Stablecoin Development Corp: Form 10-Q for the period ended Sep 30, 2026

The following discussion of our financial condition and results of operations should be read together with our unaudited condensed financial statements and related notes included in Part I, Item 1 of this report and with our financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2025 Annual Report on Form 10-K, as amended. This discussion contains forward-looking statements that involve risks and uncertainties. Words such as “expects,” “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” “determines,” variations of these words, and similar expressions are intended to identify these forward-looking statements. As a result of the significant changes that have occurred to us and our business, including the establishment of our digital asset strategy, as well as other factors, including those set forth under the section entitled “Risk Factors” in Part I, Item 1A. of our 2025 Annual Report on Form 10-K, as amended, and elsewhere in our SEC filings, including our Current Report on Form 8-K filed on October 5, 2026, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believe to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this report, even if new information becomes available in the future.

Overview

Stablecoin Development Corporation (the “Company,” “our,” “we,” or “us”), formerly known as NovaBay Pharmaceuticals, Inc., is an on-chain holding company focused on long-duration participation in protocol-aligned digital asset ecosystems and providing public market access to the stablecoin economy. The Company’s initial digital asset focus is the Sky Protocol ecosystem, with SKY as its core holding. Through staking and other on-chain activities, the Company seeks to generate protocol-level economic exposure while maintaining governance, risk management, and public-company discipline. On April 2, 2026, the Company’s corporate name change from NovaBay Pharmaceuticals, Inc. to Stablecoin Development Corporation became legally effective, and on April 6, 2026, the Company’s Common Stock commenced trading on the NYSE American under the ticker symbol “SDEV.”

Pursuant to oversight by our Board of Directors (the “Board”) and recommendations from our Investment Advisory Committee, our core business consists of the accumulation, holding and deployment of operating digital assets for use within blockchain-based networks to support protocol-level services, including staking, governance participation, validation, and related activities. The Investment Advisory Committee, chartered by the Board on September 2, 2026 (replacing what had previously been referred to as our Digital Asset Strategy Advisory Committee), is an advisory committee established by the Board to provide strategic guidance, risk oversight and expert recommendations to the Board and management with respect to the Company’s investment strategy, including the acquisition, holding, management, deployment and disposition of the Company’s investments and digital assets and the Company’s exercise of governance and voting rights associated with those holdings. The Investment Advisory Committee is not a committee of the Board within the meaning of Section 141(c) of the Delaware General Corporation Law or the Company’s Bylaws and has no authority to act for, or bind, the Company.

Stablecoin adoption has expanded across payments, settlement, and on-chain capital markets in recent years, and stablecoin supply has grown significantly. Regulatory frameworks in the United States and internationally continue to develop, which may provide greater clarity for stablecoin issuers and users. The Sky Protocol, through which the Company’s primary digital asset holdings are deployed, is one of the longest-operating decentralized stablecoin platforms, with USDS and DAI supply of approximately $9.7 billion as of September 30, 2026. The Sky Protocol generates revenue through borrowing fees, savings spread, and settlement activity. The Company’s SKY staking rewards are derived from a portion of these protocol-level revenues. The Company may evaluate additional investments that provide exposure to stablecoin infrastructure, financial services, and infrastructure assets subject to the recommendation of the Investment Advisory Committee and subsequent approval by the Board, and any applicable Purchaser consent rights under the Securities Purchase Agreement. The Investment Advisory Committee’s mandate is not limited to digital assets, but SKY remains the only asset approved by the Board under the framework. See Note 8, “Financing Activities,” for additional information.

On January 16, 2026, pursuant to the January 2026 Private Placement, the Company completed a private placement of pre-funded warrants to purchase an aggregate of 167,539,227 shares of Common Stock for aggregate gross proceeds of approximately $134.0 million, consisting of approximately $25.0 million in cash and approximately $109.0 million in SKY tokens and stablecoins. The January 2026 Private Placement provided the initial capital base for the Company’s digital asset strategy and resulted in the Company’s initial holdings of SKY tokens.

The Company holds digital assets as part of a long-term capital allocation strategy and does not engage in short-term speculative trading, margin transactions, or derivatives referencing digital assets absent recommendation by the Investment Advisory Committee and subsequent approval by the Board. Within this framework, our approach anticipates that we may:

• hold digital assets, including SKY, for extended periods as long-term positions intended to participate in protocol-level economics and potential capital appreciation;
• periodically monetize a portion of our holdings for general corporate purposes, including to manage tax positions in accordance with applicable law;
• evaluate opportunities to generate liquidity or financing that reference or are collateralized by digital assets held by the Company, including SKY; and
• continue to invest in internal capabilities and third-party relationships necessary to transact, settle, account for, and safeguard SKY.

The execution and scope of this strategy are subject to prevailing market conditions, risk limits approved by the Board following consideration of recommendations of the Investment Advisory Committee, the availability of suitable commercial opportunities, and regulatory, legal and tax considerations.

Separately, we maintain cash, cash equivalents, and short-duration investments outside of our digital asset strategy to meet near-term operating requirements and liquidity needs.

Key Drivers of Results

The Company’s financial results and financial condition are primarily driven by (i) the market price of SKY, which affects the fair value of the Company’s digital asset holdings and the magnitude of unrealized gains or losses recognized each period; (ii) staking economics, including the level of staking rewards generated by the Sky Protocol and the proportion of the Company’s holdings deployed in staking activities; (iii) the Company’s access to capital, including through its ATM Program, to fund additional SKY acquisitions; and (iv) operating expenditures required to support the Company’s digital asset holdings, including custody, compliance, legal, and accounting costs associated with maintaining public-company discipline around a digital asset-focused business model. Because the Company’s digital asset holdings constitute substantially all of its assets, changes in the market price of SKY are expected to be the most significant driver of the Company’s reported financial results and financial condition in any given period.

