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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

☐	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 001-33678

NOVABAY PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	68-0454536
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2000 Powell Street, Suite 1150, Emeryville, California 94608

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (510) 899-8800

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	NBY	NYSE American

Securities Registered Pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

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. Yes ☒ No ☐

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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). Yes ☒ No ☐

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. (Check one):

Large accelerated filer	☐	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☒	Smaller reporting company	☒

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. ☐

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting common stock held by non-affiliates of the registrant, computed by reference to the last sale price of the common stock on June 2830, ~~2024~~2025 on the NYSE American, was approximately $23,~~979~~373,~~107~~126. This figure excludes an aggregate of ~~469~~1,123 shares of common stock held by the registrant’s affiliates, including officers and directors, as of June 2830, ~~2024~~2025. Exclusion of shares held by any of these affiliates should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant. The registrant has no non-voting common stock.

As of March 2516, ~~2025~~2026, there were 526,~~816~~625,~~204~~ 029 shares of the registrant’s common stock outstanding.

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NOVABAY PHARMACEUTICALS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2024~~2025

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	1311
ITEM 1B.	UNRESOLVED STAFF COMMENTS	2231
ITEM 1C.	CYBERSECURITY	2231
ITEM 2.	PROPERTIES	2332
ITEM 3.	LEGAL PROCEEDINGS	2332
ITEM 4.	MINE SAFETY DISCLOSURES	2332
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	2433
ITEM 6.	[RESERVED]	2433
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2534
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3239
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	3340
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	8480
ITEM 9A.	CONTROLS AND PROCEDURES	8480
ITEM 9B.	OTHER INFORMATION	8480
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	8480
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	8581
ITEM 11.	EXECUTIVE COMPENSATION	8883
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	9389
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	9491
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	9592
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	9693

Unless the context requires otherwise, all references in this annual report to “we,” “our,” “us,” the “Company” and “NovaBay” refer to NovaBay Pharmaceuticals, Inc., a Delaware corporation, and, where applicable, also its former wholly-owned subsidiary, DERMAdoctor, LLC, a Missouri limited liability company (“DERMAdoctor”).

The Company previously owned live trademark registrations in the U.S., as well as trademark registrations and pending applications in many other countries internationally. We sold our primary trademark, “Avenova®”, to PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company, effective on January 17, 2025. We sold our “PhaseOne®” and “NeutroPhase®” U.S. trademarks to Phase One Health LLC, a Tennessee limited liability company, effective on January 8, 2025. The “DERMAdoctor®”, trademark is held directly by our former wholly-owned subsidiary DERMAdoctor.

OnSubsequent ~~May~~to 30December 31, ~~2024~~2025, on February 20, 2026, we effected a 1-for-355 reverse stock split of our common stock (the “Reverse Stock Split”). Except as otherwise specifically noted, all share numbers, share prices, exercise/conversion prices and per share amounts in this annual report have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our management's current expectations, assumptions, estimates, projections and beliefs and on information currently available to our management. Forward-looking statements are predictions based on expectations and projections about future events, are not statements of historical fact, and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different and adverse from any future results, performances or achievements expressed or implied by the forward-looking statements. These forward-looking statements and related risks, uncertainties, factors and assumptions include, but are not limited to statements regarding: our business plan and strategy after completing the Avenova Asset ~~Sale~~Divestiture (as defined below) and ~~Wound~~PhaseOne ~~Care~~ Divestiture (as defined below), ~~including maximizing stockholder value by completing the Dissolution (as defined below) or~~ pursuing other strategic alternatives, our anticipated expenses and capital requirements, the expected timing of, our ability to complete, and impact of the ~~Dissolution or~~ other strategic alternatives, the amount of distributions to stockholders (if any) in connection with effecting the Dissolution, and any impact as a result of failing to complete the Dissolution and/or other strategic alternatives. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “potential,” “predicts,” “projects,” “should,” “targets,” “will,” “would” and similar expressions intended to identify forward-looking statements. No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. We discuss many of these risks in greater detail under the heading “Risk Factors” in Item 1A of this annual report, and in cautionary language contained elsewhere in this annual report. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements in this annual report. You should read this annual report and the documents that we reference and have filed as exhibits thoroughly and with the understanding that forward-looking statements represent our management’s beliefs, expectations and assumptions only as of the date of this annual report and our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly after the date of this annual report.

PART I

ITEM 1.

BUSINESS

Overview

We have undergone significant changes to our business and operations as a result of a series of completed transactions summarized below and discussed in further detail under the next section titled “Recent Developments ~~and Stock Exchange Listing~~” below. WeAs ~~are~~a ~~also~~result ~~pursuing~~of athese ~~new direction~~transactions, ~~which~~we ~~will~~ have asignificantly ~~significant~~reduced ~~impact~~our onlegacy uspharmaceutical inbusiness ~~the~~operations ~~future, which is also discussed below~~ and ~~elsewhere~~have inadopted ~~this annual report. Accordingly, this annual report includes~~ a ~~significant amount of~~ new ~~information~~strategic ~~about~~direction ~~us,~~as ~~our~~a ~~changed~~ business ~~and limited operations~~, ~~our~~shifting ~~intended~~to ~~strategic~~a ~~direction~~capital ~~and~~allocation ~~prospects,~~strategy ~~which~~that ~~will~~focuses beon ~~important~~acquiring todigital ~~read~~assets ~~carefully~~that ~~and~~provide ~~understand,~~exposure asto ~~such~~economic ~~new~~participation ~~information~~within ~~will~~open ~~impact~~digital usfinancial ~~in the near term and in the future~~networks.

