Processa Pharmaceuticals, Inc.: Form 10-Q for the period ended Sep 30, 2025

Forward Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” that reflect, when made, the Company’s expectations or beliefs concerning future events that involve risks and uncertainties. Forward-looking statements frequently are identified by the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. Similarly, statements herein that describe the Company’s objectives, plans or goals also are forward-looking statements. Actual results could differ materially from those projected, implied or anticipated by the Company’s forward-looking statements. Some of the factors that could cause actual results to differ include: our limited cash and history of losses; our ability to achieve profitability; our ability to obtain adequate financing to fund our business operations in the future; our ability to secure required FDA or other governmental approvals for our product candidates and the breadth of the indication sought; our ability to successfully execute our cryptocurrency treasury strategy, fluctuations in the market price of Digital Assets that we may acquire, the risks of holding Digital Assets on our balance sheet, our limited operating history in the cryptocurrency business, risks associated with the current or future regulation of Digital Assets; the impact of competitive or alternative products, technologies and pricing; whether we are successful in developing and commercializing our technology, including through licensing; the adequacy of protections afforded to us and/or our licensors by the anticipated patents that we own or license and the cost to us of maintaining, enforcing and defending those patents; our and our licensors’ ability to protect non-patented intellectual property rights; our exposure to and ability to defend third-party claims and challenges to our and our licensors’ anticipated patents and other intellectual property rights; our ability to remain listed on the Nasdaq Capital Market; and our ability to continue as a going concern. For a discussion of these and all other known risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” herein and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which is available on the SEC’s website at www.sec.gov (http://www.sec.gov). All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.

References to the “Company,” “we,” “us” or “our” refer to the operations of Processa Pharmaceuticals, Inc. and its direct and indirect subsidiaries for the periods described herein.

Overview

Processa Pharmaceuticals, Inc. (“Processa,” “we” or the “Company”) is a publicly listed clinical-stage biopharmaceutical company. We are developing a pipeline of Next Generation Cancer therapy (“NGC”) small molecules, one of which is currently in a Phase 2 trial, while the other is in pre-clinical development. Our risk-mitigated strategy is to identify existing cancer therapies where the mechanism of action is well understood and that are cornerstones of current treatment regimens, but are highly toxic, with side effects that are often treatment limiting. We devise technologies to change the way the body metabolizes them, or the way they are distributed within the body, to improve the therapeutic effect and reduce toxicity. We then efficiently develop our pipeline of Next Generation Cancer therapies utilizing our proprietary Regulatory Science Approach, which we believe will further increase the likelihood of regulatory approval. Since the underlying active metabolites of these drugs are already commonly used in cancer therapy, we believe that if our clinical trials are successful and are showing better efficacy and tolerability than the currently used drugs, the commercial adoption for our NGC therapies will be rapid and broad.

Our Drug Pipeline

Our oncology pipeline currently consists of NGC-Cap and NGC-Iri (also identified as PCS6422 and PCS11T, respectively) and two non-oncology drugs (PCS12852 and PCS499). We are exploring options for our non-oncology drugs, which may include out-licensing or partnership opportunities. The status of our drug pipeline is set forth below:

Recent Developments

Cryptocurrency Treasury Strategy

On August 7, 2025, we announced that we were evaluating corporate cryptocurrency treasury strategies as part of our broader financial and growth objectives. We believe that strategic engagement with emerging financial technologies, including select Digital Assets with potential yield-generating capabilities, may offer novel avenues to diversify our capital base and enhance financial flexibility, while providing an opportunity for long-term value creation. One of the potential benefits of a cryptocurrency treasury strategy is the potential of blockchain-based assets to contribute meaningfully to the funding of our clinical development programs.

As of November 3, 2025, we owned $850,000 in Digital Assets. Subject to market conditions, we expect to issue equity or debt securities or engage in other capital raising transactions with the objective of using the proceeds to purchase Digital Assets.