Digital Asset Holdings – SKY

As of September 30, 2026, the Company held 2,321,079,862 SKY tokens, representing approximately 10% of the total supply of SKY. Since the closing of the January 2026 Private Placement, the Company has acquired approximately 1.3 billion additional SKY tokens on the open market at an average purchase price of approximately $0.066 per SKY token. All SKY tokens purchased outside of the January 2026 Private Placement have been purchased in open-market transactions through unaffiliated third-party execution venues, consistent with the Company’s digital asset policies. Since commencing on-chain staking activities, the Company has earned approximately 101.7 million SKY tokens in cumulative staking rewards. Substantially all of the Company’s SKY holdings remain deployed in staking activities within the Sky Protocol ecosystem, and the Company’s staked SKY carries governance voting rights in the Sky Protocol. The Company has historically staked substantially all of its SKY holdings and expects to continue deploying a substantial majority of its holdings in staking, while retaining discretion to reduce staked amounts to meet liquidity needs, manage risk or execute dispositions within its approved strategy; the Company has not adopted a fixed target percentage. Staking rewards are determined by protocol governance parameters, participation levels, and other factors, and are subject to variability over time.

SKY tokens are a network-native digital asset that may be acquired, transferred, and held through digital wallets that rely on public/private key pairs, and may be exchanged on trading venues that support SKY pairs against fiat currencies or other digital assets.

The Sky Protocol is a decentralized finance platform that evolved from MakerDAO, one of the earliest projects in the digital asset ecosystem. The protocol is implemented through open-source smart contracts deployed on the Ethereum blockchain and enables the creation and use of USDS, a decentralized stablecoin designed to maintain a soft peg to the U.S. dollar, serving as foundational financial infrastructure for lending, savings, and on-chain capital markets. SKY is the governance token of the Sky Protocol ecosystem; holders participate in protocol governance through an open, on-chain voting process. The protocol generates revenue from borrowing fees and other economic activity, a portion of which is used to fund open-market buybacks of SKY tokens that are allocated between distributions to staking participants, including the Company, and the protocol’s surplus buffer. The maximum and total supply of SKY is approximately 23.46 billion tokens. Unlike many digital assets that rely on inflationary issuance to incentivize participation, SKY derives its economic characteristics from protocol-generated revenues associated with stablecoin issuance, collateralized lending, and other on-chain financial services.

The price of SKY is determined in network-based markets by supply and demand among market participants, including individuals, institutions, market makers, and custodial service providers, and may be volatile. Liquidity, spreads, and volumes vary by venue and geography. Prices may fluctuate due to factors including protocol changes, market sentiment, macroeconomic conditions, third-party platform events, and broader digital asset market dynamics.

Industry Participants and Ecosystem

The Sky Protocol ecosystem includes open-source developers, node operators, wallet providers, custodians, trading venues, market makers, data and analytics providers, payment facilitators, and software and hardware vendors. The breadth, maturity, and reliability of third-party services may affect liquidity, price discovery, and the Company’s operational resilience. As adoption of the Sky Protocol and related infrastructure evolves, the Company expects service availability to change, including execution, clearing arrangements, and enterprise-grade integration tools.

Custody and Safeguarding of Digital Assets

The Company safeguards its SKY through Company-controlled wallets secured by the multi-party computation ("MPC") key management platform provided by Fireblocks, Inc. (“Fireblocks”) and maintains a qualified custody relationship with Payward Financial, Inc. (doing business as Kraken Financial), a Wyoming special purpose depository institution (“Kraken Financial”), which held no SKY of the Company as of September 30, 2026.

Because staking the Company’s SKY tokens requires on-chain deployment that cannot be executed from a custodial account, substantially all of the Company’s SKY tokens are held in self-custody through Company-controlled wallets secured by the MPC key management platform provided by Fireblocks. Fireblocks does not hold digital assets, does not act as a custodian, and does not have unilateral control over the Company’s digital assets.

The Company maintains the ability to custody digital assets with Kraken Financial and may reallocate assets among service providers from time to time. None of the Company’s custodial or infrastructure service providers are related parties of the Company.

The principal counterparty risk associated with our SKY holdings relates to these service providers’ performance under our custody and platform agreements. As of September 30, 2026, substantially all (more than 99%) of the Company’s SKY was deployed in the Sky Protocol’s staking smart contract rather than held at rest in a wallet, and that position is controlled through the Company’s MPC-secured wallets, in which no complete private key exists on any single device or system at any time and every transfer of assets requires multi-party quorum approval under the Company’s transaction policy engine and address allow-listing, characteristics the Company considers comparable to warm storage. In the future, we may hold our SKY across multiple service providers to diversify our exposure, and we continually evaluate and seek to engage additional digital asset custodians and infrastructure providers to further diversify risk. We may, in the future, discontinue or change the use of one or more third-party service providers or utilize alternative custody arrangements. Under our agreements, each of Kraken Financial and Fireblocks may engage third-party service providers, affiliates, or subcontractors to assist in performing their respective obligations. Our service provider agreements contain customary limitations of liability that may limit our ability to recover losses in the event of service provider failure, security breach, or other adverse events.

Governmental, Regulatory, and Accounting Considerations

The legal and regulatory landscape applicable to blockchain-based networks and digital assets continues to evolve in the United States and internationally. Multiple regulators have asserted jurisdiction over aspects of digital asset markets, including anti-money laundering compliance, market integrity and manipulation, consumer protection, tax reporting, commodities and derivatives regulation, and sanctions. Regulatory actions affecting trading venues, custodians, or other service providers could impair access, liquidity, or pricing for SKY. We monitor developments and adjust our counterparties, controls, and policies accordingly.

Digital assets held by the Company will be subject to evolving accounting standards, and changes in market value and protocol participation may result in volatility in the Company’s financial results.

Discontinued Operations

As part of the comprehensive realignment of the Company’s business during 2025, the Company completed the Avenova Asset Divestiture and the PhaseOne Divestiture (each, as defined in Note 13 to the Company’s unaudited condensed financial statements included in this report) and decided to exit its involvement in the China NeutroPhase product line. The historical financial results of these businesses are reflected as discontinued operations in the unaudited condensed financial statements included in this report. See Note 13, “Divestitures,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report for additional details.

