Stablecoin Development swings to $50.4M Q3 profit
Based on September 30 funds, management expected cash, ATM access and, if needed, monetization of unencumbered SKY to fund planned expenses for at least twelve months.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Stablecoin Development Corp. reported third-quarter net income attributable to common stockholders of $50.363 million, versus a $1.293 million loss in the 2025 quarter. Staking revenue was $2.140 million and unrealized gains on SKY tokens were $58.828 million; general and administrative expenses were $5.007 million.
For the nine months, net income was $561.696 million. Results included a $5,846.899 million noncash gain from changes in warrant fair value and a $5,302.617 million noncash loss on warrant fair value at issuance.
At September 30, 2026, the company held 2,321,079,862 SKY tokens valued at $180.209 million, representing approximately 96% of total assets and approximately 10% of SKY’s total supply. Substantially all of its SKY was staked and held in self-custody through one key-management provider. Management expected cash, ATM access and, if needed, monetization of unencumbered SKY to fund planned expenses for at least twelve months. Through October 26, it sold 15,801,547 ATM shares for approximately $45.9 million net.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Major pointQ3 common-stockholder net income: $50.363 million, versus a $1.293 million loss.
Negative
- Moderate pointSKY exposure: approximately 96% of total assets, with custody through one provider.
Key Figures
Key Terms
staking rewards technical
unrealized gain on digital assets financial
beneficial ownership limitation financial
pre-funded warrants financial
Digital Asset NAV financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What was SDEV’s third-quarter 2026 net income?
How much SKY did SDEV hold on September 30, 2026?
When do SDEV’s January 2026 pre-funded warrants become exercisable?
What are the terms of SDEV’s ATM Program?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
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Title of Each Class |
Trading Symbol(s) |
Name of Each Exchange On Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Emerging growth company |
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Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 26, 2026, there were
Stablecoin Development Corporation
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
3 |
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Condensed Balance Sheets: September 30, 2026 (unaudited) and December 31, 2025 |
3 |
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Condensed Statements of Operations: Three and nine months ended September 30, 2026 and 2025 (unaudited) |
4 |
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Condensed Statements of Stockholders’ Equity (Deficit): Three and nine months ended September 30, 2026 and 2025 (unaudited) |
5 |
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Condensed Statements of Cash Flows: Nine months ended September 30, 2026 and 2025 (unaudited) |
7 |
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Notes to Condensed Financial Statements (unaudited) |
8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
40 |
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Item 4. |
Controls and Procedures |
40 |
PART II
OTHER INFORMATION
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Item 1. |
Legal Proceedings |
41 |
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Item 1A. |
Risk Factors |
41 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
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Item 3. |
Defaults Upon Senior Securities |
41 |
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Item 4. |
Mine Safety Disclosures |
42 |
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Item 5. |
Other Information |
42 |
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Item 6. |
Exhibits |
43 |
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SIGNATURES |
45 |
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On February 20, 2026, we effected a 1-for-5 reverse stock split of our common stock, par value $0.01 per share (the “Common Stock” and, such reverse stock split, the “Reverse Stock Split”). Except as otherwise specifically noted, all share numbers, share prices, exercise/conversion prices and per share amounts in this report have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split.
PART I
FINANCIAL INFORMATION
|
ITEM 1. |
FINANCIAL STATEMENTS |
STABLECOIN DEVELOPMENT CORPORATION
CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
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September 30, 2026 |
December 31, 2025 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Prepaid expenses and other current assets |
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Total current assets |
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Digital assets, at fair value |
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Other assets |
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TOTAL ASSETS |
$ | $ | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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Liabilities: |
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Current liabilities: |
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Accounts payable |
$ | $ | ||||||
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Accrued liabilities |
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Unsecured Convertible Notes, net of discounts |
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Operating lease liabilities |
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Total current liabilities |
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Warrant liabilities, at fair value |
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Operating lease liabilities-non-current |
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Deferred tax liabilities, net |
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Total liabilities |
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Commitments and contingencies (Note 7) |
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Mezzanine (temporary) equity: |
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| Preferred stock, $ |
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Stockholders’ equity (deficit): |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital* |
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total stockholders’ equity (deficit) |
( |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
$ | $ | ||||||
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* |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
STABLECOIN DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2026 |
2025 |
2026 |
2025 |
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Staking revenue |
$ | $ | $ | $ | ||||||||||||
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Unrealized gain on digital assets |
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Operating expenses: |
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General and administrative |
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Impairment of long-lived assets |
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Total operating expenses |
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Operating income (loss) |
( |
) | ( |
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Non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance |
( |
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Non-cash gain on changes in fair value of warrant liabilities |
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Other expense, net |
( |
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) | ( |
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Total non-operating income (expense), net |
( |
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) | ||||||||||||
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Net income (loss) from continuing operations, before taxes |
( |
) | ( |
) | ||||||||||||
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Income tax expense |
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Net income (loss) from continuing operations |
( |
) | ( |
) | ||||||||||||
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Net income from discontinued operations, net of taxes (Note 13) |
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Net income (loss) attributable to common stockholders |
$ | $ | ( |
) | $ | $ | ||||||||||
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Weighted average shares outstanding*: |
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Basic |
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Diluted |
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Basic and diluted net earnings (loss) per share attributable to common stockholders*: |
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Basic earnings (loss) per share from continuing operations |
$ | $ | ( |
) | $ | $ | ( |
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Basic earnings per share from discontinued operations |
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Basic earnings (loss) per share attributable to common stockholders |
$ | $ | ( |
) | $ | $ | ||||||||||
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Diluted earnings (loss) per share from continuing operations |
$ | $ | ( |
) | $ | $ | ( |
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Diluted earnings per share from discontinued operations |
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Diluted earnings (loss) per share attributable to common stockholders |
$ | $ | ( |
) | $ | $ | ||||||||||
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* |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
STABLECOIN DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(in thousands)
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Total |
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Redeemable |
Additional |
Stockholders’ |
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Preferred Stock |
Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Equity |
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Shares |
Amount |
Shares |
Amount |
Shares* |
Amount* |
Capital* |
Deficit |
(Deficit) |
||||||||||||||||||||||||||||
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Balance at December 31, 2025 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
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Net income |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Redemption of Series F Preferred Stock |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||||||
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Conversion of Unsecured Convertible Notes to Common Stock |
— | — | ||||||||||||||||||||||||||||||||||
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Exercise of warrants |
— | — | ||||||||||||||||||||||||||||||||||
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Reclassification of warrant liabilities |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Other |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
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Issuance of Common Stock in at the market offering, net |
— | — | ||||||||||||||||||||||||||||||||||
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Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Balance at March 31, 2026 |
— | — | ( |
) | ||||||||||||||||||||||||||||||||
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Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Exercise of warrants |
— | — | ||||||||||||||||||||||||||||||||||
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Issuance of Common Stock in at the market offering, net |
— | — | ||||||||||||||||||||||||||||||||||
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Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Balance at June 30, 2026 |
— | — | ( |
) | ||||||||||||||||||||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Issuance of Common Stock in at the market offering, net |
— | — | ||||||||||||||||||||||||||||||||||
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Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Balance at September 30, 2026 |
— | $ | — | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||
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Total |
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Redeemable |
Additional |
Stockholders’ |
||||||||||||||||||||||||||||||||||
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Preferred Stock |
Preferred Stock |
Common Stock |
Paid-In |
Accumulated |
Equity |
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Shares |
