grant the holder an enforceable right to redeem ETH or SOL for which it was exchanged. Therefore, it fails the ‘other goods and services criterion’ in ASC 350-60-15-1(b) and is outside the scope of ASC 350-60. Crypto assets, at cost are therefore subsequently measured at cost, net of any impairment losses incurred since acquisition, in accordance with ASC 350-30, Intangibles—Goodwill and Other—General Intangibles Other Than Goodwill.

We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices in our principal market, indicate that it is more likely than not that any of the assets are impaired. The quoted (unadjusted) prices on the coinmarketcap.com or the Coinbase exchange, the active exchange that we have determined as our principal market, are used in the analysis. If the carrying value of LsETH and mSOL exceeds that end of period quoted price, an impairment loss has occurred in the amount equal to the difference between its carrying value and such period end closing price. Impairment losses are recognized in the period in which the impairment occurs and are reflected within “Impairment loss on crypto assets, at cost” in our unaudited consolidated statements of operations and comprehensive loss. The impaired crypto assets are written down to their fair value at the time of impairment and this becomes the new cost basis for those assets. The cost basis of LsETH or mSOL will not be adjusted upward for any subsequent increase in fair value.

Staking Activities

We participate in both native and liquid staking of our digital assets to generate yield. Our role is that of a Delegator (a staker who does not run a validation node).

Native Staking

We participate in native staking exclusively as a delegator through third-party validators. We delegate SOL to validators, either directly or through third party asset managers, who operate nodes on the Solana network to validate transactions and add blocks to the blockchain. In return for delegating SOL to validators, we are entitled to a portion of the protocol-level rewards, comprising both consensus- and execution-layer components received by the validators, in the form of SOL tokens, calculated based on our proportion of the total SOL staked. When we stake SOL natively, the SOL does not remain in our custodial wallet, but is instead deposited into Solana’s staking deposit smart contract, which is required for participation in SOL staking as a delegator. Native staked SOL are not derecognized because their deposit into the smart contract does not give any other entity the right or ability to direct their use (for example, sell, lend, pledge or otherwise use those SOL) and the staked SOL may be withdrawn at any time by the delegator through the use of private withdrawal keys, subject only to protocol-defined withdrawal and exit queue mechanics. The withdrawal credentials in the smart contract are designated to our custodian who holds our SOL solely for our benefit and does not obtain control of our SOL via their custodial services. Native staked SOL are therefore not derecognized.

Rewards from native staking activities fall outside the scope of ASC 606, Revenue from Contracts, as these activities do not represent an output of our ordinary activities. Therefore, we reflect any such rewards received as other income on the accompanying unaudited consolidated statements of operations and comprehensive loss. In this case our performance obligation is the provision of our validation rights to the validators, from which we earn variable consideration, in the form of SOL, which is non-cash consideration, measured at the fair value of SOL as of contract inception based on the quoted (unadjusted) prices on coinmarketcap.com or the Coinbase exchange, the active exchange that we have determined is our principal market. Revenue is recognized at the point in time when the Solana network confirms that the validation is complete. As a delegator, we have concluded we are not the principal to the block validation service provided to the Solana Network; it is the validators that control the service. Instead, our service is one of providing the use of our SOL by the validators to increase their validation opportunities. Consequently, we record staking revenue on a net basis, reflecting only the portion of protocol rewards to which we are entitled after validator commissions are paid to the custodians.

Liquid Staking

We also participate in liquid staking through a liquid staking protocol. One key difference and intended benefit of liquid staking versus native staking is that it allows us to earn staking rewards, like native staking, but provides liquidity and the ability to enter into other transactions through the use of receipt token. Instead of directly locking ETH or SOL into the respective staking deposit contract, we deposit ETH or SOL through our custodian into the liquid staking protocol’s smart contract. The liquid staking protocol then controls the ETH or SOL for deposit into the respective staking deposit contract and further delegation to its chosen validators. In exchange for staking our ETH or SOL, we receive LsETH or mSOL, freely transferable liquid staking receipt tokens, which enables participation in decentralized finance (DeFi) and other crypto markets while the underlying ETH or SOL remains staked on Ethereum or SOL. Upon staking ETH or SOL through the liquid staking protocol, the ETH or SOL is derecognized because the liquid staking protocol obtains the ability to deploy and direct its use, and the LsETH token or mSOL token received concurrently is then recognized. Any gain or loss on the derecognition of ETH or SOL and the recognition of the LsETH or mSOL is recognized in accordance with ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”) based on the difference between the carrying amount of the ETH or SOL staked and the fair value of the LsETH or mSOL received, and shall be included in “Realized gain or loss on crypto assets” in our unaudited consolidated statements of operations and comprehensive loss.

Staking rewards in the form of ETH or SOL are only received upon redemption of LsETH or mSOL.

Since LsETH and mSOL are accounted for under ASC 350-30, any increases in LsETH and mSOL fair value while we remain staked with the liquid staking protocols are not recognized. There is no ongoing performance obligation following the staking of ETH or SOL through the liquid staking protocol. Additionally, LsETH and mSOL are non-rebasing tokens, meaning their quantity remains fixed over time. Staking rewards are not continuously reflected in token balances but are instead realized separately. Staking rewards are therefore recognized only when the LsETH or mSOL is redeemed, measured at the fair value of ETH or SOL at contract inception, which is when the ETH or SOL were staked. Staking rewards on LsETH or mSOL shall be included in “Staking income on crypto assets” in our unaudited consolidated statements of operations and comprehensive loss. Gain or loss resulting from the difference between the carrying amount of the LsETH or mSOL redeemed and the fair value of ETH or SOL received at redemption (i.e., excluding staking rewards), shall be included in “Realized gain or loss on crypto assets” in our unaudited consolidated statements of operations and comprehensive loss.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We do not expect the adoption of this new guidance to have a material impact on our unaudited consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements, to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in ASU 2025-11 also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The amendments in ASU 2025-11 can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the disclosure impact that ASU 2025-11 may have on its financial statement presentation and disclosures.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on our unaudited consolidated financial statements.

We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e) and 15d-15(e), promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of March 31, 2026, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 27, 2026 (“Annual Report”). Except as set forth below, there have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.