Potential conflicts of interest

A substantial portion of the Chief Executive Officer’s potential compensation under the CEO PSUs depends on the Company’s stock price and on the growth of the Company’s Digital Asset NAV. Digital Asset NAV is affected by the Company’s decisions to acquire, hold, stake, or dispose of digital assets. Digital Asset NAV, as defined in the award agreement, is the fair market value, as reflected in the Company’s financial statements, of all digital assets and related investments within the Company’s approved strategy, as determined by the Board (or the applicable committee), excluding cash, cash equivalents and stablecoin holdings, and subject to any required investor consent rights. As of September 30, 2026, the Company’s digital assets within its approved strategy consisted solely of SKY, and Digital Asset NAV was $180.2 million, equal to the carrying value of digital assets reported on the Company’s unaudited condensed balance sheet as of that date. The CEO PSUs were designed and approved by the Compensation Committee of the Board, which is composed entirely of independent directors. In addition, under the Securities Purchase Agreement, each Purchaser in the January 2026 Private Placement (including R01, an affiliate of the Chief Executive Officer, as described in Note 15 to the unaudited condensed financial statements) holds, for a period of 24 months following the closing and for so long as it retains at least 50% of the securities it purchased, a consent right over any material amendment, modification, addition to or revocation of the Company’s digital asset strategy. As a result, a material change to the strategy requires the consent of the Purchasers holding that right and cannot be effected by the Chief Executive Officer alone. Within the strategy recommended by the Investment Advisory Committee and subsequently approved by the Board, the Company retains discretion over individual acquisitions, dispositions, and staking of digital assets.

The VWAP RSU tranches are earned upon the Company’s Common Stock achieving 10-trading-day VWAP thresholds of $1.70, $2.55, and $5.10 per share during a five-year performance period beginning October 16, 2026. The closing price of the Company’s Common Stock on September 30, 2026 was $2.59, which exceeded the first two thresholds. Because the performance period had not yet begun, no VWAP RSU tranche had been achieved as of September 30, 2026. Subsequent to September 30, 2026, the first two VWAP RSU tranches were earned on October 16, 2026, when the ten-trading-day VWAP of the Common Stock first equaled or exceeded $2.55 per share during the performance period. See Note 16, "Subsequent Events." The third threshold represents an increase of approximately 97% from the September 30, 2026 closing price. The NAV RSU tranches are earned only if Digital Asset NAV increases from $180.2 million as of September 30, 2026 to at least $250.0 million, an increase of approximately 39%, sustained for two consecutive quarterly reporting periods. See Note 12 and Note 15 to the unaudited condensed financial statements for additional information.

Third Quarter 2026 Highlights

During the three months ended September 30, 2026, the Company recognized an unrealized gain on digital assets of $58.8 million, reflecting an increase in the market price of SKY from $0.05215 per token at June 30, 2026 to $0.07764 per token at September 30, 2026. As a result, the Company’s SKY holdings moved from a cumulative unrealized loss at June 30, 2026 to a cumulative unrealized gain of $30.9 million at September 30, 2026. As of September 30, 2026, the Company held 2,321,079,862 SKY tokens with an aggregate fair value of $180.2 million.

The Company did not purchase SKY tokens during the three months ended September 30, 2026; all additions to its SKY holdings during the quarter were received as staking rewards. The Company continued to stake substantially all of its SKY holdings within the Sky Protocol during the quarter, receiving 34,568,488 SKY tokens and recognizing staking revenue of $2.1 million. Staking rewards are determined by Sky Protocol governance parameters and represent a share of protocol-level revenues generated from USDS stablecoin issuance, collateralized lending, and other on-chain financial services.

During the three months ended September 30, 2026, the Company sold 1,160,636 shares of Common Stock under the ATM Program for aggregate net proceeds of approximately $1.3 million, which the Company used to fund operating expenses and for general corporate purposes. During the nine months ended September 30, 2026, the Company sold 3,854,399 shares of Common Stock under the ATM Program for aggregate net proceeds of approximately $16.5 million. Approximately $83.2 million of Common Stock remained available for issuance under the ATM Program as of September 30, 2026.

On August 11, 2026, the Company filed a registration statement on Form S-3 to register the resale of shares of Common Stock issued upon the exercise of the October 2025 Pre-Funded Warrants and the conversion of the Series D Preferred Stock and Series E Preferred Stock, and issuable upon exercise of the January 2026 Pre-Funded Warrants. The Company filed Amendment No. 1 to the registration statement on September 16, 2026, Amendment No. 2 to the registration statement on October 6, 2026 and Amendment No. 3 to the registration statement on October 26, 2026. As of the date of this report, the registration statement, as amended, had not been declared effective.

On September 2, 2026, the Board took several governance actions. It increased its size from five to six directors and appointed David Garcia Rios, SFF’s designee under the Investors’ Rights Agreement, as a Class II director. It chartered the Investment Advisory Committee (replacing what had previously been referred to as our Digital Asset Strategy Advisory Committee) to provide strategic guidance, risk oversight and recommendations to the Board and management with respect to the Company’s investment strategy, including the acquisition, holding, management, deployment and disposition of the Company’s investments and digital assets. On the same date, pursuant to a written consent of the Board dated September 1, 2026, the Company filed Certificates of Withdrawal eliminating the certificates of designation for the Company’s Series A through Series F preferred stock, none of which remained outstanding. As a result, all 5,000,000 authorized shares of preferred stock were undesignated as of September 30, 2026.

Financial Overview

Following the establishment of the Company’s digital asset strategy in October 2025 and the closing of the January 2026 Private Placement, the Company has transitioned its operations to focus on the accumulation, holding, and deployment of digital assets, with an initial focus on SKY tokens. As of September 30, 2026, the Company held 2,321,079,862 SKY tokens with an aggregate fair value of $180.2 million, representing approximately 96% of the Company’s total assets. This concentration in a single digital asset exposes the Company to significant price volatility and related risks. See “Quantitative and Qualitative Disclosures About Market Risk” below and “Financial Condition, Liquidity and Capital Resources” below for additional information.