AsWe awere ~~result of completing each of the transactions discussed below, we have significantly reduced our business operations and currently have limited sources of future revenue generation. Our Company was~~ historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products. ~~Our~~In ~~eyecare products sold under~~ the ~~Avenova~~past ~~brand and related assets (the “Avenova Assets”) were our leading products formulated with our proprietary~~year, stable and pure form of hypochlorous acid and were cleared by the Food and Drug Administration (the “FDA”) for sale in the United States. As described in additional detail below, subsequent to December 31, 2024, on January 17, 2025, we completed ~~the sale of the Avenova Assets to PRN Physician Recommended Nutriceuticals, LLC,~~ a ~~Delaware~~comprehensive ~~limited~~realignment ~~liability company (“PRN”), which constituted the sale~~ of ~~substantially all of~~ our ~~revenue~~business. ~~generating~~We ~~and~~have ~~operating~~adopted ~~assets~~a ~~(the~~capital ~~“Avenova~~allocation ~~Asset~~strategy ~~Sale”).~~focused ~~See~~on ~~additional~~acquiring ~~discussion~~digital ~~under~~assets ~~the~~that ~~section~~provide ~~“Recent~~exposure ~~Developments~~to ~~and~~economic ~~Stock~~participation ~~Exchange~~within ~~Listing”~~open ~~and~~digital ~~subheading~~financial ~~“Avenova Asset Sale” below~~networks.

On January 16, 2026, we completed a private placement of pre-funded warrants to purchase an aggregate of 167,539,227 shares of common stock of the Company, par value $0.01 per share (the “Common Stock”) in exchange for $25 million of cash and an aggregate of approximately $112.4 million in SKY tokens and stablecoins (the “Private Placement”). The proceeds from the Private Placement and any future cash raise will be used to support a multi-year capital allocation strategy focused on acquiring and holding a portfolio of select digital assets that exhibit revenue-generating characteristics, consistent with our operating and risk framework, with SKY token (“SKY”), protocol token of the decentralized Sky network, being the only currently approved asset.

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 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 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 established by our Digital Asset Strategy Advisory Committee, the availability of suitable commercial opportunities, and regulatory, legal and tax considerations.

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WeInitial ~~have~~Digital ~~also~~Asset ~~historically~~Holdings ~~manufactured~~- and sold a proprietary form of hypochlorous acid for the wound care market primarily under the NeutroPhase and PhaseOne brands. Our wound care products are used for cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. Subsequent to December 31, 2024, on January 8, 2025, we completed the sale of our wound care product trademarks, NeutroPhase, PhaseOne and OmniPhase (collectively, the “Wound Care Trademarks”) and the sale of our wound care inventory to Phase One Health LLC, a Tennessee limited liability company (“Phase One”) (collectively, the “Wound Care Divestiture”). Following the Wound Care Divestiture, our wound care business has been significantly reduced although we are continuing to manufacture our wound care products under remaining contractual obligations to our distribution partner in China. We anticipate fulfilling these obligations by the end of the second quarter of 2025. See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Wound Care Divestiture” below.SKY

~~Through~~Our ~~our~~Digital ~~former~~Asset ~~subsidiary,~~Strategy ~~DERMAdoctor~~Advisory Committee has set a primary strategic objective to use all available cash to strategically acquire SKY. As of the closing of the Private Placement, we ~~previously~~held ~~offered~~an ~~over~~aggregate 30of ~~dermatologist-developed~~approximately ~~products~~943.6 ~~targeting~~million ~~common~~SKY. ~~skin~~SKY ~~concerns~~can be acquired, ~~ranging~~transferred, ~~from~~and ~~aging~~held through digital wallets that rely on public/private key pairs, and ~~blemishes~~it may be exchanged on trading venues that support SKY pairs against fiat currencies or other digital assets. The Sky network (also referred to ~~dry~~herein ~~skin,~~as ~~perspiration~~the ~~and~~“Sky ~~keratosis~~Protocol”) ~~pilaris~~is a decentralized protocol developed around the USDS stablecoin that is managed by Sky ecosystem governance. OnIt ~~March~~is 25a non-custodial, ~~2024~~blockchain-based software protocol consisting of open-source, weself-executing, ~~announced~~autonomous smart contracts that are currently deployed on the ~~closing~~Ethereum ofblockchain. There are two tokens that are native to the ~~sale~~Sky ofProtocol. ~~DERMAdoctor~~The (first is the ~~“DERMAdoctor~~USDS ~~Divestiture”)~~stablecoin, which is a collateral-backed token designed to maintain a soft-peg to the US dollar. The second is the SKY token, which is the protocol token of the decentralized Sky ecosystem.