Clinical Pipeline Update

Over the last year since the first patient was dosed in the NGC-Cap Phase 2 advanced or metastatic breast cancer trial, the study has been actively adding additional U.S. clinical study sites and screening and enrolling more patients. We plan to obtain preliminary safety-efficacy data from these breast cancer patients in order to provide insight into the benefit of NGC-Cap over existing treatments. This preliminary data should provide information that could also help to adaptively modify the protocol to increase the efficiency and/or improve the information obtained from the study.

Since FDA now accepts proteinuria as an endpoint for nephrology diseases, such as primary glomerular diseases (PGDs), we have recently begun to re-evaluate the potential clinical safety and efficacy of PCS499 in PGDs. These analyses have been based on PCS499 and pentoxifylline (PTX) safety-efficacy in diabetic nephropathy and, for PTX, in primary glomerular diseases. PTX is a generic drug with similar pharmacological properties to PCS499 and is approved for the treatment of patients with intermittent claudication. The data suggests that PCS499 may not only be safer, but also more efficacious in more patients than PTX or other drugs presently used on- and off-label for PGDs. We plan to meet with the FDA in the fourth quarter of 2025 to further define the design of the Phase 3 study.

Public Offerings

As described in Note 2, during the nine months ended September 30, 2025, we raised net proceeds of $10.6 million in public offerings in January and June through the sale of 15,340,972 shares of common stock, pre-funded warrants to purchase up to 20,709,700 shares of common stock, accompanying Series A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of common stock in our January offering and common accompanying warrants to purchase up to 28,000,000 shares of common stock in our June offering. During the nine months ended September 30, 2025, all pre-funded warrants, and warrants to purchase 2,912,422 shares of common stock, were exercised.

We plan to use the net proceeds from both financings for continued research and development for NCG-Cap, and for working capital and general corporate purposes.

PCS12852 Update: Intact Therapeutics and Yuhan Corporation

On June 17, 2025, we entered into a binding term sheet (“Term Sheet”) with Intact Therapeutics (“Intact”) granting Intact the exclusive option to license PCS12852, a highly specific and potent 5HT4 irreversible agonist that is Phase 2B ready as potentially the first meaningful treatment for gastroparesis patients. Upon execution of the Term Sheet, Intact agreed to pay a non-refundable standstill payment of $20,000 and upon execution of a license agreement, the Company will receive a 3.5% equity interest in Intact and a payment of $2.5 million, with $1.0 million paid within thirty days of closing and the remaining $1.5 million paid within twelve months of closing. The Term Sheet also provides that the license agreement will provide for development and regulatory milestone payments, commercial milestone payments based on net product sales and a 12% royalty on worldwide net sales of licensed products, excluding South Korea.

The obligations of the parties to enter into the license agreement are subject to additional diligence by Intact. Pursuant to the Term Sheet, the parties have one hundred and twenty (120) days to finish any remaining due diligence and enter into the license agreement. On October 11, 2025, Intact opted to extend the due diligence deadline by an additional one hundred and twenty (120) days for a fee of $30,000. There can be no assurance that we will enter into a license agreement with Intact.

In connection with the Term Sheet, Yuhan Corporation executed Amendment No. 1 to our existing license agreement dated August 19, 2020 (the “Yuhan Agreement”), effective June 11, 2025, which, among other things, extended the deadline to dose the first patient in a Phase 2B clinical trial, Phase 3 clinical trial or other pivotal clinical trial from 48 months to 108 months from the effective date of the original agreement.

NGC-Gem (also identified as PCS3117)

On June 27, 2025, we provided a 120-day written notice of termination of our licensing agreement with Ocuphire Pharma, Inc. (now Opus Genetics) dated June 16, 2021, rescinding all rights and licenses previously granted to us for PCS3117 (NGC-Gem). On October 24, 2025, the termination period ended and all rights were reassigned to Opus.

Results of Operations

Comparison of the three and nine months ended September 30, 2025 and 2024

The following table summarizes our net loss during the periods indicated:

Revenues

We do not currently have any revenue under contract or any immediate sales prospects.

Research and Development Expenses

Our research and development costs are expensed as incurred. Research and development expenses include (i) program and testing related expenses including external consulting and professional fees related to the product testing and our development activities and (ii) internal research and development staff salaries and other payroll costs including stock-based compensation, payroll taxes and employee benefits.