The Company has access to its ATM Program, pursuant to which it was initially authorized to sell up to $100.0 million of shares of Common Stock from time to time at prevailing market prices. Approximately $83.2 million of Common Stock remained available for issuance under the ATM Program as of September 30, 2026. During the nine months ended September 30, 2026, the Company used net proceeds from the ATM Program, together with other available capital, to acquire SKY tokens on the open market. The pace and magnitude of any future ATM sales and SKY purchases will depend on a number of factors, including prevailing market conditions for the Company’s Common Stock, SKY token pricing and liquidity, the Company’s cash position and operating cash requirements, and the availability of shares under the ATM Program. The Company may also pursue additional financing transactions, subject to market conditions and Board approval. There can be no assurance that the Company will be able to sell shares under the ATM Program on favorable terms, or at all, or that any future financing transactions will be completed on favorable terms, or at all.

As of September 30, 2026, the Company’s non-affiliate public float was below the $75 million threshold under General Instruction I.B.1 to Form S-3, although the Company believes it remains eligible to register offerings on Form S-3 in reliance on General Instruction I.B.6. The Company’s Sales Agreement and related prospectus supplement for the ATM Program were filed on January 20, 2026, at which time the Company met the General Instruction I.B.1 public float requirement. On March 19, 2026, the staff of the SEC’s Division of Corporation Finance issued Corporation Finance Interpretation Question 116.26, under which the Staff stated it would not object to an issuer continuing to offer and sell the full amount of securities covered by a prospectus supplement filed while I.B.1-eligible, notwithstanding a subsequent decline in public float below $75 million. In reliance on this interpretation, the Company believes it may continue to sell the remaining amount registered under the ATM Program.

Critical Accounting Estimates

The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these unaudited condensed financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these unaudited condensed financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, the Company evaluates its estimates and judgments. The Company bases its estimates on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates.

While the Company’s significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report, the Company believes that the accounting for the January 2026 Pre-Funded Warrants issued in connection with the January 2026 Private Placement is the most critical to fully understanding and evaluating its reported financial results as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The January 2026 Pre-Funded Warrants, which have a nominal exercise price, were measured at intrinsic value, calculated as the quoted market price of the Company’s Common Stock less the per-share exercise price, multiplied by the number of shares of Common Stock issuable upon exercise. The Company’s determination that intrinsic value approximates fair value for these warrants is based on their nominal exercise price and economic similarity to common stock. Given the substantial number of shares of Common Stock issuable upon exercise of these warrants, relatively small changes in the Company’s Common Stock price had a significant effect on the measured fair value of the warrant liabilities and on the related non-cash gains and losses recognized in the unaudited condensed statements of operations. The fair value of the January 2026 Pre-Funded Warrants at issuance was determined using the closing price of the Company’s Common Stock on January 20, 2026 (the first trading day following the announcement of the January 2026 Private Placement, which was made after market close on January 16, 2026), as management concluded that this price was the most appropriate reference price reflecting the market’s absorption of the dilutive impact of the announcement.

The intrinsic value of the January 2026 Pre-Funded Warrants at issuance exceeded the cash and other consideration received in the January 2026 Private Placement by approximately $5.3 billion, resulting in the recognition of a non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance. Changes in the Company’s Common Stock price during the three months ended March 31, 2026 resulted in a non-cash gain on changes in fair value of warrant liabilities of approximately $5.8 billion. Following stockholder approval obtained on March 12, 2026, the warrant liability recorded for the January 2026 Pre-Funded Warrants was reclassified to stockholders’ equity at fair value on that date, and no further fair value adjustments will be recorded with respect to those warrants in future periods. The October 2025 Pre-Funded Warrants remained classified as a liability for a portion of the period because they are not considered indexed to the Company’s own stock under ASC 815, as a result of certain anti-dilution provisions, and required remeasurement at fair value at each reporting date. On June 12, 2026 and June 15, 2026, the October 2025 Pre-Funded Warrants were modified, and all outstanding October 2025 Pre-Funded Warrants were exercised in full on a cashless basis on June 15, 2026, resulting in a non-cash gain of approximately $9.3 million. Following the exercise, there were no warrant liabilities outstanding as of September 30, 2026, and no further fair value estimates will be required with respect to these warrants in future periods. See Note 10, “Common Stock Warrants and Warrant Liabilities,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report.

Results of Operations

Comparison of the Three Months Ended September 30, 2026 and 2025 (dollars in thousands)

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Impact of Divestitures

Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture for the three months ended September 30, 2025 have been aggregated and reported for each of these periods in the line item titled “Net income (loss) from discontinued operations, net of taxes” in the table above. See additional information in Note 13, “Divestitures,” in the Notes to the unaudited condensed financial statements in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.

Staking Revenue

Staking revenue was $2.1 million for the three months ended September 30, 2026, compared to no staking revenue for the three months ended September 30, 2025. Staking revenue is attributable to staking rewards earned on the Company’s SKY token holdings during the period, with no comparable result for the three months ended September 30, 2025, as the Company did not hold digital assets or conduct staking activities during the prior year period. The Company received 34,568,488 SKY tokens for staking rewards during the three months ended September 30, 2026.

Unrealized Gain on Digital Assets

The Company recognized an unrealized gain on digital assets of $58.8 million for the three months ended September 30, 2026, with no comparable result for the three months ended September 30, 2025, as the Company did not hold digital assets during the prior year period. The unrealized gain represents the change in fair value of the Company’s SKY token holdings during the three months ended September 30, 2026, driven by fluctuations in the market price of SKY tokens. SKY tokens are measured at fair value at each reporting date, with changes in fair value recognized in earnings. Because the fair value of digital assets may be subject to significant volatility, the Company expects that changes in the fair value of its SKY token holdings will continue to result in unrealized gains or losses in future periods, which may have a material impact on the Company’s results of operations. For additional information, see Note 5, “Digital Assets,” in the Notes to unaudited condensed financial statements, in Part I, Item 1 of this report.

General and Administrative Expenses

General and administrative expenses were $5.0 million for the three months ended September 30, 2026, compared to $1.2 million for the three months ended September 30, 2025, an increase of approximately $3.8 million or 313%. The increase was primarily attributable to $3.3 million of stock-based compensation expense and a $0.3 million increase in director and officer liability insurance costs, both reflecting costs associated with the Company’s digital asset strategy and its operation as a public company. Expenses for the three months ended September 30, 2026 also included public company costs such as legal and professional services. By comparison, expenses for the three months ended September 30, 2025 consisted primarily of general operating expenses, together with costs associated with the closing of the 2025 Preferred Stock Purchase Agreement.