~~With~~SKY ~~the~~is ~~Company having completed~~ the ~~sale~~initial ofand ~~substantially~~sole ~~all~~digital ofasset ~~its~~approved ~~assets~~by in the ~~Avenova~~Digital Asset ~~Sale~~Strategy ~~and~~Advisory ~~the~~Committee ~~other~~as ~~transactions,~~of the ~~Company’s~~date ~~board~~ of ~~directors~~this ~~(the~~filing; ~~“Board”)~~however, ~~evaluated~~ the ~~different strategic options available to the~~ Company.’s ~~After~~strategy ~~consideration~~contemplates ofevaluating ~~various~~additional ~~factors,~~digital ~~including the significantly reduced remaining business,~~ assets, ~~revenue~~over ~~and~~time ~~operating~~that ~~expenses~~meet ~~following~~similar ~~the~~economic ~~completion of the Avenova Asset Sale~~ and ~~the~~risk ~~Wound~~criteria. ~~Care~~Changes ~~Divestiture, the absence of other more favorable strategic options currently available~~ to ~~us, as well as~~ the ~~greater~~investment ~~likelihood~~strategy ~~of receiving stockholder approval at a newly called special meeting of the stockholders, the Board determined that the best opportunity available~~ to ~~maximize~~acquire ~~the~~new ~~remaining~~assets ~~value~~or ~~for our Company and~~ to ~~our stockholders is to wind-up the Company’s affairs and~~ pursue aother ~~voluntary~~growth ~~liquidation~~strategies ~~and~~will ~~dissolution~~require ~~under Delaware law (~~the ~~“Dissolution”)~~completion ~~pursuant to a Plan~~ of ~~Complete Liquidation and Dissolution (~~the ~~“Plan~~following ofprocess. ~~Dissolution”)~~Our ~~that~~Digital ~~may~~Asset ~~result~~Strategy inAdvisory ~~distributions~~Committee, toconsisting ~~our stockholders~~ of ~~our~~Michael ~~remaining~~Kazley ~~asset~~and ~~value~~at ifleast ~~any~~one ~~remains.~~other ~~Accordingly~~advisor, ~~the~~must ~~Board~~first ~~unanimously determined that it is in the best interest of the company and its stockholders to~~ approve and ~~authorize~~ the ~~necessary~~investors ~~action~~in ~~to obtain stockholder approval for~~ the ~~Dissolution~~Private ~~pursuant~~Placement tomust ~~the~~consent ~~Plan of Dissolution, with the Board retaining discretion~~ to ~~continue~~such ~~evaluating and determining if and when the Dissolution should be effected~~change. ~~Concurrently~~The ~~with~~Digital ~~the~~Asset ~~Company~~Strategy ~~pursuing~~Advisory ~~the~~Committee ~~Dissolution,~~will ~~the~~then ~~Company~~recommend ~~is also evaluating other strategic alternatives that may be available~~ to ~~us to~~ the ~~extent~~Board ~~the~~of ~~Dissolution~~Directors ~~does not proceed. See additional discussion under~~ the ~~section~~change ~~“Recent~~in ~~Developments~~strategy ~~and~~for ~~Stock~~its ~~Exchange Listing” and subheading “Company Dissolution and Other Strategic Alternatives” and “Engagement of Financial Advisor – Lucid” below~~approval.

The ~~Company~~price ~~was incorporated under the laws~~ of ~~the~~SKY ~~State~~is ofdetermined ~~California~~in onnetwork-based ~~January~~markets ~~19,~~by ~~2000,~~supply asand ~~NovaCal~~demand ~~Pharmaceuticals,~~among ~~Inc.~~market ~~It had no operations until July 1~~participants, ~~2002,~~including ~~on which date it acquired all of the operating assets of NovaCal Pharmaceuticals~~individuals, ~~LLC~~institutions, amarket ~~California limited liability company. In February 2007~~makers, ~~the~~and ~~Company~~custodial ~~changed~~service ~~its name from NovaCal Pharmaceuticals, Inc~~providers. ~~to NovaBay Pharmaceuticals~~Liquidity, ~~Inc. In June 2010~~spreads, ~~the~~and ~~Company~~volumes ~~changed~~vary ~~the~~by ~~state~~venue ~~in which it was incorporated (the “Reincorporation”)~~ and ~~is now incorporated under the laws of the State of Delaware~~geography. ~~All~~Prices ~~references~~may tobe ~~“the~~volatile ~~Company”~~due ~~herein refer~~ to ~~the~~factors ~~California~~including ~~corporation~~protocol ~~prior~~changes, tomarket ~~the~~sentiment, ~~date~~macroeconomic ofconditions, ~~the~~third-party ~~Reincorporation~~platform ~~and~~events, ~~to the Delaware corporation on~~ and ~~after~~broader ~~the~~digital ~~date~~asset ofmarket ~~the Reincorporation~~dynamics.

~~Recent~~Unlike ~~Developments~~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 ~~Stock~~other ~~Exchange~~on-chain ~~Listing~~financial services. Protocol surplus may be allocated to SKY holders through mechanisms such as staking distributions and systematic token buybacks, subject to governance-approved parameters and network conditions.

~~Avenova~~Industry ~~Asset~~Participants ~~Sale~~and Ecosystem

~~Subsequent~~The toSKY ~~December~~ecosystem ~~31,~~includes ~~2024~~open-source developers, onnode ~~January~~operators, 17wallet providers, ~~2025~~custodians, wetrading ~~completed~~venues, ~~the~~market ~~sale~~makers, ofdata ~~the~~and ~~Avenova~~analytics ~~Assets~~providers, topayment ~~PRN~~facilitators, ~~which~~and ~~constituted~~software ~~substantially~~and ~~all~~hardware ofvendors. ~~our~~The ~~revenue~~breadth, ~~generating~~maturity, and ~~operating~~reliability ~~assets; however, PRN did not purchase any~~ of ~~our~~third-party ~~other~~services ~~products~~may oraffect ~~assets~~liquidity, ~~including~~price ~~those that related to our wound care~~discovery, ~~urology~~and oroperational ~~dermatology businesses~~resilience. ~~The~~As ~~Avenova~~adoption ~~Asset Sale was consummated pursuant to the Asset Purchase Agreement~~evolves, ~~dated~~we ~~September~~expect ~~19,~~service ~~2024,~~availability ~~as amended by Amendment No. 1~~ to ~~the Asset Purchase Agreement~~change, ~~dated~~including ~~November 5~~execution, ~~2024~~clearing ~~(as so amended~~arrangements, ~~the~~and ~~“Purchase~~enterprise-grade ~~Agreement”)~~integration tools.

Custody and Safeguarding of SKY

Overview of Custodial Arrangements

We hold substantially all of our SKY in custody accounts with U.S.-based service providers that have demonstrated records of regulatory compliance and information security. Our current custodial and infrastructure service providers currently are Fireblocks, Inc. (“Fireblocks”) and Payward Financial, Inc. (“Kraken”).