Costs for the three- and nine-month periods for the periods ended September 30, 2025 and 2024 were as follows:

The $626,000 decrease in research and development expenses during the three months ended September 30, 2025 was due to a decrease in preclinical, clinical trial and other costs for the Phases 1 and 2 clinical trial for NGC-Cap when compared to the same period in 2024. During the same period in 2024, we incurred an additional $529,000 in costs related to the IND/initiation of our Phase 2 trial for NGC-Cap, and an additional $136,000 in costs related to our Phase 1 trial for NGC-Cap. The decrease was offset by a net $39,000 increase in costs primarily related to PCS499 as we continue to evaluate the potential clinical safety and efficacy to target primary glomerular diseases (PGDs). We also had an increase in salaries and benefits as we increased salary rates for our R&D C-suite executives.

During the nine months ended September 30, 2025, we had a $215,000 increase in preclinical, clinical trial, and other costs due to our ongoing Phase 2 trial of NGC-Cap and evaluation of PCS499 for PGDs. when compared to the same period in 2024. This increase was offset by a $259,000 decrease in salaries and other payroll-related costs due to our decrease in staff in 2025.

The funding necessary to bring a drug candidate to market is subject to numerous uncertainties. Once a drug candidate is identified, the further development of that drug candidate may be halted or abandoned at any time due to a number of factors. These factors include, but are not limited to, funding constraints, safety or a change in market demand. For each of our drug candidate programs, we periodically assess the scientific progress and merits of the programs to determine if continued research and development is economically viable. Some programs may be terminated due to the lack of scientific progress and lack of prospects for ultimate commercialization.

Our clinical trial cost accruals are based on estimates of patient enrollment and related costs at clinical investigator sites, as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf.

We estimate preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf. In accruing service fees, we estimate the period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses and expensed when the services are rendered.

General and Administrative Expenses

Our general and administrative expenses for the three months ended September 30, 2025 increased by approximately $681,000 to $1.8 million from $1.1 million for the three months ended September 30, 2024. This increase was due primarily to increases in salaries and other-payroll related costs of $214,000, primarily due to salary increases to our C-suite executives; an increase of $150,000 in investment management fees related to our recent digital asset transaction; an increase in employee stock-based compensation of $139,000; an increase of $165,000 in professional fees, and net increases in taxes and other miscellaneous office expenses of $13,000. We received approximately $9,000 less in reimbursements from CorLyst during the three months ended September 30, 2025 when compared to the same period in 2024.

Our general and administrative expenses for the nine months ended September 30, 2025 increased by approximately $831,000 to $4.6 million from $3.8 million for the nine months ended September 30, 2024. This increase was due primarily to increases in salaries and other-payroll related costs of $396,000, primarily due to salary increases to our C-suite executives; an increase of $150,000 in investment management fees related to our recent cryptocurrency transaction; an increase in employee stock-based compensation of $305,000; and net increases in taxes and other miscellaneous office expenses of $31,000. The increases were offset by decreases in office expenses of $38,000; insurance expenses of $6,000; professional fees of $5,000; and travel expenses of $2,000. We received approximately $1,000 more in reimbursements from CorLyst during the nine months ended September 30, 2025 when compared to the same period in 2024.

Other Income

Other income for the three and nine months ended September 30, 2025 includes our portion of the Intact payment of $8,000 along with dividend/interest income of approximately $52,000 and $40,000 for the three months ended September 30, 2025 and 2024, respectively, and approximately $74,000 and $195,000 for the nine months ended September 30, 2025 and 2024, respectively.

Income Tax Benefit

We did not recognize any income tax benefit for the three or nine months ended September 30, 2025 or 2024.

Cash Flows

The following table sets forth our sources and uses of cash and cash equivalents for the nine months ended September 30, 2025 and 2024:

Net cash used in operating activities

We used net cash in our operating activities of $8,484,617 and $8,997,321 during the nine months ended September 30, 2025 and 2024, respectively. The decrease in cash used in operating activities was primarily due to the timing of our use and/or payment of amounts recorded as prepaid assets with our CROs. During 2024, we continued to incur costs related to our Phase 1B trial for NGC-Cap and we made a prepayment to the CRO for our Phase 2 trial for NGC-Cap as we began that trial.