Amount |
Shares |
Amount |
Shares* |
Amount* |
Capital* |
Deficit |
(Deficit) |
||||||||||||||||||||||||||||
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Balance at December 31, 2024 |
— | $ | — | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||
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Net income |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Exercise of warrants |
— | — | ||||||||||||||||||||||||||||||||||
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Repurchase of warrants |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Balance at March 31, 2025 |
— | — | ( |
) | ||||||||||||||||||||||||||||||||
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Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Repurchase of warrants |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||||||||||||||
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Vesting of director restricted stock awards |
— | — | ||||||||||||||||||||||||||||||||||
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Balance at June 30, 2025 |
— | — | ( |
) | ||||||||||||||||||||||||||||||||
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Net loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Issuance of Series D Preferred Stock, net of offering costs |
— | — | ||||||||||||||||||||||||||||||||||
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Issuance of Series F Preferred Stock and cancellation of warrants in conjunction with Series F Agreements |
— | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
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Deemed capital contribution pursuant to Series F Agreements |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
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Exercise of warrants |
— | — | ||||||||||||||||||||||||||||||||||
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Dividend paid |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Balance at September 30, 2025 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
|
* |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
STABLECOIN DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
Nine Months Ended September 30, |
||||||||
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2026 |
2025 |
|||||||
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Operating activities: |
||||||||
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Net income |
$ | $ | ||||||
|
Net income from discontinued operations, net of taxes |
( |
) | ||||||
|
Adjustments to reconcile net income to net cash used in operating activities: |
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Staking rewards earned in SKY tokens |
( |
) | ||||||
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Stock-based compensation expense related to employee and director stock awards |
||||||||
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Unrealized gain on digital assets |
( |
) | ||||||
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Non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance |
||||||||
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Non-cash gain on changes in fair value of warrant liabilities |
( |
) | ||||||
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Non-cash right-of-use asset amortization |
||||||||
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Non-cash impairment of long-lived assets |
||||||||
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Amortization of debt discounts on convertible notes |
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Deferred income taxes |
||||||||
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Other assets |
||||||||
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Accounts payable and accrued liabilities |
( |
) | ||||||
|
Operating lease liabilities |
( |
) | ( |
) | ||||
|
Net cash used in operating activities, continuing operations |
( |
) | ( |
) | ||||
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Investing activities: |
||||||||
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Purchases of SKY tokens |
( |
) | ||||||
|
Proceeds from redemption of stablecoins |
||||||||
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Net cash used in investing activities, continuing operations |
( |
) | ||||||
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Financing activities: |
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Proceeds from sale of pre-funded warrants in private placement |
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Proceeds from issuance of Common Stock in at the market offering, net |
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Proceeds from warrant exercises |
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Payments on redemption of Series F Preferred Stock |
( |
) | ||||||
|
Cash payment pursuant to Series F Agreements |
( |
) | ||||||
|
Net proceeds from issuance of Series D Preferred Stock |
||||||||
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Repayment of bridge loan |
( |
) | ||||||
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Payment on warrants purchases |
( |
) | ||||||
|
Dividend paid |
( |
) | ||||||
|
Net cash provided by (used in) financing activities, continuing operations |
( |
) | ||||||
|
Net decrease in cash, cash equivalents, and restricted cash, continuing operations |
( |
) | ( |
) | ||||
|
Net increase in cash and cash equivalents, discontinued operations |
||||||||
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
( |
) | ||||||
|
Cash, cash equivalents and restricted cash, beginning of period |
||||||||
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Cash, cash equivalents and restricted cash of continuing operations, end of period |
$ | $ | ||||||
|
Nine Months Ended September 30, |
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2026 |
2025 |
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Supplemental disclosure of cash flow information: |
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Interest paid |
$ | $ | ||||||
|
Supplemental disclosure of non-cash information: |
||||||||
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Digital assets and stablecoins received in exchange for pre-funded warrants |
$ | $ | ||||||
|
Warrant liabilities transferred to equity |
||||||||
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Warrants exercised on a cashless basis |
||||||||
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Conversions of preferred stock to Common Stock |
||||||||
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Conversions of Unsecured Convertible Notes to Common Stock |
||||||||
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Cancellation of Common Stock warrants pursuant to Series F Agreements |
||||||||
|
Deemed capital contribution |
||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
NOTE 1. ORGANIZATION
Stablecoin Development Corporation (“Stablecoin Development” or the “Company” or “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 January 16, 2026, the Company completed a private placement of pre-funded warrants to purchase an aggregate of
SKY, the governance token of the Sky Protocol, is currently the only digital asset deployed under the Company’s current strategy and represents the Company’s primary digital asset holding. As of September 30, 2026, the Company held
The Company intends to hold digital assets as part of a long-duration strategic position. The Company retains discretion to monetize a portion of its digital asset holdings if and when management determines it appropriate to do so.
On April 2, 2026, the Company’s corporate name change from NovaBay Pharmaceuticals, Inc. to Stablecoin Development Corporation became legally effective. On April 6, 2026, the Company’s Common Stock commenced trading on the NYSE American, LLC (“NYSE American”) under the new ticker symbol “SDEV”. The name change and new ticker symbol reflect the Company’s strategic repositioning as an on-chain holding company focused on protocol-aligned digital asset ecosystems and are reflected throughout this report.
The Company is incorporated under the laws of the State of Delaware. The Company has one operating and reportable segment encompassing its operations as of September 30, 2026.
On February 20, 2026, we effected a 1-for-
Discontinued Operations
Historical financial results related to each of the Company’s divested businesses and assets are now presented as discontinued operations in the Company’s unaudited condensed financial statements (see Note 13, “Divestitures”).
Liquidity
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 (as defined in Note 8, “Financing Activities”) and its ability, if needed, to monetize a portion of its unencumbered SKY token holdings are expected to be sufficient to fund its planned operating expenses for at least twelve months from the issuance of these financial statements. Under the ATM Program, approximately $
Subsequent to September 30, 2026 and through October 26, 2026, the Company sold an aggregate of
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and are expressed in U.S. dollars. The unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes as of and for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as amended by Amendment No. 1 on Form 10-K/A (the “Form 10-K”).
The unaudited condensed balance sheet as of December 31, 2025 was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying unaudited condensed financial statements reflect all normal recurring adjustments necessary for their fair presentation. There have been no changes to the Company’s significant accounting policies described in the Form 10-K that have had a material impact on the unaudited condensed financial statements. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed financial statements and accompanying notes. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the fair value measurement of digital assets, warrant liabilities (including the determination of the principal market for digital assets and the reference price used to measure warrant liabilities), stock-based compensation, income taxes and other contingencies.
These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of September 30, 2026 and December 31, 2025, the Company’s cash and cash equivalents were held at financial institutions in the United States.
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the unaudited condensed balance sheets (in thousands):
|
September 30, |
December 31, |
|||||||
|
2026 |
2025 |
|||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Restricted cash included in current assets |
||||||||
|
Restricted cash included in other assets |
||||||||
|
Total cash, cash equivalents, and restricted cash in the unaudited condensed statements of cash flows |
$ | $ | ||||||
The restricted cash amounts included in other current assets on the unaudited condensed balance sheets represent a certificate of deposit held as collateral for the Company’s credit card account.
Concentrations of Credit Risk and Major Partners
Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with financial institutions in the United States.
The Company maintains cash balances at multiple financial institutions. Certain of these accounts utilize deposit sweep programs designed to allocate funds across a network of participating banks in amounts intended to maximize FDIC insurance coverage. However, the Company also maintains significant cash balances at other financial institutions that do not utilize such programs, and, as a result, a portion of the Company’s cash balances exceeds the federally insured limit of $250,000. Any loss incurred or lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
The Company’s SKY tokens may be held through a combination of qualified third-party custody and self-custody using a third-party key management platform. As of September 30, 2026, substantially all of the Company’s SKY tokens were staked and, because staking requires on chain deployment that cannot be executed from a custodial account, were held in self-custody with a single key management infrastructure provider, representing approximately 96% of the Company’s total assets. A failure, security breach, or operational disruption affecting this provider could impair the Company’s ability to access or safeguard a substantial majority of its digital assets. See Note 5, “Digital Assets,” for additional information.
The Company holds a significant position in SKY tokens, which represented approximately
Fair Value of Financial Assets and Liabilities
The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts payable, accrued liabilities and warrant liabilities. The Company’s cash and cash equivalents, restricted cash, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.