Fireblocks is a Delaware corporation that provides us with a software-as-a-service platform that gives us the ability to securely store, manage and administer our digital assets through one or more administrative "workspaces" that we control directly on various blockchains. Fireblocks provides wallet infrastructure and key management technology but does not act as a custodian or hold our digital assets in trust. Kraken is a Wyoming Special Purpose Depository Institution (“SPDI”) that provides institutional digital asset custody services. We have established custody capabilities with Kraken under our Prime Broker Agreement with the Payward entities, which permits Kraken to hold digital assets in trust for our benefit pursuant to Wyoming law.

As of the date of this filing, our SKY tokens are maintained in wallets administered through the Fireblocks platform. However, we maintain the ability to custody digital assets with Kraken and may reallocate assets among service providers from time to time.

The primary counterparty risk we are exposed to with respect to our SKY relates to these service providers’ performance of their obligations under our custody and platform agreements. We hold our SKY across multiple service providers to diversify our exposure to any single provider. Our contracts do not restrict our ability to reallocate SKY among providers, and our SKY holdings may be concentrated with a single provider from time to time.

Given the significant amount of SKY we hold, we continually evaluate and seek to engage additional digital asset custodians and infrastructure providers to further diversify risk. We may also, in the future, discontinue or change the use of one or more third-party service providers or utilize alternative custody arrangements, including self-custody. Under our agreements, each of Kraken and Fireblocks may engage third-party service providers, affiliates, or subcontractors to assist in performing their respective obligations. None of our service providers are related parties of the Company.

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In ~~accordance~~addition ~~with the Purchase Agreement, at the closing of the Avenova Asset Sale we received the cash purchase price equal~~ to ~~$11.5~~these ~~million,~~custodial ~~less (i) the $507~~arrangements,~~953.72~~ ~~balance of a secured promissory note (~~the ~~“Bridge~~Company ~~Loan”)~~may ~~that~~utilize wenon-custodial ~~entered~~or ~~into~~third-party ~~with~~Web3 ~~PRN~~wallets onand ~~November 5~~infrastructure, ~~2024~~including ~~that~~institutional-grade ~~was~~transaction ~~paid to PRN~~ and ~~the~~security ~~Bridge Loan was discharged with collateral released and (ii) $500~~platforms,~~000,~~ ~~which amount was deposited into an escrow account (the “Escrow”) for up~~ to ~~six~~facilitate ~~(6)~~protocol ~~months~~participation, tostaking, begovernance, ~~used for our indemnification obligations under the Purchase Agreement~~ or ~~the~~other ~~payment~~interactions ofwith ~~any~~decentralized ~~Net Working Capital Adjustment (as defined below) after the closing~~applications. ~~The~~Assets ~~final~~held ~~amount of the purchase price that we received~~ in ~~the~~such ~~Avenova~~wallets ~~Asset~~are ~~Sale~~generally islimited ~~subject~~ to aamounts ~~post-closing~~necessary ~~working~~for ~~capital~~operational ~~adjustment, upward~~ or ~~downward,~~transactional ~~that~~purposes ~~will~~and beare ~~limited~~subject to aninternal ~~amount~~controls, segregation of ~~up to $500~~duties,~~000~~ ~~(the “Net Working Capital Adjustment”). The Net Working Capital Adjustment will be mutually determined by PRN~~ and usrisk ~~commencing~~management ~~ninety~~policies ~~(90)~~designed ~~days after the closing of the Avenova Asset Sale based upon the difference between the amount of our Net Working Capital (as defined in the Purchase Agreement) immediately prior~~ to ~~the~~mitigate ~~closing and the agreed upon target working capital value of $800,000~~loss.

InCustodian ~~connection with the closing of the Avenova Asset Sale~~Selection, weSecurity ~~entered~~Practices into a Transition Services Agreement, dated January 17, 2025 with PRN, pursuant to which we agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and ~~operational~~Liability support for a period of four (4) months after the closing of the Avenova Asset Sale (the “PRN Transition Services Agreement”). In exchange for providing such services, PRN and NovaBay agreed upon service fees to be paid to us.Limitations

~~For~~We ~~more~~carefully ~~information on~~select ~~the~~our ~~Avenova~~service ~~Asset~~providers ~~Sale,~~through ~~please~~a ~~see~~due ~~Note~~diligence ~~12,~~process ~~“Avenova~~designed ~~Asset Sale and Bridge Loan” in the Notes~~ to ~~Consolidated~~assess ~~Financial~~their ~~Statements~~operational ~~in Part II~~capabilities, Item 8 of this annual report, the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on September 20, 2024, October 29, 2024, November 6, 2024, November 22, 2024, December 19, 2024, and January 23, 2025, and the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on October 16, 2024, as supplemented, including on November 12, 2024.security

~~Wound~~controls ~~Care~~and ~~Divestiture~~regulatory posture. In evaluating service providers, we consider whether they can demonstrate, among other things:

~~Subsequent~~● toSegregation ~~December 31, 2024, on January 3, 2025, we entered into a Trademark Acquisition Agreement with Phase One that provided for the purchase by Phase One~~ of the Company’s Wound Care Trademarks for a purchase price of $500,000 (the “Trademark Acquisition Agreement”). In connection with the Wound Care Divestiture, we also entered into a Transition Services Agreement, dated January 3, 2025, with Phase One (the “Phase One Transition Services Agreement”), pursuant to which we: (i) provided limited transition services to Phase One until January 10, 2025; (ii) sold our ~~existing~~assets wound care inventory from an outstanding purchase order to Phase One for an aggregate payment of $126,000; and (iii) provided our remaining empty wound care product bottles to Phase One. In addition, the Phase One Transition Services Agreement provided that the existing supplier and distributor relationship between NovaBay and Phase One would be terminated upon the closing of the Wound Care Divestiture. We completed the Wound Care Divestiture on-chain ~~January~~or 8,in ~~2025.~~omnibus ~~For~~arrangements ~~more~~with ~~information on the Wound Care Divestiture, see the Company’s Current Report on Form 8~~books-Kand-records ~~filed with the SEC on January 10, 2025.~~sub-accounting;