As the Company’s digital asset operations mature, management expects the composition of general and administrative expenses to continue shifting toward costs associated with digital asset custody and infrastructure, cybersecurity, regulatory compliance, and specialized legal and accounting services required for digital asset operations. The Company expects these operational cost categories to represent an increasing proportion of its operating cost base relative to legacy transformation-related expenditures, which are substantially complete.

Other Expense, Net

There was no other expense, net for the three months ended September 30, 2026, compared to $77 thousand for the three months ended September 30, 2025. The 2025 amount consisted of interest expenses related to the unsecured convertible notes, for which there was no comparable expense in the 2026 period.

Income Tax Expense

Income tax expense was $5.6 million for the three months ended September 30, 2026, compared to $0 for the three months ended September 30, 2025. The expense is substantially all non-cash deferred income tax expense attributable to the unrealized gain on the Company’s SKY holdings recognized during the quarter, which is not taxable until realized and gave rise to a net deferred tax liability of $5.6 million as of September 30, 2026. See Note 14, “Income Taxes,” in the Notes to unaudited condensed financial statements included in Part I, Item 1 of this report.

Comparison of the Nine Months Ended September 30, 2026 and 2025 (dollars in thousands)

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Impact of Divestitures

Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture for the nine months ended September 30, 2025 have been aggregated and reported for each of these periods in the line item titled “Net income (loss) from discontinued operations, net of taxes” in the table above. See additional information in Note 13, “Divestitures,” in the Notes to the unaudited condensed financial statements in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.

Staking Revenue

Staking revenue was $6.8 million for the nine months ended September 30, 2026, compared to no staking revenue for the nine months ended September 30, 2025. Staking revenue is attributable to staking rewards earned on the Company’s SKY token holdings during the period, with no comparable result for the nine months ended September 30, 2025, as the Company did not hold digital assets or conduct staking activities during the prior year period. The Company received 101,701,388 SKY tokens for staking rewards during the nine months ended September 30, 2026.

Unrealized Gain on Digital Assets

The Company recognized an unrealized gain on digital assets of $30.9 million for the nine months ended September 30, 2026, with no comparable result for the nine months ended September 30, 2025, as the Company did not hold digital assets during the prior year period. The unrealized gain represents the excess of the fair value of the Company’s SKY token holdings at September 30, 2026 of $180.2 million over their aggregate cost basis of $149.3 million. Cost basis includes the value at which tokens received in the January 2026 Private Placement and as staking rewards were initially recognized. The nine-month result reflects an increase in the market price of SKY. SKY tokens are measured at fair value at each reporting date, with changes in fair value recognized in earnings. The fair value of digital assets may be subject to significant volatility, and the Company expects that changes in the fair value of its SKY token holdings will continue to result in unrealized gains or losses in future periods, which may have a material impact on the Company’s results of operations. For additional information, see Note 5, “Digital Assets,” in the Notes to unaudited condensed financial statements, in Part I, Item 1 of this report.

General and Administrative Expenses

General and administrative expenses were $13.3 million for the nine months ended September 30, 2026, compared to $5.8 million for the nine months ended September 30, 2025, an increase of approximately $7.5 million or 129%. The increase was primarily attributable to an increase in compensation expense and director and officer liability insurance costs, both associated with the Company’s transformation following the adoption of its digital asset strategy. Expenses for the nine months ended September 30, 2026 also included public company costs such as legal and professional services. By comparison, expenses for the nine months ended September 30, 2025 consisted primarily of outside services costs related to non-recurring strategic initiatives, including the Avenova Asset Divestiture and the pursuit of a potential dissolution as a strategic option for the Company, as well as one-time severance costs relating to the departure of employees in connection with completing the Avenova Asset Divestiture.

As the Company’s digital asset operations mature, management expects the composition of general and administrative expenses to continue shifting toward costs associated with digital asset custody and infrastructure, cybersecurity, regulatory compliance, and specialized legal and accounting services. The Company expects these categories to represent an increasing proportion of its operating cost base relative to legacy transformation-related expenditures, which are substantially complete.

Impairments of Long-lived Assets

There were no impairments of long-lived assets recorded during the nine months ended September 30, 2026. During the nine months ended September 30, 2025, the Company recorded one-time impairments for right-of-use assets associated with leases of $643 thousand and $33 thousand for fixed assets including leasehold improvements due to the uncertainty at the time associated with our future operations and our strategic direction as we were exploring a dissolution of the Company and other potential strategic alternatives that were available to us.

Non-cash Loss on Fair Value of Warrant Liabilities in Excess of Proceeds at Issuance

During the nine months ended September 30, 2026, the Company recognized a non-cash loss of $5.3 billion with no comparable results for the nine months ended September 30, 2025. The issuance-date fair value of the January 2026 Pre-Funded Warrants exceeded the proceeds received, resulting in a non-cash loss on warrant issuance. For additional information, please see Note 10, “Common Stock Warrants and Warrant Liabilities,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report.

Non-cash Gain on Changes in Fair Value of Warrant Liabilities

Adjustments to the fair value of warrant liabilities resulted in a gain of $5.8 billion for the nine months ended September 30, 2026 with no comparable adjustment for the nine months ended September 30, 2025. This gain related to the October 2025 Pre-Funded Warrants and the January 2026 Pre-Funded Warrants, which were initially classified as liabilities and recorded at fair value at each reporting date. Following stockholder approval obtained on March 12, 2026, the warrant liability recorded for the January 2026 Pre-Funded Warrants was reclassified to stockholders’ equity at their fair value on that date, and no further fair value adjustments will be recorded with respect to those warrants in future periods. The October 2025 Pre-Funded Warrants remained classified as a liability because they were not considered indexed to the Company’s own stock under ASC 815, as a result of certain anti-dilution provisions. On June 12, 2026, the October 2025 Pre-Funded Warrants held by R01 were modified, and on June 15, 2026, the October 2025 Pre-Funded Warrants held by Framework were modified. All outstanding October 2025 Pre-Funded Warrants were exercised in full on a cashless basis on June 15, 2026. In connection with the amendments, the October 2025 Pre-Funded Warrants were remeasured at intrinsic value immediately prior to exercise, consistent with the Company’s existing quarterly measurement policy for these warrants; the resulting change in fair value was not attributable to the terms of the amendments themselves. Accordingly, there were no warrant liabilities outstanding as of September 30, 2026. For additional information regarding warrant liabilities and their valuation, please see Note 3, “Fair Value Measurements” and Note 10, “Common Stock Warrants and Warrant Liabilities” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report.