The Company follows the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities;
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and
Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
See additional information in Note 3, “Fair Value Measurements.”
Digital Assets
The Company’s digital assets currently consist only of SKY tokens. The Company accounts for its digital assets in accordance with ASC 350-60, Intangibles—Goodwill and Other-Crypto Assets. Digital assets purchased are initially recorded at cost, including capitalized exchange trading fees. Digital assets received as staking rewards are initially recorded at the fair value of the tokens when earned. Digital assets are subsequently measured at fair value at each reporting date, with changes in fair value recognized in earnings. Fair value is determined using the quoted price of the digital asset in its principal market (Coinbase Exchange for SKY tokens) as of midnight UTC on the reporting date. The Company uses the specific identification method to determine the cost basis of digital assets for purposes of calculating gains and losses upon disposition.
Digital assets are classified as non-current assets on the Company’s unaudited condensed balance sheets, reflecting the Company’s intent and ability to hold and stake SKY tokens on a long-term basis as part of its ongoing participation in the Sky Protocol.
Impairment of Long-Lived Assets
The Company recorded $
The Company recorded $
Common Stock Warrants
The Company accounts for Common Stock purchase warrants issued in connection with its equity offerings in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging (“ASC 815”).
The Company classifies as equity any warrants that (i) require physical share settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement (physical share settlement or net-share settlement). The Company classifies as liabilities any warrants that (i) require net-cash settlement, (ii) give the counterparty a choice of net-cash settlement, physical settlement, or net-share settlement. In accordance with ASC 815, the Company also classifies as liabilities any warrants for which the shares underlying the contract are subject to stockholder approval before the warrant can be exercised. The Company also classifies as liabilities any warrants that are not considered indexed to the Company’s own stock, including warrants containing anti-dilution or similar adjustment provisions that do not qualify for the scope exception for standard down-round features.
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the unaudited condensed statements of operations. Warrants that contain nominal exercise prices are economically similar to common stock and do not require assumptions related to volatility, expected term, or other option-pricing inputs. Such warrants are measured based on intrinsic value, calculated as the excess of the Company’s Common Stock price over the exercise price, multiplied by the number of warrant shares outstanding. The fair values of other liability-classified warrants, if any, are determined using appropriate valuation techniques such as the Black-Scholes option pricing model. These values are subject to a significant degree of management’s judgment. See Note 10, “Common Stock Warrants and Warrant Liabilities.”
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized.
The U.S. federal income tax treatment of rewards from staking digital assets such as SKY remains uncertain and is currently the subject of debate and regulatory attention. Under current guidance by the Internal Revenue Service (“IRS”), staking rewards are generally treated as ordinary income upon receipt. If regulation or policy changes, or the interpretation or enforcement thereof, results in adverse tax treatment of rewards from staking SKY, we could be subject to increased audits by the IRS and additional tax liabilities.
Uncertain Tax Positions
The Company accounts for uncertainty in income taxes in accordance with ASC 740-10. The Company recognizes the financial statement effects of a tax position only when it is more likely than not, based on the technical merits of the position, that the position will be sustained upon examination by the relevant taxing authority. For tax positions meeting the more-likely-than-not threshold, the amount recognized is measured as the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement. The Company recognizes any interest and penalties related to uncertain tax positions as a component of income tax expense. Accrued interest and penalties are included in the related tax liability line in the unaudited condensed balance sheets.
Net Income (Loss) per Share
The Company computes net income or loss per share by presenting both basic and diluted loss per share (“EPS”) as shown in the unaudited condensed statements of operations.
Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Shares of Common Stock issuable upon exercise of the January 2026 Pre-Funded Warrants and the October 2025 Pre-Funded Warrants, which are exercisable for nominal consideration, are included in the weighted average number of common shares outstanding used to compute basic EPS beginning March 12, 2026, the date the Company obtained stockholder approval for the issuance of the underlying shares. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods if their effect would be anti-dilutive.
The following table provides a reconciliation of the numerator and denominator used for basic and diluted earnings (loss) per share (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Numerator for basic and diluted income (loss) per share: |
||||||||||||||||
|
Net income (loss) from continuing operations |
$ | $ | ( |
) | $ | $ | ( |
) | ||||||||
|
Net income from discontinued operations, net of taxes |
||||||||||||||||
|
Net income (loss) attributable to common stockholders |
$ | $ | ( |
) | $ | $ | ||||||||||
|
Denominator for income (loss) per share: |
||||||||||||||||
|
Weighted average shares outstanding – basic (diluted for net loss) |
||||||||||||||||
|
Effect of dilutive Pre-Funded Warrants |
||||||||||||||||
|
Effect of dilutive in-the-money warrants and RSUs |
||||||||||||||||
|
Weighted average shares outstanding – diluted for net income |
||||||||||||||||
The following outstanding preferred stock, stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive (in thousands):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Common Stock equivalent of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred Stock”) |
||||||||||||||||
|
Stock options and RSUs |
||||||||||||||||
|
Stock warrants |
||||||||||||||||
|
* |
After giving retroactive effect to the 1-for- |
Revenue Recognition
The Company’s revenue consists of rewards earned through participation in the Sky Protocol’s staking program. The Company has applied the principles underlying ASC 606, Revenue from Contracts with Customers (“ASC 606”) by analogy in determining the presentation, timing, and measurement of staking revenue by following the five steps: (i) identify the contract, (ii) identify the performance obligation, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligation and (v) determine when to recognize revenue. Revenue is recognized upon transfer of control of promised products or services (i.e., performance obligations) to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services.
Staking rewards are earned and recognized as revenue at the time the Sky Protocol’s staking smart contract allocates rewards to the Company’s staking position, and are measured at the fair value of the SKY tokens when earned. Rewards accrue and are allocated to the Company’s staking position by the protocol’s smart contract on a per-Ethereum-block basis (approximately every 12 seconds), based on the quantity of SKY tokens staked and the reward rate established through Sky Protocol governance. Fair value is determined using the quoted spot price on Coinbase Exchange, which the Company has determined to be the principal market for SKY tokens.
Recent Accounting Pronouncements
In December 2025, the FASB issued Accounting Standards Update (“ASU”) No. 2025-12, Codification Improvements (“ASU 2025-12”). ASU 2025-12 addresses 33 issues across a range of topics intended to clarify, correct, or improve GAAP. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted on an issue-by-issue basis. Aside from Issue 4 (which requires retrospective application), entities may elect to apply the amendments either prospectively or retrospectively to the beginning of the earliest period presented, on an issue-by-issue basis. The amendments to Topic 260, Earnings Per Share, regarding the calculation of diluted earnings per share when a loss from continuing operations exists are required to be applied retrospectively. The Company is currently evaluating the effect that the adoption of ASU 2025-12 will have on its unaudited condensed financial statements and related disclosures, including the potential effect on diluted earnings per share for prior periods presented.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the scope, form and content, and disclosure requirements applicable to interim financial statements prepared in accordance with GAAP, including by consolidating in Topic 270 a list of the interim disclosure requirements that are currently located throughout the Codification and adding a principle requiring disclosure of events and changes since the last annual reporting period that have a material effect on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities. Early adoption is permitted. The Company is currently evaluating the effect that the adoption of ASU 2025-11 will have on its unaudited condensed financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 is intended to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the statements of operations. ASU 2024-03 does not change the requirements for the presentation of expenses on the face of the statements of operations. Under ASU 2024-03, entities are required to disaggregate, in tabular format, expenses presented on the face of the statements of operations if they include any of the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect that the adoption of ASU 2024-03 will have on its unaudited condensed financial statements and related disclosures.