~~Company~~● ~~Dissolution~~Secure private key management, including vault-based custody, multi-party computation (“MPC”) or proprietary cryptography and ~~Other~~hardware-based ~~Strategic~~storage, ~~Alternatives~~multi-factor authorization, and role-based access controls;

In● ~~connection~~Contractual ~~with~~liability ~~pursuing~~provisions ~~the~~for ~~Avenova~~failure ~~Asset~~to ~~Sale,~~safeguard ~~that would result in the sale of substantially all of the~~ assets ~~of the Company~~, ~~our~~subject ~~Board also unanimously determined at the time that the best opportunity available~~ to ~~optimize~~negotiated value to our stockholders was to pursue the Dissolution pursuant to the Plan of Dissolution. The Avenova Asset Sale and the Dissolution were presented to stockholders at a special meeting of stockholders that was originally convened on November 22, 2024 and was subsequently adjourned and finally reconvened on January 30, 2025 (the “2024 Special Meeting”). At the 2024 Special Meeting, we received stockholder approval for the Avenova Asset Salelimitations; however, we did not receive the requisite vote of stockholders representing a majority of the outstanding shares of our common stock to approve the Dissolution, having received approval of stockholders representing 49% of the outstanding shares of our common stock. Of the votes cast at the 2024 Special Meeting by holders of our common stock, approximately 88% of those shares voted in favor of the Dissolution.

●

Information security and operational safeguards; and

●

Rights to review or obtain third-party control attestations and to perform additional diligence as market conditions warrant.

Our custodial and platform agreements employ distinct approaches to key management. Under our agreement with Kraken, all supported digital assets are stored using proprietary cryptography and hardware storage. Under our agreement with Fireblocks, digital assets are managed through a vault system in which cryptographic key shares are split between our devices and Fireblocks' infrastructure, and we have engaged a third-party disaster recovery service provider, Station70, to facilitate key recovery in the event of loss or compromise. Both approaches are intended to mitigate risks associated with internet connectivity, including unauthorized access and cyberattacks.

We negotiate contractual liability provisions with each of our service providers, the key terms of which differ as described below.

Under our agreement with Kraken, the Prime Broker is required to use reasonable care to keep in safe custody all custodied digital assets for the benefit of and on behalf of the Company. Except in the case of gross negligence, willful misconduct or fraud, the total aggregate liability of Kraken for custodial services is capped at the greater of (A) the fair market value of the custodied digital assets at the time the events giving rise to the liability occurred and (B) the fair market value of the custodied digital assets at the time the Company has actual knowledge of the events giving rise to the liability. Kraken will not be liable for indirect, incidental, special or consequential damages, except in the case of willful misconduct or fraud.

Under our agreement with Fireblocks, Fireblocks warrants that the platform will perform materially in accordance with applicable documentation and that it will use commercially reasonable efforts to ensure the platform does not introduce malicious code into our systems. Fireblocks' maximum aggregate liability is capped at the total fees paid to Fireblocks under the applicable order form in the twelve (12) months immediately preceding the event giving rise to the claim, except for our misappropriation or other violation of Fireblocks' intellectual property rights. Neither party is liable for indirect, incidental, special, punitive or consequential damages, or any loss of revenue, reputation, or profits, data, or data use, except in the case of our misappropriation of Fireblocks' intellectual property.

Ongoing Monitoring

We conduct ongoing monitoring of our service providers throughout each engagement, which includes:

●

obtaining and reviewing available third-party certifications and audit reports, including Services Organization Controls (“SOC”) Type 2 and ISO 27001 reports maintained by Fireblocks and records maintained by Kraken;

●

exercising contractual rights to review relevant internal controls, including through audit rights; and

●

performing supplemental due diligence reviews annually or more often when warranted by market conditions or other circumstances.

Insolvency and Legal Protections

Based on existing law and the terms and conditions of our contractual arrangements with our service providers, we believe that our SKY would not be considered part of a service provider's bankruptcy estate were one or more of our service providers to enter bankruptcy, receivership, or similar insolvency proceedings. However, legal precedent regarding the treatment of digital assets in insolvency proceedings remains limited and evolving, and no assurance can be provided that a court would reach a conclusion consistent with our belief.

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~~With~~We ~~the~~also ~~Company~~utilize ~~having~~affiliated ~~completed~~or ~~the~~vetted ~~sale~~third-party ofexecution ~~substantially~~providers all of its assets in the Avenova Asset Sale and substantially all of its wound care assets to Phase One in the Wound Care Divestiture, the Board, upon further analysis of the best opportunity to maximize the remaining value for ~~the~~SKY ~~Company~~acquisitions and ~~its stockholders~~dispositions, ~~among~~leveraging ~~the~~custodian ~~other~~connectivity ~~alternatives currently available, determined that it is in the best interest of the Company~~ and ~~its~~settlement ~~stockholders for the Company to continue pursuing the voluntary Dissolution pursuant to the Plan of Dissolution~~rails. ~~The~~Notwithstanding ~~ability~~these ~~of the Company to proceed with the Dissolution under Delaware law is subject to the Company first receiving stockholder approval. Accordingly~~controls, ~~the~~risks ~~Company intends to hold a new special meeting~~ of ~~stockholders~~loss ondue ~~April 16, 2025 (the “New Special Meeting”) where the Company’s stockholders will be asked~~ to, ~~among~~cyber ~~other items~~incidents, ~~consider~~operational ~~and approve the Dissolution pursuant to the Plan of Dissolution. Even if the Dissolution is approved by the Company’s stockholders~~failures, ~~the Board reserves the right~~insolvency, inor ~~its~~legal ~~discretion,~~uncertainty ~~to no longer pursue and abandon the Dissolution, if the Board determines that the Dissolution is no longer in the best interest of the Company and its stockholders~~remain. IfSee ~~the~~“Risk ~~Dissolution~~Factors—Risks isRelated ~~not approved by stockholders at the New Special Meeting or the Board otherwise decides not~~ to ~~pursue~~Our ~~the~~Blockchain-Based ~~Dissolution,~~Strategy” then we will continue our corporate existence and the Board will pursue other strategic alternatives available to us, or, to the extent another viable alternative is not available, then the Company may need to file for bankruptcy protection or commence a similar state law proceedingbelow. ~~For additional information regarding the Dissolution, see the Company’s new definitive proxy statement for the New Special Meeting that was filed with the SEC on March 19, 2025.~~