Other Expense, Net

Other expense, net was $1.4 million for the nine months ended September 30, 2026 and $190 thousand for the nine months ended September 30, 2025. The 2026 result was due primarily to costs incurred in connection with the January 2026 Private Placement. There was no comparable expense related to financing activities in the 2025 period. See Note 8, “Financing Activities” in the Notes to the unaudited condensed financial statements, in Part I, Item 1 of this report.

Income Tax Expense

Income tax expense was $5.6 million for the nine months ended September 30, 2026, compared to $0 for the nine months ended September 30, 2025, consisting of the deferred income tax expense recognized in the third quarter net of a de minimis benefit recognized in the first half of the year. The non-cash gains and losses on the Company’s warrant liabilities are not recognized for income tax purposes and did not give rise to income tax expense. See Note 14, “Income Taxes,” in the Notes to unaudited condensed financial statements included in Part I, Item 1 of this report.

Financial Condition, Liquidity and Capital Resources

Our net income from continuing operations was $561.7 million for the nine months ended September 30, 2026, compared to a net loss from continuing operations of $6.7 million for the nine months ended September 30, 2025. Net income from continuing operations for the nine months ended September 30, 2026 was driven primarily by a non-cash gain on changes in fair value of warrant liabilities of approximately $5.8 billion, partially offset by a non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance of approximately $5.3 billion, both of which related to the Company’s October 2025 Pre-Funded Warrants and January 2026 Pre-Funded Warrants, together with staking revenue of $6.8 million and an unrealized gain on digital assets of $30.9 million, partially offset by general and administrative expenses of $13.3 million and income tax expense of $5.6 million. Following stockholder approval obtained on March 12, 2026, the January 2026 Pre-Funded Warrant liability was reclassified to stockholders’ equity at fair value on that date. On June 12, 2026 and June 15, 2026, the October 2025 Pre-Funded Warrants were modified, and all outstanding October 2025 Pre-Funded Warrants were exercised in full on a cashless basis on June 15, 2026. Accordingly, there were no warrant liabilities outstanding as of September 30, 2026. See Note 10, “Common Stock Warrants and Warrant Liabilities,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report.

As of September 30, 2026, our cash and cash equivalents were $7.2 million, compared to $8.0 million as of December 31, 2025, a decrease of approximately $0.8 million. This decrease primarily reflects approximately $84.5 million used to acquire additional SKY tokens and approximately $8.9 million used in operating activities, partially offset by net cash proceeds received during the nine months ended September 30, 2026, including (i) approximately $25.0 million in cash received in connection with the January 2026 Private Placement, (ii) the conversion of approximately $51.0 million of stablecoins received in connection with the January 2026 Private Placement into U.S. dollars, a portion of which was subsequently used to acquire additional SKY tokens, and (iii) approximately $16.5 million in net proceeds from sales under the ATM Program. The remaining change reflects other financing activities, including the redemption of the Company’s Series F Preferred Stock and proceeds from warrant exercises. See Note 8, “Financing Activities,” in the Notes to unaudited condensed financial statements in Part I, Item 1 of this report.

The Company also holds a significant position in SKY tokens, which represented approximately 96% of total assets and approximately 10% of the total supply of SKY available in the market as of September 30, 2026.

Following the establishment of the Company’s digital asset strategy and the completion of the financing transactions described above, the Company’s primary sources of liquidity consist of cash and cash equivalents and access to the capital markets, including through the ATM Program. The Company holds its SKY as a long-term strategic position and has not monetized any SKY to date. The Company may monetize SKY at any time, in its discretion, for portfolio purposes (including realizing gains, rebalancing the Company’s treasury and managing tax positions) or funding purposes, and has not adopted predetermined price levels, thresholds, schedules or formulas that trigger monetization.

Based on funds available as of September 30, 2026, management believes that the Company’s existing cash and cash equivalents, access to its ATM Program and its ability, if needed, to monetize a portion of its unencumbered SKY token holdings are expected to be sufficient to enable the Company to meet its planned operating expenses for at least twelve months from the issuance of these financial statements. Under the ATM Program, approximately $83.2 million of Common Stock remained available for issuance as of September 30, 2026. Beyond twelve months, the Company’s ability to fund growth and meet obligations will depend on market conditions, including the Company’s ability to access capital on acceptable terms through its ATM Program or other financing sources, the volatility and liquidity of SKY tokens and the Company’s operating cash requirements.

Subsequent to September 30, 2026 and through October 26, 2026, the Company sold an aggregate of 15,801,547 shares of Common Stock under the ATM Program for aggregate net proceeds of approximately $45.9 million, and on October 13, 2026, Tether exercised a portion of its January 2026 Pre-Funded Warrant on a cashless basis, resulting in the issuance of 5,546,110 shares of Common Stock. See Note 16, “Subsequent Events,” in the Notes to unaudited condensed financial statements included in Part I, Item 1 of this report for additional information.

Net Cash Used in Operating Activities, Continuing Operations

Net cash used in operating activities from continuing operations was $8.9 million for the nine months ended September 30, 2026, which included net income of $561.7 million. Net income was adjusted for non-cash items, including a non-cash gain on changes in fair value of warrant liabilities of $5.8 billion, a non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance of $5.3 billion, an unrealized gain on digital assets of $30.9 million, staking rewards earned in SKY tokens of $6.8 million, stock-based compensation expense of $6.5 million, and deferred income tax expense of $5.6 million. Changes in operating assets and liabilities resulted in a net cash outflow of $0.7 million, driven primarily by decreases in operating lease liabilities of $0.7 million, including a $569 thousand payment made in connection with the early termination of the Company’s Emeryville office lease, accounts payable and accrued liabilities of $0.1 million, partially offset by decreases in prepaid expenses and other current assets and other assets of $0.1 million.