NOTE 3. FAIR VALUE MEASUREMENTS
The following tables present the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025 (in thousands):
|
Fair Value Measurements Using |
||||||||||||||||
|
Quoted |
||||||||||||||||
|
Prices in |
||||||||||||||||
|
Active |
||||||||||||||||
|
Markets |
Significant |
|||||||||||||||
| Balance at |
for |
Other |
Significant |
|||||||||||||
|
September |
Identical |
Observable |
Unobservable |
|||||||||||||
|
30, |
Items |
Inputs |
Inputs |
|||||||||||||
|
2026 |
(Level 1) |
(Level 2) |
(Level 3) |
|||||||||||||
|
Assets |
||||||||||||||||
|
Restricted cash held as a certificate of deposit |
$ | $ | $ | $ | ||||||||||||
|
SKY digital assets |
$ | $ | $ | $ | ||||||||||||
|
Fair Value Measurements Using |
||||||||||||||||
|
Quoted |
||||||||||||||||
|
Prices in |
||||||||||||||||
|
Active |
||||||||||||||||
|
Markets |
Significant |
|||||||||||||||
|
Balance at |
for |
Other |
Significant |
|||||||||||||
|
December |
Identical |
Observable |
Unobservable |
|||||||||||||
|
31, |
Items |
Inputs |
Inputs |
|||||||||||||
|
2025 |
(Level 1) |
(Level 2) |
(Level 3) |
|||||||||||||
|
Assets |
||||||||||||||||
|
Restricted cash held as a certificate of deposit |
$ | $ | $ | $ | ||||||||||||
|
Liabilities |
||||||||||||||||
|
Warrant liability |
$ | $ | $ | $ | ||||||||||||
The Company’s restricted cash held as a deposit is classified within Level 1 of the fair value hierarchy because it is valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
SKY digital assets are measured at fair value on a recurring basis using quoted prices in the Company’s principal market (Level 1 inputs) in accordance with ASC 820. The Company did not hold any digital assets as of December 31, 2025.
The Company determines its principal market as the market with the greatest volume and level of activity for SKY that is accessible to the Company. In making this determination, the Company considers factors including (i) its ability to legally and operationally transact in the market, (ii) observed trading volume and liquidity, (iii) pricing transparency and reliability, and (iv) the market in which the Company primarily executes its transactions.
Although certain global exchanges may report higher aggregate trading volumes, those markets are not considered accessible to the Company due to regulatory and operational constraints. Accordingly, the Company has concluded that Coinbase Exchange represents its principal market, as it exhibits the greatest volume and level of activity for SKY among markets accessible to the Company and provides observable, orderly pricing in USD-denominated markets.
The warrant liabilities as of December 31, 2025 were measured at fair value based on the intrinsic value of the warrants, determined using the quoted market price of the Company’s Common Stock at the measurement date. Because the warrants themselves were not actively traded and the valuation relied on observable market inputs other than quoted prices for identical instruments, the liabilities were classified within Level 2 of the fair value hierarchy.
Warrant Liabilities
Pre-funded warrants with a nominal exercise price are economically similar to common stock and are measured based on intrinsic value, calculated as the market price of the Company’s Common Stock less the nominal exercise price, multiplied by the number of warrant shares outstanding. 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 or September 30, 2025.
The fair value of the January 2026 Pre-Funded Warrants (as defined in Note 8, “Financing Activities”) 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).
See Note 10, “Common Stock Warrants and Warrant Liabilities” for additional information and the definitions related to the Company’s warrants.
NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2026 |
2025 |
|||||||
|
Prepaid insurance |
$ | $ | ||||||
|
Deferred financing costs |
||||||||
|
Restricted cash |
||||||||
|
Other |
||||||||
|
Total prepaid expenses and other current assets |
$ | $ | ||||||
NOTE 5. DIGITAL ASSETS
The Company holds SKY tokens, which it acquired in connection with the January 2026 Private Placement and through subsequent purchases on digital asset exchanges. The Company also receives additional SKY tokens through participation in the Sky Protocol’s staking program, as described below.
The following table summarizes the Company’s digital asset holdings as of September 30, 2026 (in thousands, except number of tokens):
|
Crypto Asset |
Number of Units / Tokens |
Cost Basis |
Fair Value |
Cumulative Unrealized Gain |
||||||||||||
|
SKY tokens |
$ | $ | $ | |||||||||||||
The Company did not hold any digital assets as of December 31, 2025.
As of September 30, 2026, the Company’s digital assets were not subject to any contractual sale restrictions.
The following table presents a roll forward of the Company’s digital asset holdings for the period ended September 30, 2026 (in thousands, except number of tokens):
|
Number of Tokens |
Fair Value |
|||||||
|
Balance at December 31, 2025 |
$ | |||||||
|
Additions: |
||||||||
|
Received in connection with the January 2026 Private Placement |
||||||||
|
Purchased on digital asset exchanges |
||||||||
|
Received as staking rewards |
||||||||
|
Dispositions |
||||||||
|
Net change in fair value |
N/A | |||||||
|
Balance at September 30, 2026 |
$ | |||||||
The Company recognized unrealized gain of $
The
In connection with the January 2026 Private Placement, the Company also received stablecoins (USDT and USDS) with an aggregate fair value of approximately $
Native Staking
The Company participates in the Sky Protocol’s staking program by locking SKY tokens directly into the protocol’s staking smart contract through wallets controlled by the Company. Unstaking is not subject to any fixed lockup, unbonding period, or exit queue: SKY may be staked and unstaked, and rewards claimed, at any time and in any amount, with no minimum. There is no lockup and, currently, no exit fee. The staking module includes a governance-settable exit fee parameter that is currently set to zero, and exit parameters are governance-adjustable.
As of September 30, 2026, the Company had staked
NOTE 6. ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
|
September 30, |
December 31, |
|||||||
|
2026 |
2025 |
|||||||
|
Professional Services |
$ | $ | ||||||
|
Employee payroll and benefits |
||||||||
|
Taxes |
||||||||
|
Interest on Unsecured Convertible Notes |
||||||||
|
Other |
||||||||
|
Total accrued liabilities |
$ | $ | ||||||
NOTE 7. COMMITMENTS AND CONTINGENCIES
Indemnification Agreements
In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, including its service providers, vendors, and counterparties. Additionally, the Company provided for certain indemnification obligations in connection with the Avenova Asset Divestiture and PhaseOne Divestiture (see Note 13, “Divestitures”). The potential future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company maintains liability insurance policies that limit its exposure. As a result, the Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2026 or December 31, 2025.
Legal Matters
From time to time, the Company is subject to various legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. The ultimate outcome of any litigation or other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against the Company in a reporting period for an amount above expectations, the Company’s financial condition and operating results for that period may be adversely affected.
The Company cannot provide assurance that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against it in the future, and these matters could relate to prior, current, or future transactions or events.
Leases
The Company previously leased office space for its corporate headquarters located in Emeryville, California. On June 30, 2026, the Company terminated the lease early, pursuant to a lease termination agreement, prior to the original lease expiration date. In connection with the early termination, the Company made a lease termination fee payment of approximately $
Lease costs for the three and nine months ended September 30, 2026 and 2025 were as follows (in thousands):
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
|
2026 |
2025 |
2026 |
2025 |
|||||||||||||
|
Operating lease – expense* |
$ |
$ | $ | $ | ||||||||||||
|
Operating lease – included in operating cash flow * |
||||||||||||||||
|
* |
|
The Company has measured its operating lease liabilities as the present value of minimum lease payments using its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate for operating leases from continuing operations are summarized as follows:
|
For the Period Ended |
||||||||
|
2026 |
2025 |
|||||||
|
Weighted-average remaining lease term (in years) |
— | |||||||
|
Weighted-average discount rate |
% |
% |
||||||
The Company had no future minimum lease payments under non-cancelable leases as of September 30, 2026, as its lease agreement was terminated on June 30, 2026.