~~Engagement~~Considerations of ~~Financial~~Holding ~~Advisor—Lucid~~ SKY

AsWe abelieve ~~result~~that oflong-term ~~the~~ownership ~~Company~~of ~~having~~digital ~~not~~assets, ~~obtained~~including ~~stockholder~~SKY, ~~approval~~can atprovide ~~the~~exposure ~~2024~~to ~~Special~~blockchain-based ~~Meeting~~financial ~~and~~infrastructure ~~the~~that ~~uncertainty~~enables ofpeer-to-peer ~~whether~~settlement ~~stockholders~~and ~~will~~programmability ~~approve~~without ~~the~~reliance ~~Dissolution~~on ata ~~the~~central ~~New~~operator. ~~Special~~We ~~Meeting,~~also ~~the~~believe ~~Board~~that ~~determined~~such ~~that~~exposure itcan ~~was~~offer participation in ~~the~~protocol-level ~~best~~economics ~~interest~~if adoption of the ~~Company~~Sky Protocol, tooling, and ~~its~~ecosystem ~~stockholders~~services toexpands. ~~identify~~However, ~~potential~~this ~~strategic~~strategy ~~alternatives~~also ~~that~~contains ~~may~~risk, beand ~~available~~we towill uscontinue ~~now~~to ~~instead~~monitor ofand ~~waiting~~adjust ~~until~~our ~~after~~strategy for the ~~New~~impact ~~Special~~of ~~Meeting.~~volatility, ~~Accordingly~~technology, ~~the~~operational, ~~Company~~and ~~entered~~governance ~~into~~risks aninherent ~~engagement~~to ~~letter~~open-source ~~with~~networks, ~~Lucid~~market ~~Capital~~structure ~~Markets~~risks, ~~LLC~~and ~~(“Lucid”)~~evolving onand ~~March~~overlapping 4,regulatory ~~2025~~frameworks ~~(the~~across ~~“Engagement~~jurisdictions ~~Agreement”),~~ that ~~provides~~may ~~for~~affect ~~Lucid~~trading tovenues, ~~assist~~custodians, ~~us in identifying~~ and ~~exploring~~enterprise ~~other~~access ~~strategic~~to ~~alternatives~~services. ~~involving~~We aweigh ~~potential~~these ~~business~~factors ~~combination~~against ofour ~~the~~liquidity ~~Company~~needs, ~~(“Potential~~risk ~~Transaction”).~~appetite, ~~Such~~and ~~potential~~regulatory ~~transactions~~obligations ~~may~~in ~~include~~determining ~~mergers,~~the ~~reverse~~scope ~~mergers,~~and ~~strategic~~cadence ~~partnerships,~~of ~~and~~any ~~licensing~~future ~~and~~acquisitions ~~sub-licensing~~or ~~transactions~~dispositions.

~~The Engagement Agreement will continue until the earlier of: (i) the completion of a Potential Transaction, (ii) nine (9) months from March 4,~~ 2025, orFinancing (iii) upon written notice of termination by either the Company or Lucid at any time. The Engagement Agreement also provides for the Company to pay Lucid for its advisory services, including: (i) a one-time fee of $100,000 that was due to Lucid on the date the Engagement Agreement was signed; (ii) specified monthly fees of up to a maximum of an additional $250,000 payable to Lucid upon the termination of the Engagement Agreement (other than in the case of a material breach by Lucid) if a Potential Transaction is not consummated; (iii) an $800,000 transaction fee in the event the Company successfully completes a Potential Transaction; (iv) a fairness opinion fee in the amount of $300,000, due and payable to Lucid upon Lucid rendering a fairness opinion to the Company’s Board; and (v) a right of first refusal for Lucid to participate as a co-placement agent in any concurrent private placement equity financing by the Company contemplated along with a Potential Transaction, provided that Lucid secures investors for such private placement equity financing and the Company and Lucid are able to enter into a separate engagement agreement for Lucid to serve as co-placement agent.Transactions

~~The~~2025 ~~Engagement~~Preferred ~~Agreement~~Stock ~~also~~Purchase ~~contains representations, warranties, indemnification provisions and confidentiality provisions that are customary for an agreement of this nature. For more information on the Engagement~~ Agreement~~, please see the Company’s Current Report on Form 8-K filed with the SEC on March 7, 2025.~~

~~Settlement~~On ~~Agreements~~August 19, 2025, the Company entered into a preferred stock purchase agreement (the “2025 Preferred Stock Purchase Agreement”) with ~~Certain~~David ~~Warrant~~E. ~~Holders~~Lazar, that provides for the Company to sell in a private placement (i) an aggregate of 481,250 shares of Series D Preferred Stock convertible into an aggregate of 15.4 million shares of Common Stock for $3.85 million and (ii) an aggregate of 268,750 shares of Series E Preferred Stock convertible into an aggregate of 8.6 million shares of Common Stock for an additional $2.15 million.