Net cash used in operating activities from continuing operations was $5.8 million for the nine months ended September 30, 2025, which consisted primarily of a net loss from continuing operations of $6.7 million, adjusted by stock-based compensation expenses related to employee and director stock awards of $6 thousand, non-cash right-of-use asset amortization of $123 thousand, non-cash impairment of long-lived assets of $0.7 million, accretion of interest and amortization of debt discounts on convertibles notes of $84 thousand, and a net decrease of $49 thousand in our net operating assets and liabilities of continuing operations.

Net Cash Used in Investing Activities, Continuing Operations

Net cash used in investing activities from continuing operations was $33.5 million for the nine months ended September 30, 2026, consisting of $84.5 million in purchases of SKY tokens, partially offset by $51.0 million in proceeds from the redemption of stablecoins received in connection with the January 2026 Private Placement.

There was no cash used in, or provided by, investing activities from continuing operations during the nine months ended September 30, 2025.

Net Cash Provided by (Used in) Financing Activities, Continuing Operations

Net cash provided by financing activities from continuing operations was $41.5 million for the nine months ended September 30, 2026, consisting primarily of $25.0 million in proceeds from the issuance of pre-funded warrants in connection with the January 2026 Private Placement, $16.5 million in net proceeds from sales under the ATM Program, and $0.3 million in proceeds from warrant exercises, partially offset by $0.4 million in payments on redemption of Series F Preferred Stock.

Net cash used in financing activities from continuing operations was $3.2 million for the nine months ended September 30, 2025, which consisted primarily of $2.0 million in cash payments to repurchase outstanding warrants, a $0.5 million repayment of the Bridge Note, and dividend paid of $4.8 million. Offsetting these payments were $0.9 million in proceeds from warrant exercises and $3.8 million in proceeds from the 2025 Preferred Stock Purchase Agreement (as described in Note 8 to the unaudited condensed financial statements).

Net Operating Losses and Tax Credit Carryforwards

The Company believes that it experienced an ownership change during 2025 and, as a result, its pre-change net operating loss (“NOL”) carryforwards became subject to significant limitations under Section 382 of the Internal Revenue Code. As of December 31, 2025, the Company had federal and state NOL carryforwards of approximately $2.9 million and $348 thousand, respectively, primarily generated subsequent to the 2025 ownership change. The Company’s federal NOLs may be carried forward indefinitely but are generally limited to offsetting 80% of taxable income in any given year. The state NOL carryforwards begin to expire in 2045. As of December 31, 2025, the Company had no federal or state tax credit carryforwards.

Current federal and California tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of an ownership change of a corporation. Accordingly, our ability to utilize net operating loss carryforwards may be limited as a result of such ownership changes. Such a limitation could result in the expiration of carryforwards before they are utilized.

Inflation

The Company’s operating expenses primarily consist of legal, accounting, and other professional services. Inflation has not had a material effect on the Company’s results of operations during the nine months ended September 30, 2026. The value of the Company’s digital asset holdings is subject to significant price volatility based on macroeconomic factors, market sentiment, and conditions specific to digital asset markets (which are independent of but may be indirectly influenced by inflationary pressures) and may have a material impact on the Company’s results of operations and financial position.

Off-Balance Sheet Arrangements

We did not have any “off-balance sheet arrangements” as defined in Item 303(b)(1)(ii)(B) of Regulation S-K at September 30, 2026 or December 31, 2025.

Seasonality

The Company is not exposed to any significant impact from seasonality.

Contractual Obligations

In the normal course of business, the Company enters into contracts and commitments that obligate it to make payments in the future. As of September 30, 2026, the Company had no material fixed or determinable contractual payment obligations requiring disclosure in tabular form, other than as disclosed elsewhere in this report. As of September 30, 2026, the Company had no convertible note obligations outstanding.

Digital Asset Price Risk

Our principal market risk relates to the price volatility of digital assets. As of September 30, 2026, the Company held SKY tokens with an aggregate fair value of $180.2 million, representing the substantial majority of the Company’s total assets. The fair value of SKY tokens is subject to significant volatility, which may result in material changes to the carrying value of the Company’s digital asset holdings and the Company’s results of operations from period to period. Factors affecting the price of SKY tokens include, but are not limited to, supply and demand dynamics in digital asset markets, market sentiment, regulatory developments, technological developments, security incidents, conditions specific to the Sky Protocol, and broader macroeconomic conditions.

The Company’s digital asset holdings are concentrated in a single digital asset. As a result, the Company is exposed to the risk that adverse developments specifically affecting SKY or the Sky Protocol could have a material adverse effect on the Company’s financial position and results of operations. A hypothetical 10% decrease in the fair value of SKY tokens as of September 30, 2026 would have resulted in a decrease in the carrying value of the Company’s digital asset holdings of approximately $18 million, with a corresponding non-cash loss recognized in the unaudited condensed statements of operations.

Interest Rate Risk

The Company’s exposure to interest rate risk is limited primarily to interest income sensitivity on its cash and cash equivalents. The Company maintains its cash and cash equivalents in short-term, highly liquid investments. As of September 30, 2026, a 10% change in interest rates would have had an immaterial effect on interest income.