NOTE 8. FINANCING ACTIVITIES
2026 ATM
On January 20, 2026, the Company entered into an ATM Sales Agreement (the “Sales Agreement”) with Virtu Americas LLC (“Virtu”), pursuant to which the Company may offer and sell shares of its Common Stock, having an aggregate offering price of up to $
During the three months ended September 30, 2026, the Company sold
January 2026 Private Placement
On January 16, 2026, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) underlying the January 2026 Private Placement with each of R01 Fund LP (“R01”), Framework Ventures IV L.P. (“Framework”), Tether Investments, S.A. de C.V. (“Tether”) and Sky Frontier Foundation (“SFF” and, together with R01, Framework and Tether, the “Purchasers”). Each of R01, Framework and Tether was, as of September 30, 2026, a significant holder of the Company’s securities. R01 Capital LLC is the general partner of R01 Fund LP. R01 Capital Manager LLC is the investment manager for R01 Capital LLC. Michael Kazley, the Company’s Chief Executive Officer and Chairman of the Board of Directors (the “Board”), is the managing member of R01 Capital Manager LLC. Pursuant to the January 2026 Private Placement, the Company issued and sold pre-funded warrants (the “January 2026 Pre-Funded Warrants”) to purchase an aggregate of
The amount paid at closing for each January 2026 Pre-Funded Warrant was $
October 2025 Pre-Funded Warrants
On October 16, 2025, the Company issued and sold pre-funded warrants (the “October 2025 Pre-Funded Warrants”) to R01 and Framework in two transactions for aggregate net proceeds of approximately $
The October 2025 Pre-Funded Warrants contain anti-dilution adjustment provisions that adjust the exercise price and the number of shares issuable upon exercise of the warrants upon the occurrence of specified dilutive issuances of securities by the Company. In October 2025, the conversion of the Company’s outstanding Series D Preferred Stock and Series E Preferred Stock into Common Stock triggered the anti-dilution adjustment provisions. As a result, (i) the exercise price of the October 2025 Pre-Funded Warrants was reduced to $
2025 Preferred Stock Purchase Agreement
On August 19, 2025, the Company entered into a securities purchase agreement (the “2025 Preferred Stock Purchase Agreement”) with David E. Lazar that provided for the Company to sell in a private placement (i) an aggregate of
Simultaneous to entering into the 2025 Preferred Stock Purchase Agreement on August 19, 2025, Mr. Lazar completed the purchase of the
On October 9, 2025, Mr. Lazar entered into a securities purchase agreement with R01 and Framework to transfer and assign to R01 and Framework all of Mr. Lazar’s right, title and interest in (i)
2025 Warrant Exchange and Issuance of Series F Preferred Stock
On August 19, 2025, simultaneous with the signing of the 2025 Preferred Stock Purchase Agreement, the Company entered into warrant exchange agreements (the “Series F Agreements”) with each of Anson Investments Master Fund LP, Hudson Bay Capital Management LP and Armistice Capital, LLC (collectively, the “Series F Holders”). The Series F Agreements provide for the irrevocable surrender and cancellation of all warrants beneficially owned by the Series F Holders, in exchange for the Company issuing (i) an aggregate of
Because the carrying value of the Common Stock warrants cancelled in conjunction with the Series F Agreements exceeded the total cash payment made and carry value of the Series F Preferred Stock issued, the Company recorded a deemed capital contribution of $
NOTE 9. CONVERTIBLE NOTES
In March 2024, the Company issued $
In December 2025, holders converted $
Interest expense recognized in connection with the Unsecured Convertible Notes, including amortization of issuance costs and debt discount, was $
NOTE 10. COMMON STOCK WARRANTS AND WARRANT LIABILITIES
The following table summarizes Common Stock warrant activity for the period ended September 30, 2026 and the number of warrants outstanding as of September 30, 2026. Weighted average exercise prices are presented per issuable share.
|
July 2020 Warrants |
TLF Warrants |
November 2021 Warrants |
September 2022 Warrants |
November 2022 A-1 Warrants |
December 2023 Warrants |
June 2024 Warrants |
July 2024 Series F-1 Warrants |
October 2025 Pre- Funded Warrants* |
January 2026 Pre- Funded Warrants |
Total Warrants |
||||||||||||||||||||||||||||||||||
|
December 31, 2025 |
||||||||||||||||||||||||||||||||||||||||||||
|
Pre-Funded Warrants granted |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
|
Warrants exercised |
( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||
|
Warrants expired |
( |
) | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||
| Warrants issued for 1-for- |
||||||||||||||||||||||||||||||||||||||||||||
|
September 30, 2026 |
||||||||||||||||||||||||||||||||||||||||||||
|
Weighted Average Price per share at September 30, 2026 |
expired |
expired |
$ | $ | $ |
fully exercised |
fully exercised |
$ |
fully exercised |
$ | $ | |||||||||||||||||||||||||||||||||
|
Expiration Date |
expired |
expired |
|
|
|
fully exercised |
fully exercised |
|
fully exercised |
Do not expire |
||||||||||||||||||||||||||||||||||
|
* |
|
There was
Total net proceeds from warrant exercises during the nine months ended September 30, 2026 and 2025 was $
January 2026 Pre-Funded Warrants
See Note 8, “Financing Activities,” for the issuance terms of the January 2026 Pre-Funded Warrants.
The January 2026 Pre-Funded Warrants were classified as a liability from the date of issuance because stockholder approval was required before they could be exercised, and were measured at intrinsic value at each reporting date based on 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 January 2026 Pre-Funded Warrants contain anti-dilution provisions that adjust the number of shares issuable upon exercise upon specified dilutive issuances at a price per share less than $
October 2025 Pre-Funded Warrants
See Note 8, “Financing Activities,” for the issuance terms of the October 2025 Pre-Funded Warrants.
The October 2025 Pre-Funded Warrants were classified as a liability from the date of issuance because stockholder approval was required before they could be exercised, and were measured at intrinsic value at each reporting date based on 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 October 2025 Pre-Funded Warrants contained anti-dilution provisions that, upon specified events including dilutive issuances and conversions of convertible securities, adjusted the exercise price and the number of shares issuable upon exercise.
On March 12, 2026, the Company obtained the requisite stockholder approval for the issuance of shares underlying the October 2025 Pre-Funded Warrants. Notwithstanding receipt of such approval, 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 the anti-dilution provisions described above.
On June 12, 2026, the Company agreed with R01, and on June 15, 2026, the Company agreed with Framework, in each case, to amend the October 2025 Pre-Funded Warrants to remove certain restrictions on exercisability. On June 15, 2026, following such amendments, each of R01 and Framework fully exercised their respective October 2025 Pre-Funded Warrants on a cashless basis, with each receiving
July 2024 Series F-1 Warrants and Series F-3 Warrants
In July 2024, in connection with the Company’s underwritten public offering completed on July 29, 2024, the Company issued Series F-1 Warrants and Series F-3 Warrants at an initial exercise price of $
In March 2025, the Company entered into three separate confidential settlement and release agreements (collectively, the “Settlement Agreements”) with each of Sabby Volatility Warrant Master Fund, Ltd. (“Sabby”), Bigger Capital Fund, LP (“Bigger”) and District 2 Capital Fund LP (“District 2,” and together with Sabby and Bigger, the “Warrant Holders”) to settle certain disputed matters relating to warrants held by the Warrant Holders, including the Series F-1 Warrants and the Series F-3 Warrants. In connection with the Settlement Agreements, Series F-1 Warrants exercisable for
All remaining unexercised Series F-3 Warrants expired on July 29, 2025.
November 2022 A-1 Warrants
In November 2022, the Company issued Common Stock purchase warrants exercisable for shares of Common Stock at an initial exercise price of $
Other Outstanding Warrants
As of September 30, 2026, the Company had outstanding Common Stock purchase warrants issued in prior periods that are classified as a component of permanent equity, including the November 2021 Warrants, the September 2022 Warrants, and the November 2022 A-1 Warrants, as outlined in the table above. There was no exercise, repurchase, or other activity related to these warrants during the period ended September 30, 2026. The July 2020 Warrants and the TLF Warrants, which had been outstanding at December 31, 2025, expired in accordance with their terms during the period ended September 30, 2026.