As we continue our development of NGC-Cap and evaluate the other NGC drug in our portfolio, we anticipate our research and development efforts and ongoing general and administrative costs will continue to generate negative cash flows from operating activities for the foreseeable future. As we continue our clinical trials for NGC-Cap, we anticipate our clinical trial costs will increase when compared to prior periods since activities in 2024 were primarily related to the completion of our Phase 1B trial and setup of our Phase 2 trial for NGC-Cap.

Net cash used in investing activities

We did not use cash in investing activities during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, we used net cash in our investing activities of $3,244 to purchase property and equipment.

Net cash provided by financing activities

During the nine months ended September 30, 2025, as described in Note 3, we received net proceeds of $12.9 million from selling a cumulative 25,405,765 shares of common stock, pre-funded warrants to purchase up to 20,709,700 shares of common stock, accompanying Series A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of common stock in our January offering and common accompanying warrants to purchase up to 28,000,000 shares of common stock in our June offering. We also received $728,000 from the exercise of warrants to purchase 2,912,422 shares of common stock sold in our June offering. We used net cash in our financing activities of approximately $10,000 to pay income taxes owed on stock-based compensation, and $7,000 for payments owed under a financing lease obligation.

During the nine months ended September 30, 2024, we sold 476,000 shares of common stock, pre-funded warrants to purchase up to 1,079,555 shares of common stock in lieu of shares of common stock, all of which were exercised into shares of our common stock, and warrants to purchase up to 1,555,555 shares of our common stock pursuant to a public offering for net proceeds of $6.3 million. We also sold 374,190 shares of common stock under our ATM Offering for net proceeds of approximately $931,000. We used net cash in financing activities of approximately $16,000 to pay income taxes owed on stock-based compensation, approximately $9,000 for the settlement of a stock award, and approximately $4,000 for payments owed under a financing lease obligation.

Liquidity

At September 30, 2025, we had cash and cash equivalents totaling $6.3 million. Based on our current business plans, we believe these funds, together with the $945,000 in gross proceeds we received subsequent to September 30, 2025 from the exercise of stock purchase warrants, will satisfy our capital needs into the first quarter of 2026. However, absent additional funding, our current cash and cash equivalents will not be sufficient to fund our planned operations for a period of one year or more after the date that these condensed consolidated financial statements were available to be issued based on the timing and amount of our projected net loss from continuing operations and the related amount of cash to be used in operating activities during that period of time. Our ability to execute our longer-term operating plans, including future preclinical studies and clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions.

We have incurred losses since inception, currently devoting substantially all our efforts toward research and development of our next generation cancer therapy drug product candidates, including conducting clinical trials and providing general and administrative support for these operations, and have an accumulated deficit of $97.4 million at September 30, 2025. During the nine months ended September 30, 2025, we generated a net loss of $10.2 million and used $8.5 million in net cash for operating activities from continuing operations. To date, none of our drug candidates have been approved for sale, and therefore we have not generated any product revenue and do not expect positive cash flow from operations in the foreseeable future. We will continue to be dependent upon equity and/or debt financing until we are able to generate positive cash flows from our operations.

Capital markets activity during the nine months ended September 30, 2025 included the following:

• On January 29, 2025, we sold 1,030,972 shares of common stock, pre-funded warrants to purchase up to 7,019,700 shares of common stock, and accompanying Series A Warrants to purchase up to 8,050,672 shares of our common stock and Series B Warrants to purchase up to 4,025,336 shares of common stock for net proceeds of $4.4 million, after deducting placement agent fees and offering-related expenses.
• On June 18, 2025, we sold 14,310,000 shares of common stock, pre-funded warrants to purchase up to 13,690,000 shares of common stock, and accompanying common warrants to purchase up to 28,000,000 shares of common stock for net proceeds of $6.2 million, after deducting placement agent fees and offering-related expenses.
• On August 4, 2025, we entered into a Securities Purchase Agreement with an accredited investor and sold 5,467,181 shares for $1.2 million in net proceeds.
• On August 4, 2025, we also sold 4,597,612 shares for $1.0 million in net proceeds under our ATM agreement.
• We also received approximately $728,000 for the exercise of warrants to purchase 2,912,422 shares of common stock from the June offering. As of November 3, 2025, warrants to purchase an additional 3,781,267 of common stock were exercised for approximately $945,000.