Foreign Currency Risk

The Company’s operations and digital asset transactions are conducted primarily in U.S. dollars. The Company has not had material exposure to foreign currency rate fluctuations. The Company’s transactions in stablecoins are denominated in U.S. dollars (or stablecoins) and the Company’s holdings of SKY tokens, which are quoted and traded in U.S. dollars, do not expose the Company to material foreign currency risk.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, and because the previously disclosed material weakness in our internal control over financial reporting, which relates to the review of the contractual terms of our outstanding equity-linked financial instruments and the identification of triggering events under those instruments, as described in Part II, Item 9A of Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2025, filed with the SEC on April 29, 2026, had not been remediated as of September 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2026.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Assessing the costs and benefits of such controls and procedures necessarily involves the exercise of judgment by management. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Remediation of Material Weakness

Management, with oversight from the Audit Committee of the Board of Directors, continues to implement remediation measures to address the material weakness in our internal control over financial reporting previously described in Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2025. In May 2026, the Company engaged a third-party fund administrator to perform monthly closing procedures, including the reconciliation of the Company’s on-chain digital asset balances and staking rewards to its books and records, independently of management, and in June 2026 the Company hired a Vice President of Finance and Controller to strengthen the Company’s accounting and financial reporting function. The implementation of our remediation measures will require validation and testing of the design and operating effectiveness of internal control over financial reporting over a sustained period. The material weakness will not be considered remediated until the applicable controls are designed, implemented, and operate effectively for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively. We cannot ensure that the measures taken to date, and actions we may take in the future, will be sufficient to remediate the material weakness or that they will prevent or avoid potential future deficiencies. Until remediation is complete, the Company will continue to perform additional analyses and other procedures to help ensure that its financial statements are prepared in accordance with GAAP.

Changes in Internal Control Over Financial Reporting

Other than noted above, there were no changes in our internal control over financial reporting during the current quarter which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For information regarding factors that could affect our business, results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A included in our 2025 Annual Report, as amended by Amendment No. 1 on Form 10-K/A and our Current Report on Form 8-K filed on October 5, 2026. Except as set forth below, there have been no material changes from such risk factors.

Substantially all of our SKY is held in self-custody through a single key management platform and deployed in Sky Protocol smart contracts, and a loss of access to or security breach affecting those assets may not be recoverable.

Because native staking requires on-chain deployment that cannot be executed from a custodial account, substantially all of our SKY is held in self-custody through Company-controlled wallets secured by the multi-party computation (“MPC”) key management platform provided by Fireblocks, Inc. (“Fireblocks”), and is deployed in the Sky Protocol’s staking smart contract. As of September 30, 2026, we held 2,321,079,862 SKY with a fair value of approximately $180.2 million, representing approximately 96% of our total assets. As of September 30, 2026, we held no SKY with Kraken Financial, our qualified custodian.

Fireblocks is a technology provider, not a custodian. It does not hold our digital assets, and pursuant to our agreement with Fireblocks: (i) Fireblocks disclaims responsibility for any loss of digital assets in our workspace and (ii) Fireblocks’ aggregate liability is capped at the fees we paid in the preceding twelve months, an amount that is insignificant relative to the value of our SKY. Because our SKY is self-custodied, it does not benefit from the asset segregation, regulatory supervision or insolvency protections that may apply to assets held with a qualified custodian. We do not maintain insurance specifically covering the theft or loss of our digital assets, and our existing insurance policies provide limited coverage, if any, for such losses. As a result, a loss of our SKY may not be recoverable from any third party. Such a loss could result from cyberattack, credential theft, unauthorized transfers, a failure of our internal controls, or the loss or compromise of key shares, including any failure of our disaster recovery arrangements with Station70.

In addition, our concentration in a single key management environment means that an outage, software vulnerability or security failure affecting Fireblocks could prevent us from accessing, unstaking or transferring our SKY for an extended period. Staked SKY is also exposed to vulnerabilities in, or exploits of, the Sky Protocol’s smart contracts. Sky Protocol governance may also change staking parameters, including exit parameters, in ways that adversely affect us. Any of these events could materially and adversely affect our business, financial condition and results of operations and the market price of our Common Stock.

The anti-dilution provision and beneficial ownership limitation of the January 2026 Pre-Funded Warrants could cause the price of our Common Stock to fall to a level that results in its delisting from NYSE American.

If we issue, or are deemed to issue, Common Stock or Common Stock equivalents at a price below $0.85 per share, subject to specified excluded issuances, the number of shares issuable under the January 2026 Pre-Funded Warrants increases under a broad-based weighted-average formula. The increase is settled in additional warrant shares, the exercise price stays at $0.05 per share, no adjustment may reduce the number of warrant shares, and there is no limit on the number of additional warrant shares that may become issuable. Because the exercise price is nominal, holders can receive these additional shares for almost no further payment. Our Common Stock has closed below $0.85 on NYSE American in the past and may do so in the future. Each holder is also subject to a beneficial ownership limitation that generally bars it from exercising if it would then beneficially own more than 4.99% (or, at the holder’s election, 9.99%) of our outstanding Common Stock. This limitation may lead holders to exercise and resell in successive installments, putting sustained selling pressure on our Common Stock, which could cause or contribute to a decline in its market price. A lower stock price could make our later financings more dilutive, and any financing priced below $0.85 per share would trigger further adjustments, resulting in additional warrant shares that may in turn be exercised and resold. These features could reinforce one another and drive down the price of our Common Stock.

Our Common Stock is listed on NYSE American. NYSE American has rules for continued listing, including, without limitation, requirements relating to the selling price of our Common Stock and other matters. Under Section 1003(f)(v) of the NYSE American Company Guide, NYSE American may delist our Common Stock if it sells for a substantial period of time at a low price per share and we fail to effect a reverse stock split within a reasonable time after NYSE American notifies us that it deems such action appropriate. NYSE American has not adopted a numerical price threshold for this standard, but has stated that its staff engages with listed companies whose average closing price over 30 trading days falls below $1.00 and that it immediately suspends trading in securities that trade below $0.10. Beginning July 1, 2027, pursuant to amendments approved by the SEC on August 14, 2026, NYSE American will immediately suspend trading in, and commence delisting proceedings with respect to, any security whose closing price is below $0.25 on any trading day, without any compliance period. NYSE American also immediately delists the securities of a company that has effected one or more reverse stock splits with a cumulative ratio of over 200 shares to one over the prior two-year period, or whose reverse stock split results in non-compliance with any other continued listing standard. We effected a 1-for-5 reverse stock split on February 20, 2026, and we may be unable or unwilling to effect a further reverse stock split in response to a notice from NYSE American in the future.

A decline in the price of our Common Stock caused by the features described above could cause us to fail to meet these requirements. Failure to maintain our listing, or delisting from NYSE American, would make it more difficult for stockholders to dispose of our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. This could have an adverse effect on the price of our Common Stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock is not traded on a national securities exchange.