Summary of Common Stock Warrant Liabilities
The following roll forward presents the Company’s warrant liabilities measured at fair value during the period ended September 30, 2026 (in thousands)
|
Warrant liabilities as of December 31, 2025 |
$ | |||
|
Fair value of January 2026 Pre-Funded Warrants upon issuance |
||||
|
Decrease in fair value of warrant liabilities |
( |
) | ||
|
Reclassification of January 2026 Pre-Funded Warrant liabilities to equity during period |
( |
) | ||
|
Exercise of October 2025 Pre-Funded Warrants |
( |
) | ||
|
Warrant liabilities as of September 30, 2026 |
$ |
The October 2025 Pre-Funded Warrants and January 2026 Pre-Funded Warrants, which have a nominal exercise price, are 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. On March 12, 2026, the Company obtained stockholder approval for the issuance of shares underlying the October 2025 and January 2026 Pre-Funded Warrants. Upon receipt of such approval, the January 2026 Pre-Funded Warrants were reclassified to stockholders’ equity at fair value on that date. 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 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 the discussions of the individual warrant series above.
NOTE 11. STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized Share Capital
Under the Company’s Amended and Restated Certificate of Incorporation, as amended, the Company is authorized to issue up to
On September 2, 2026, the Company filed Certificates of Withdrawal with the Secretary of State of the State of Delaware effecting the elimination of the Certificates of Designation for the Company’s Series A convertible preferred stock, Series B non-voting convertible preferred stock, Series C non-voting convertible preferred stock, Series D non-voting convertible preferred stock, Series E non-voting convertible preferred stock, and Series F voting retractable preferred stock, none of which remained outstanding. As a result, all
Reverse Stock Split
On February 20, 2026, the Company effected the 1-for-
Series B Preferred Stock
As of December 31, 2025,
Series D Preferred Stock
On August 19, 2025, the Company issued
The Series D Preferred Stock was non-voting, except for certain protective provisions, and was entitled to dividends and liquidation rights on an as-converted-to-common basis. There were no redemption or repurchase rights that required cash settlement for the Series D Preferred Stock, and the Company was not obligated to redeem or repurchase any shares of the Series D Preferred Stock.
Series E Preferred Stock
On August 19, 2025, in connection with the 2025 Preferred Stock Purchase Agreement (see Note 8, “Financing Activities”), an investor committed to purchase
The rights and preferences of the Series E Preferred Stock is identical to those of the Series D Preferred Stock described above except that conversion is at the option of the holder rather than automatic.
Series F Preferred Stock
The Series F Voting Retractable Preferred Stock (“Series F Preferred Stock”) was redeemable in cash at the option of the holder following shareholder approval in October 2025 and was classified as mezzanine equity on the Company’s unaudited condensed balance sheet at its redemption value. After December 31, 2025, the Company had the ability to call the shares for redemption. During the three months ended March 31, 2026, the remaining
NOTE 12. STOCK-BASED COMPENSATION
Equity Compensation Plans
In January 2026, the Company adopted the 2026 Equity Incentive Plan (the “2026 Plan”), which was approved by stockholders on March 12, 2026. The 2026 Plan provides for the grant of equity awards, including stock options, restricted stock, performance awards, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and other share-based awards to employees, directors, consultants and advisors, as determined by the Compensation Committee of the Board (the “Committee”). Upon stockholder approval of the 2026 Plan, no further awards may be granted under the Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”) or its 2007 Omnibus Incentive Plan (the “2007 Plan”); however, awards previously granted under the 2017 Plan and 2007 Plan remain outstanding and continue to be governed by the terms of those plans until exercised, settled, forfeited or otherwise canceled in accordance with their terms.
Upon adoption, the 2026 Plan allowed for awards of up to
The 2007 Plan expired on March 15, 2017. Outstanding stock options granted under the 2007 Plan continue to be governed by its terms, expire no later than ten years from the date of grant, and were fully vested as of September 30, 2026.
The 2017 Plan was adopted in March 2017 and approved by stockholders on June 2, 2017. Following stockholder approval of the 2026 Plan on March 12, 2026, no new awards may be granted under the 2017 Plan. Outstanding awards under the 2017 Plan remain subject to its terms, including that the exercise price of non-qualified stock options, ISOs and SARs may not be less than
The Company issues new shares of Common Stock to satisfy exercises of options and settlement of RSUs under the 2007 Plan, the 2017 Plan and the 2026 Plan.
Restricted Stock Units
The following table summarizes information about the Company’s RSUs outstanding at December 31, 2025, and activity during the nine months ended September 30, 2026:
|
(in thousands, except per share data) |
Number of Shares |
Weighted- Average Grant Date Fair Value |
||||||
|
Outstanding at December 31, 2025 |
$ | |||||||
|
Granted |
||||||||
|
Forfeited/canceled |
||||||||
|
Outstanding at September 30, 2026 |
||||||||
Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.
For the three months ended September 30, 2026 and 2025, the Company recognized stock-based compensation expense of $
Equity Awards Granted Under the 2026 Equity Incentive Plan
On March 31, 2026, the Compensation Committee of the Board approved, and the Company communicated to the recipients, an aggregate of
The CEO PSUs are divided equally between two components. Fifty percent are eligible to vest based on the Company’s Common Stock achieving specified 10-trading-day volume-weighted average price (“VWAP”) thresholds of $
The grant-date fair value of the VWAP RSUs was determined using a Monte Carlo simulation. Significant assumptions, which represent Level 3 inputs within the fair value hierarchy, were as follows: expected volatility of
The NAV RSUs contain performance conditions. As of September 30, 2026, the Company concluded that achievement of the Digital Asset NAV thresholds was not probable and accordingly no compensation expense has been recognized in respect of the NAV RSUs. The Company will reassess probability at each reporting date, and if achievement becomes probable, will recognize a cumulative catch-up of compensation expense equal to the portion of the requisite service period elapsed.
Total unrecognized compensation cost related to unvested RSUs, excluding the NAV RSUs for which achievement of the performance conditions was not probable, was $
Stock-Based Awards to Non-Employees
The Company did not grant options or restricted stock to non-director non-employees during the three and nine months ended September 30, 2026 and 2025. The Company did not recognize stock-based compensation expense as it relates to non-employees for the three and nine months ended September 30, 2026 and 2025.
NOTE 13. DIVESTITURES
On January 17, 2025, the Company completed the sale of its eyecare products sold under the Avenova brand and related assets (the “Avenova Asset Divestiture”) to PRN Physician Recommended Nutriceuticals, LLC for a base purchase price of $
In accordance with ASC 205-20, the results of operations and cash flows of the Avenova Asset Divestiture and the PhaseOne Divestiture have been excluded from continuing operations and presented as discontinued operations for all periods presented.