During the nine months ended September 30, 2025, we entered into a Master Services Agreement with Cube Operations LLC (“Cube”) to manage our Digital Assets and transferred $500,000 into a crypto wallet managed for us by Cube, of which $350,000 was invested in USDC, and the remaining $150,000 was used for initial account setup and maintenance costs. Subsequent to September 30, 2025, we transferred an additional $500,000 to our crypto wallet and we now hold a total of $850,000 in Digital Assets.

We plan to raise additional funds in the future through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but will only do so if the terms are acceptable to us. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend our current or planned future clinical trial plans, or research and development programs. This may also cause us to not meet obligations contained in certain of our license agreements and put these assets at risk. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures. Subject to market conditions, we also expect to issue equity or debt securities or engage in other capital raising transactions with the objective of using the proceeds to purchase Digital Assets. We believe that strategic engagement with emerging financial technologies, including select Digital Assets with potential yield-generating capabilities, may offer returns than can contribute meaningfully to the funding of our clinical development programs. However, there can be no assurance that future funding will be available when needed.

Contractual Obligations and Commitments

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Off Balance Sheet Arrangements

At September 30, 2025, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Use of Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Actual results could differ from the estimates we use in applying our critical accounting policies. We are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Except as disclosed herein, there have been no changes in our critical accounting policies from those included in our most recent Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

At September 30, 2025, management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the evaluation of its disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at September 30, 2025 to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Except as set forth below, there have been no material changes to our risk factors as described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Disruptions at the FDA and other government agencies could hinder new or modified products from being developed, approved, or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA and other government agencies to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, staffing cuts, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. The ability of the FDA and other government agencies to properly administer their functions is highly dependent on the levels of government funding and the ability to fill key leadership appointments, among various factors.

Recent actions by the United States federal government have caused concern in the industry that the FDA will experience staffing reductions and budget cuts. In addition, some senior FDA employees with responsibility for regulation of drugs and biologics have already resigned from the FDA. There are also reports that the United States federal government intends to request Congress to reduce FDA funding in upcoming budgets. Such funding cuts may also delay the development and approval of our products.

Nasdaq may delist our securities from trading on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our securities are currently listed on Nasdaq. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:

• a limited availability of market quotations for our securities;
• reduced liquidity with respect to our securities;
• a determination that shares of our common stock are “penny stock” which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares;
• a limited amount of news and analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.

On February 4, 2025, we received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) notifying us that, for the last 30 consecutive business days, the closing bid price for the Company’s common stock has been below the minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). As a result, the Company is not in compliance with the $1.00 minimum bid price requirement for the continued listing on the Nasdaq Capital Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had been given 180 calendar days, or through August 4, 2025, to regain compliance with Rule 5550(a)(2). On August 7, 2025, Nasdaq granted us an additional 180 calendar days, or through February 2, 2026, to regain compliance.

On September 11, 2025, our stockholders approved a reverse stock split of our common stock in order to attempt to regain compliance with Rule 5550(a)(2). We may be unable to complete the Reverse Stock Split, and even if we do, we may still be unable to meet the minimum bid price requirement and we may be unable to meet other applicable Nasdaq Capital Market listing requirements.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on Nasdaq, our securities are covered securities. If we are no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which our securities are offered.

Risks Related to our Cryptocurrency Treasury Strategy

We have recently announced exploring a new Cryptocurrency Treasury Strategy, and we may be unable to successfully implement it.