InSimultaneous ~~March~~to ~~2025,~~entering ~~the Company entered~~ into ~~three~~the ~~(3)~~2025 ~~separate~~Preferred ~~confidential~~Stock ~~settlement~~Purchase ~~and~~Agreement ~~release~~on ~~agreements~~August ~~(collectively~~19, ~~the “Settlement Agreements”) with each of Sabby Volatility Warrant Master Fund~~2025, ~~Ltd~~Mr. ~~(“Sabby”),~~Lazar ~~Bigger~~completed ~~Capital~~the ~~Fund,~~Initial LPSeries ~~(“Bigger”)~~D ~~and~~Preferred ~~District~~Purchase. 2The ~~Capital~~2025 ~~Fund~~Preferred LPStock ~~(“District~~Purchase ~~2,”~~Agreement ~~and~~provided ~~together~~for ~~with Sabby and Bigger,~~ the ~~“Warrant~~ability ~~Holders”)~~of toMr. ~~settle~~Lazar ~~certain disputed matters relating~~ to ~~the~~assign, ~~Company’s~~transfer ~~common~~and/or ~~stock~~sell ~~purchase~~his ~~warrants~~shares ~~held by each~~ of ~~the~~Series ~~Warrant~~D ~~Holders.~~Preferred ~~The disputed matters~~Stock, ~~among~~Series ~~other~~E ~~things~~Preferred Stock, ~~included~~the ~~Sabby~~shares ~~seeking~~of toCommon ~~exercise~~Stock ~~certain~~underlying ~~buyout~~the ~~rights~~Transferred ~~under~~Stock ~~their~~and/or ~~warrants,~~his ~~prior~~right to ~~the~~acquire ~~expiration of~~ such ~~provisions,~~securities. ~~which~~On ~~rights~~October ~~have~~9, ~~in any case~~2025, ~~expired~~Mr. onLazar ~~February~~tendered ~~22,~~his ~~2025,~~resignation ~~thirty~~as ~~(30)~~Chief ~~days~~Executive ~~following~~Officer ~~the~~and ~~public~~a ~~announcement~~director of ~~the~~NovaBay ~~closing~~and ofentered ~~the~~into ~~Avenova~~a ~~Asset~~securities ~~Sale~~purchase onagreement ~~January~~with ~~23,~~R01 ~~2025.~~Fund ~~The~~LP ~~terms~~(“R01”) ofand ~~the~~Framework ~~Settlement~~Ventures ~~Agreements~~IV ~~are~~L.P. ~~substantially~~(“Framework” ~~the same~~and, ~~except~~together with ~~respect~~R01, to the ~~financial~~“Lazar ~~terms~~Purchasers”) ~~for~~to ~~each~~effect ofsuch ~~the Warrant Holders~~transfer. ~~The~~Pursuant ~~Settlement~~to ~~Agreement~~the ~~with~~agreement, ~~Sabby~~Mr. ~~provided~~Lazar ~~for~~agreed ~~Sabby~~ to ~~have~~assign ~~exercised~~to ~~certain of its common stock purchase warrants for 4.99% of~~ the ~~Company’s~~Lazar ~~outstanding~~Purchasers ~~common~~all ~~stock and each~~ of ~~Bigger~~Mr. ~~and District 2~~Lazar’s ~~Settlement~~right, ~~Agreements~~title ~~provided for each of Bigger~~ and ~~District~~interest 2in to(i) ~~have exercised their respective common stock purchase warrants for 2.49% of the Company’s~~ 441,326 outstanding ~~common~~shares ~~stock. The remaining unexercised portion~~ of ~~specified~~Series ~~warrants~~D ofPreferred ~~Sabby,~~Stock ~~District 2~~ and ~~Bigger~~(ii) ~~were purchased by~~ the ~~Company~~rights ~~for $1,125,000, $344,924~~ and ~~$344,924,~~obligations ~~respectively.~~to ~~Following the execution of the Sabby Settlement Agreement, Sabby’s warrant exercise was promptly completed on March 6, 2025, followed by the completion of the Company’s~~ purchase of the ~~unexercised~~Transferred ~~portion~~Stock ofand ~~Sabby’s specified warrants on~~ the ~~next~~transactions ~~day,~~contemplated ~~March~~by ~~7, 2025. Additionally, following~~ the ~~execution~~Lazar ~~of each of Bigger and District 2’s Settlement Agreements~~sale, each of ~~Bigger~~which ~~and~~were ~~District~~purchased 2from ~~completed~~the ~~its~~Company ~~respective warrant exercise on March 11, 2025, followed~~ by ~~the~~Mr. ~~Company’s~~Lazar ~~purchase~~pursuant ofto the ~~unexercised~~2025 ~~portion~~Preferred ofStock ~~each~~Purchase ~~of Bigger and District 2’s specified warrants on March 11, 2025~~Agreement.

Since the Common Stock is currently listed on the NYSE American, LLC (“NYSE American”), the Company is subject to the requirements of that exchange. Among these requirements are Section 713(a) and (b) of the Company Guide (the “Company Guide”). Section 713(a) of the Company Guide requires stockholder approval in connection with any transaction, other than a public offering, involving the sale, issuance, or potential issuance, of common stock or securities convertible into common stock, equal to 20.0% or more of presently outstanding stock for less than the greater of book or market value. Section 713(b) of the Company Guide requires stockholder approval of a transaction, other than a public offering, involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into, or exercisable for, common stock) when the issuance or potential issuance of additional shares may result in a change of control of the issuer. As a result of the significant number of shares of Common Stock that may be issued upon the future conversion of the Series D Preferred Stock and Series E Preferred Stock compared to the currently issued and outstanding shares of Common Stock as provided above, the Company was required to obtain stockholder approval in accordance with the Company Guide Rule 713(a) and Rule 713(b) for conversion approval. Conversion approval was obtained on October 16, 2025.