The components of discontinued operations for the three months ended September 30, 2025 are summarized below (in thousands):
|
Results of operations |
||||||||||||||||
|
Avenova |
PhaseOne |
China NeutroPhase product line |
Total |
|||||||||||||
|
Net sales |
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold |
||||||||||||||||
|
Gross profit |
||||||||||||||||
|
Net income from discontinued operations before income taxes |
||||||||||||||||
|
(Benefit) Provision for income taxes |
( |
) | ( |
) | ( |
) | ||||||||||
|
Net income from discontinued operations, net of taxes |
$ | $ | $ | $ | ||||||||||||
The components of discontinued operations for the nine months ended September 30, 2025 are summarized below (in thousands):
Results of operations
|
Avenova |
PhaseOne |
China NeutroPhase product line |
Total |
|||||||||||||
|
Net sales |
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold |
||||||||||||||||
|
Gross profit |
||||||||||||||||
|
Operating expenses |
||||||||||||||||
|
Sales and marketing |
||||||||||||||||
|
Research and development |
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|
Total operating expenses |
||||||||||||||||
|
Operating income |
||||||||||||||||
|
Gain on divestiture |
||||||||||||||||
|
Net income from discontinued operations before income taxes |
||||||||||||||||
|
Provision for income taxes |
||||||||||||||||
|
Net income from discontinued operations, net of taxes |
$ | $ | $ | $ | ||||||||||||
Cash flows from discontinued operations
|
Avenova |
PhaseOne |
China NeutroPhase product line |
Total |
|||||||||||||
|
Operating activities: |
||||||||||||||||
|
Net income from discontinued operations |
$ | $ | $ | $ | ||||||||||||
|
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||||||||||
|
Non-cash gain on divestiture |
( |
) | ( |
) | ( |
) | ||||||||||
|
Changes in operating assets and liabilities: |
||||||||||||||||
|
Accounts receivable |
( |
) | ( |
) | ( |
) | ||||||||||
|
Inventory |
||||||||||||||||
|
Prepaid expenses and other current assets |
||||||||||||||||
|
Other assets |
||||||||||||||||
|
Accounts payable and accrued liabilities |
( |
) | ( |
) | ( |
) | ||||||||||
|
Net cash (used in) provided by operating activities, discontinued operations |
( |
) | ( |
) | ( |
) | ||||||||||
|
Investing activities: |
||||||||||||||||
|
Proceeds from divestiture |
||||||||||||||||
|
Net cash provided by investing activities, discontinued operations |
||||||||||||||||
|
Net increase (decrease) in cash and cash equivalents, discontinued operations |
$ | $ | $ | ( |
) | $ | ||||||||||
NOTE 14. INCOME TAXES
The Company recorded income tax expense of $
In accordance with ASC 740-270-30-18, the Company has determined that it is unable to make a reliable estimate of its annual effective tax rate for the year ending December 31, 2026. Small variations in forecasted pre-tax book income produce significant variability in the estimated annual effective tax rate due to the magnitude of non-cash items, including the remeasurement of liability-classified warrants and the recognition of unrealized gains and losses on digital assets measured at fair value. As a result, the Company has computed its income tax provision for the period ended September 30, 2026 using the actual effective tax rate for the year-to-date period, which the Company believes represents the best estimate of the annual effective tax rate.
The Company evaluates the realizability of its deferred tax assets each reporting period based on all available positive and negative evidence, including cumulative results in recent years and the character and timing of reversals of existing taxable temporary differences. As of March 31, 2026, taxable temporary differences related to unrealized gains on the Company’s digital assets provided sufficient positive evidence that it was more likely than not that the Company’s deferred tax assets would be realized, and the Company recorded a net deferred tax liability. During the three months ended June 30, 2026, a decline in the value of the Company’s digital assets reversed the unrealized gain to an unrealized loss, resulting in a net deferred tax asset against which the Company recorded a full valuation allowance. During the three months ended September 30, 2026, the increase in the value of the Company’s digital assets reversed the unrealized loss to an unrealized gain, and the resulting taxable temporary difference again represents a source of future taxable income sufficient to support the realization of the Company’s deferred tax assets, which include net operating loss carryforwards remaining after the limitation under Section 382 of the Internal Revenue Code and other deductible temporary differences. Accordingly, as of September 30, 2026, the Company’s deferred tax assets are offset against its deferred tax liabilities and a net deferred tax liability of $
NOTE 15. RELATED PARTY TRANSACTIONS
January 2026 Private Placement
In connection with the January 2026 Private Placement, each Purchaser was granted, for a period of
As a result of the rights granted in connection with the January 2026 Private Placement, the Company has concluded that, in addition to R01 and Framework, SFF and Tether are also related parties of the Company within the meaning of ASC 850.
Sky Frontier Foundation
SFF is an independent foundation organized to support the development of the Sky Protocol ecosystem. SFF participates in Sky Protocol governance and holds SKY tokens separate from its investment in the Company. Because the Company holds SKY tokens and participates in Sky Protocol governance, transactions and governance decisions affecting the Sky Protocol may involve both the Company and SFF, which could be deemed to create potential conflicts of interest. Other than the January 2026 Private Placement and the rights granted in connection therewith as described above, and ordinary-course director compensation paid to Mr. Garcia Rios under the Company’s 2026 Non-Employee Director Compensation Program, no transactions between the Company and SFF have occurred as of September 30, 2026.
June 2026 Pre-Funded Warrant Amendments
On June 12, 2026, the Company agreed with R01, and on June 15, 2026, the Company agreed with Framework, in each case, to amend such holder’s October 2025 Pre-Funded Warrants to remove the beneficial ownership limitation and the delayed initial exercise date provision that had previously restricted the holder’s ability to exercise. Following such amendments, on June 15, 2026, each of R01 and Framework fully exercised their respective October 2025 Pre-Funded Warrants on a cashless basis, receiving an aggregate of
Consulting Agreement
R01 has provided certain consulting services to the Company through one of its employees. During the three months ended March 31, 2026, the Company engaged this individual directly to provide consulting services related to general corporate matters and digital asset treasury operations. The consulting agreement provides for a monthly fee of $
NOTE 16. SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through October 29, 2026, the filing date of this Form 10-Q with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the unaudited condensed financial statements as of September 30, 2026, and events which occurred subsequently but were not recognized in the unaudited condensed financial statements.
At-the-Market Offering Program
Subsequent to September 30, 2026 and through October 26, 2026, the Company sold an aggregate of
Exercise of January 2026 Pre-Funded Warrant
On October 13, 2026, Tether exercised a portion of its January 2026 Pre-Funded Warrant on a cashless basis pursuant to Section 2(c) thereof with respect to
CEO Performance-Based Restricted Stock Units
The performance period for the VWAP RSUs described in Note 12, "Stock-Based Compensation," commenced on October 16, 2026. On October 16, 2026, the Common Stock attained a ten-trading-day VWAP (as defined in the award agreement) of at least $
Decline in Market Price of SKY
Subsequent to September 30, 2026, the market price of SKY declined. The price of SKY in the Company’s principal market, Coinbase Exchange, was $0.06761 per token as of midnight UTC on October 26, 2026, compared to $0.07764 per token as of September 30, 2026, a decrease of approximately 13%.
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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)
|
Three Months Ended September 30, |
Dollar |
Percent |
||||||||||||||
|
2026 |
2025 |
Change |
Change |
|||||||||||||
|
Statement of Operations |
||||||||||||||||
|
Staking revenue |
$ | 2,140 | $ | — | $ | 2,140 | — | |||||||||
|
Unrealized gain on digital assets |
58,828 | — | 58,828 | — | ||||||||||||
|
Operating expenses |
||||||||||||||||
|
General and administrative expenses |
5,007 | 1,211 | 3,796 | 313 | % | |||||||||||
|
Impairment of long-lived assets |
— | 87 | (87 | ) | (100 | %) | ||||||||||
|
Total operating expenses |
5,007 | 1,298 | 3,709 | 286 | % | |||||||||||
|
Operating income (loss) |
55,961 | (1,298 | ) | 57,259 | (4,411 | %) | ||||||||||
|
Other expense, net |
— | (77 | ) | 77 | (100 | %) | ||||||||||
|
Total non-operating income (expense), net |
— | (77 | ) | 77 | (100 | %) | ||||||||||
|
Net income (loss) from continuing operations before tax |
55,961 | (1,375 | ) | 57,336 | (4,170 | %) | ||||||||||
|
Income tax expense |
5,598 | — | 5,598 | — | ||||||||||||
|
Net income (loss) from continuing operations |
50,363 | (1,375 | ) | 51,738 | (3,763 | %) | ||||||||||
|
Net income from discontinued operations, net of taxes |
— | 82 | (82 | ) | (100 | %) | ||||||||||
|
Net income (loss) |
$ | 50,363 | $ | (1,293 | ) | $ | 51,656 | (3,995 | %) | |||||||
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)
|
Nine Months Ended September 30, |
Dollar |
Percent |
||||||||||||||
|
2026 |
2025 |
Change |
Change |
|||||||||||||
|
Statement of Operations |
||||||||||||||||
|
Staking revenue |
$ | 6,809 | $ | — | $ | 6,809 | — | |||||||||
|
Unrealized gain on digital assets |
30,869 | — | 30,869 | — | ||||||||||||
|
Operating expenses |
||||||||||||||||
|
General and administrative expenses |
13,272 | 5,803 | 7,469 | 129 | % | |||||||||||
|
Impairment of long-lived assets |
— | 676 | (676 | ) | (100 | %) | ||||||||||
|
Total operating expenses |
13,272 | 6,479 | 6,793 | 105 | % | |||||||||||
|
Operating income (loss) |
24,406 | (6,479 | ) | 30,885 | (477 | %) | ||||||||||
|
Non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance |
(5,302,617 | ) | — | (5,302,617 | ) | — | ||||||||||
|
Non-cash gain on changes in fair value of warrant liabilities |
5,846,899 | — | 5,846,899 | — | ||||||||||||
|
Other expense, net |
(1,422 | ) | (190 | ) | (1,232 | ) | 648 | % | ||||||||
|
Total non-operating income (expense), net |
542,860 | (190 | ) | 543,050 | (285,816 | %) | ||||||||||
|
Net income (loss) from continuing operations before tax |
567,266 | (6,669 | ) | 573,935 | (8,606 | %) | ||||||||||
|
Income tax expense |
5,570 | — | 5,570 | — | ||||||||||||
|
Net income (loss) from continuing operations |
561,696 | (6,669 | ) | 568,365 | (8,522 | %) | ||||||||||
|
Net income from discontinued operations, net of taxes |
— | 11,124 | (11,124 | ) | (100 | %) | ||||||||||
|
Net income (loss) |
$ | 561,696 | $ | 4,455 | $ | 557,241 | 12,508 | % | ||||||||
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.