On August 7, 2025, we announced that we are exploring a new cryptocurrency treasury strategy. While we have begun investing in Digital Assets, there is no assurance that we will be able to successfully implement this new strategy or operate Digital Asset-related activities at the scale or profitability currently anticipated. Successfully implementing this strategy may present organizational and infrastructure challenges, and we may not be able to fully implement or realize the intended benefits of our strategy. There can be no assurance that we will be successful in implementing our new business strategy. In addition, moving to a new business strategy may result in a loss of established efficiency, which may have a negative impact on our business. We may also face an increased amount of competition as we attempt to expand and grow our business, which may negatively impact our results of operations, cash flows and financial condition.

Digital Assets have also historically experienced, and are expected to continue to experience, high price volatility. Such price fluctuations are likely to influence our financial results and the market price of our common stock. Our financial results and the market price of our common stock would be adversely affected, and our business and financial condition would be negatively impacted, if the price of Digital Assets we hold decreases substantially, resulting in a loss of capital.

Our Digital Assets are or will be held in custody accounts. We could have a high concentration of Digital Assets in one location or with one custodian, which may be prone to losses arising out of hacking, loss of passwords, comprised access credentials, malware, or cyberattacks. Security breaches and cyberattacks are of particular concern with respect to our Digital Asset holdings. Digital Assets and the entities that provide services to participants in the Digital Asset ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. We and our custodians likely will not have sufficient amounts of insurance to recover our full investment. Accordingly, a successful security breach or cyberattack could result in a partial or total loss of our Digital Assets in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our Digital Assets.

We could be subject to legal or regulatory action, including fines, in the event the Securities Exchange Commission, a foreign regulatory authority, or a court were to determine that a digital asset held by us is a “security” under applicable laws.

While all investments entail a risk of loss of capital, investments in Digital Assets should be considered substantially more speculative and significantly more likely to result in a loss, including a total loss of capital, than many other forms of investment. The investment characteristics of Digital Assets differ from those of many traditional currencies, commodities, and securities. A particular Digital Asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if we are unable to properly characterize a Digital Asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, results of operations and/or financial condition.

Digital Assets are novel assets, and are subject to significant legal, commercial, regulatory, and technical uncertainty.

Digital Assets are relatively novel and are subject to rapidly evolving legal, commercial, regulatory, and technical landscapes. Because the application of federal and state securities and other applicable laws, regulations, and rules (“Applicable Law”) remain unsettled in several material respects, there is substantial risk that a governmental or regulatory authority could adopt or interpret Applicable Law in a manner that adversely affects the price of Digital Assets. Increased regulatory scrutiny may result in additional costs for us and may require our management team to devote increased time and attention to regulatory matters, change aspects of our business, or result in limits on the utility of Digital Assets. Moreover, the regulatory landscape with respect to Digital Assets is rapidly changing and we may be required to comply with any new laws, regulations, or interpretations, which may result in heightened regulatory and compliance related costs, litigation, regulatory investigations, and enforcement or other actions. Adverse changes to, or our failure to comply with Applicable Law may have an adverse effect on our reputation, brand, our business, operating results, and financial condition. Further, if any of our Digital Assets are determined to constitute a security for purposes of U.S. federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of the Digital Assets we hold.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Digital Assets or the ability of individuals or institutions such as us to own or transfer Digital Assets. Regulatory authorities have been evolving in their approach to Digital Assets. It is not possible to predict whether, or when, any of these developments will lead to U.S. Congress granting additional authorities to the SEC or other regulators, or whether any other federal, state, or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of Digital Asset markets to function or the willingness of financial and other institutions to continue to provide services to the Digital Assets industry, nor how any new regulations or changes to existing regulations might impact the value of Digital Assets generally and any Digital Assets we hold specifically. The consequences of increased regulation of Digital Assets and Digital Asset-related activities could adversely affect the market price of any Digital Assets we hold and in turn adversely affect the market price of our common stock.

Moreover, the risks of engaging in a cryptocurrency treasury strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

The liquidity of Digital Assets may also be impacted to the extent that changes in Applicable Laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for Digital Assets. The evolving regulatory landscape creates uncertainty for the Company, as new regulations or changes to existing regulations could materially and adversely affect our business operations, financial condition, and results of operations. The effect of any future regulatory change on the Company is impossible to predict, but such change could be substantial and adverse.