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ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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.
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ITEM 4. |
CONTROLS AND PROCEDURES |
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.
PART II. OTHER INFORMATION
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ITEM 1. |
LEGAL PROCEEDINGS |
From time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business. As of September 30, 2026, there were no matters that, in the opinion of management, would ultimately result in liability that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
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ITEM 1A. |
RISK FACTORS |
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.
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ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
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ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
None.
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ITEM 4. |
MINE SAFETY DISCLOSURES |
Not applicable.
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ITEM 5. |
OTHER INFORMATION |
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(a) |
None. |
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(b) |
During the three months ended September 30, 2026, there have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. |
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(c) |
During the three months ended September 30, 2026, none of our directors or Section 16 officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each such term is defined in Item 408 of Regulation S-K. |
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ITEM 6. |
EXHIBITS |
The following exhibits are filed with or incorporated by reference into this report.
EXHIBIT INDEX
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Incorporation by Reference |
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|
Exhibit Number |
Exhibit Description |
Form |
File Number |
Exhibit Reference |
Filing Date |
Filed Herewith |
|
3.1 |
Second Amended and Restated Certificate of Incorporation of Stablecoin Development Corporation |
8-K |
001-33678 |
3.1 |
3/12/2026 |
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3.2 |
Amendment to the Second Amended and Restated Certificate of Incorporation, dated March 31, 2026 |
8-K |
001-33678 |
3.1 |
4/1/2026 |
|
|
3.3 |
Bylaws, as amended and restated effective April 2, 2026 |
8-K |
001-33678 |
3.2 |
4/1/2026 |
|
|
3.4 |
Certificate of Withdrawal of Certificate of Designation of Series A Convertible Preferred Stock |
8-K |
001-33678 |
3.1 |
9/8/2026 |
|
|
3.5 |
Certificate of Withdrawal of Certificate of Designation of Series B Non-Voting Convertible Preferred Stock |
8-K |
001-33678 |
3.2 |
9/8/2026 |
|
|
3.6 |
Certificate of Withdrawal of Certificate of Designation of Series C Non-Voting Convertible Preferred Stock |
8-K |
001-33678 |
3.3 |
9/8/2026 |
|
|
3.7 |
Certificate of Withdrawal of Certificate of Designation of Series D Non-Voting Convertible Preferred Stock |
8-K |
001-33678 |
3.4 |
9/8/2026 |
|
|
3.8 |
Certificate of Withdrawal of Certificate of Designation of Series E Non-Voting Convertible Preferred Stock |
8-K |
001-33678 |
3.5 |
9/8/2026 |
|
|
3.9 |
Certificate of Withdrawal of Certificate of Designation of Series F Voting Retractable Preferred Stock |
8-K |
001-33678 |
3.6 |
9/8/2026 |
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|
4.1 |
Form of Amended November 2021 Warrant |
8-K |
001-33678 |
4.2 |
9/13/2022 |
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4.2 |
Form of September 2022 Warrant (2020 participants) |
8-K |
001-33678 |
4.3 |
9/13/2022 |
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4.3 |
Form of September 2022 Warrant (2021 participants) |
8-K |
001-33678 |
4.4 |
9/13/2022 |
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|
4.4 |
Form of Series A-1 Long-Term Warrant |
8-K |
001-33678 |
4.5 |
9/13/2022 |
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|
4.5 |
Form of Series F-1 Common Stock Warrant |
8-K |
001-33678 |
4.1 |
7/29/2024 |
|
|
4.6 |
Form of Pre-Funded Warrant |
8-K |
001-33678 |
4.1 |
1/16/2026 |
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|
10.1+ |
Amended and Restated Employment Agreement, dated July 16, 2026, by and between Stablecoin Development Corporation and Henry Blynn |
8-K |
001-33678 |
10.2 |
7/17/2026 |
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10.2+ |
Form of Restricted Stock Unit Agreement (Time-Based) |
8-K |
001-33678 |
10.3 |
4/1/2026 |
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|
10.3 |
Form of Indemnification Agreement |
8-K |
001-33678 |
10.1 |
9/8/2026 |
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10.4* |
Master Service Agreement, dated January 6, 2026, between the Company and Fireblocks, Inc., together with the Order Form thereunder |
S-3/A |
333-298229 |
10.3 |
9/16/2026 |
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10.5* |
Prime Broker Agreement, dated February 4, 2026, among Payward Interactive, Inc., Payward Financial, Inc. (doing business as Kraken Financial), Staked Cayman and the Company, pursuant to which Payward Financial, Inc. provides custody services |
S-3/A |
333-298229 |
10.4 |
9/16/2026 |
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|
10.6+ |
2026 Non-Employee Director Compensation Program |
X |
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31.1 |
Certification of the Principal Executive Officer of Stablecoin Development Corporation, as required by Rule 13a-14(a) or Rule 15d-14(a) |
X |
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31.2 |
Certification of the Principal Financial Officer of Stablecoin Development Corporation, as required by Rule 13a-14(a) or Rule 15d-14(a) |
X |
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32.1 |
Certification by the Chief Executive Officer of Stablecoin Development Corporation, as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) |
X |
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32.2 |
Certification by the Chief Financial Officer of Stablecoin Development Corporation, as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) |
X |
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101.INS |
Inline XBRL Instance Document |
X |
||||
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
X |
||||
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101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
X |
||||
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101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase |
X |
||||
|
101.LAB |
Inline XBRL Taxonomy Extension Labels Linkbase Document |
X |
||||
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
X |
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|
104 |
The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments) |
X |
|
+ |
Indicates a management contract or compensatory plan or arrangement. |
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* |
Certain schedule and exhibits were omitted as well as confidential portions of this exhibit by means of marking such portions with brackets because the confidential portions (i) are not material and the type of information that is typically treated as private or confidential and/or (ii) would be competitively harmful if publicly disclosed. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| STABLECOIN DEVELOPMENT CORPORATION | ||
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Date: October 29, 2026 |
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By: |
/s/ Michael Kazley |
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Michael Kazley Chief Executive Officer, Chairman (principal executive officer) |
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Date: October 29, 2026 |
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By: |
/s/ Tommy Law |
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Tommy Law Chief Financial Officer (principal financial officer and principal accounting officer) |
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