On October 16, 2025, subsequent to the conversion approval, each share of Series D Preferred Stock automatically converted into 32 shares of Common Stock or an aggregate of 15.4 million shares of Common Stock. As of December 31, 2025, no shares of Series D Preferred Stock remained outstanding.

On October 16, 2025, subsequent to the conversion approval, pursuant to the 2025 Preferred Stock Purchase Agreement, the Company filed the certificate of designations relating to the 2025 Preferred Stock Issuance and completed the sale of 268,750 shares of Series E Preferred Stock at a price of $8.00 per share for aggregate gross proceeds of $2.15 million. On October 21, 2025, at the option of the Purchasers, all 268,750 shares of Series E Preferred Stock were converted into 8.6 million shares of Common Stock. As of December 31, 2025, no shares of Series E Preferred Stock remained outstanding.

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In connection with the warrant exercise, the Warrant Holders will own approximately 9% of the Company’s outstanding common stock and have each agreed to certain commitments in their respective Settlement Agreements with respect to their exercised shares, which commitments include: (i) continuing to remain the record and beneficial owner of the exercised shares until the record date of March 18, 2025 (the “Record Date”) for the Company’s New Special Meeting, where the Company’s stockholders will be asked to consider and vote upon whether to approve the Dissolution, (ii) voting all shares of common stock owned by each respective Warrant ~~Holder~~Exchange ~~as of the Record Date, including the exercised shares, in favor of the Dissolution proposal (the “Voting Commitment”);~~ and ~~(iii)~~Issuance ~~limiting the amount~~ of ~~shares~~Series ofF ~~common~~Preferred stock that each Warrant Holder would sell from the Record Date to until the date of the New Special Meeting. The Settlement Agreements provide for a liquidated damages provision, stating that Sabby would pay liquidated damages of $425,000 for not honoring the Voting Commitment, and each of Bigger and District 2 would pay $150,000 for not honoring the Voting Commitment.Stock

~~The~~On ~~Settlement~~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”) ~~also~~with ~~include~~each aof Anson Investments Master Fund LP, Hudson Bay Capital Management LP and Armistice Capital, LLC (collectively, the “~~most~~Series ~~favored~~F ~~nations~~Holders”). ~~provision~~The Series F Agreements provide for ~~each~~the irrevocable surrender and cancellation of all warrants beneficially owned by the ~~Warrant~~Series F Holders, in exchange for the Company issuing (i) an aggregate of 1,986,568 shares of Series F Preferred Stock and (ii) an aggregate cash payment of $525 thousand to the Series F Holders. Warrants exercisable for an aggregate of 397,657 shares of Common Stock were surrendered and cancelled in conjunction with the Series F Agreements. The Series F Agreements also include a “most favored nations” provision that would increase the amount paid to the ~~Warrant~~Series F Holders if, ~~any~~after ~~other~~the effective date of the Series F Agreements, another holder of the Company’s ~~common~~Common ~~stock~~Stock purchase warrants receives a higher amount per underlying warrant,; asexcept ~~well~~that asthis aprovision ~~mutual~~shall ~~release~~not ofapply ~~all~~to ~~claims~~(i) bysettlements ~~the~~with ~~Company~~retail ~~and~~investor ~~the~~warrant ~~Warrant~~holders ~~Holders~~that ~~against~~(1) ~~each~~individually ~~other,~~is ~~without~~less ~~any~~than ~~admission~~or ofequal ~~liability~~to bysix ~~either~~and ~~party~~thirty hundredths percent (6.30%) ~~For~~of ~~more~~a ~~information~~Series onF ~~the~~Holder’s ~~Settlement~~total ~~Agreements,~~warrants ~~please~~outstanding ~~see~~or (2) in the ~~Company~~aggregate is less than or equal to twelve and seventy hundredths percent (12.70%) of a Series F Holder’s ~~Form~~total ~~8-K~~warrants ~~filed~~outstanding onor ~~March~~(ii) ~~11,~~prior ~~2025~~warrant settlements by the Company.

~~NYSE~~Because ~~American~~the ~~Notices~~carrying value of the Common Stock warrants cancelled in conjunction with the Series F Agreements exceeded the total cash payment made and book value of the Series F Preferred Stock issued, the Company recorded a deemed capital contribution of $433 thousand upon entering the Series F Agreements.

OnOctober ~~April~~2025 ~~18,~~Pre-Funded ~~2024,~~Warrant the Company received a notification from the NYSE American LLC Exchange (“NYSE American”) stating that the Company is not in compliance with Section 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (requiring stockholders’ equity of $4.0 million or more if the Company has reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and $6.0 million or more if the Company has reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively).Transactions

On ~~May~~October 2816, ~~2024~~2025, the Company ~~received~~issued aand ~~letter~~sold ~~from~~pre-funded ~~NYSE~~warrants ~~American~~(the ~~stating~~“October ~~that~~2025 ~~the~~Pre-Funded ~~Company~~Warrants”) isto ~~not~~purchase inan ~~compliance~~aggregate ~~with~~of ~~the~~1,081,082 ~~minimum~~shares ~~stockholders’~~of ~~equity~~Common ~~requirements~~Stock, ofto ~~Section~~R01 ~~1003(a)(i)~~and ofFramework ~~the~~in ~~NYSE~~two ~~American~~transactions ~~Company~~for ~~Guide.~~aggregate ~~Section~~net ~~1003(a)(i)~~proceeds of ~~the~~approximately ~~NYSE~~$5.9 ~~American~~million. ~~Company~~The ~~Guide~~purchase ~~requires~~price awas ~~listed~~$5.50 ~~company~~per toOctober ~~maintain~~2025 ~~stockholders’~~Pre-Funded ~~equity~~Warrant, ofrepresenting ~~$2.0~~110% ~~million~~of orthe ~~more~~closing ifprice of the ~~listed~~Common ~~company~~Stock ~~has~~on ~~reported~~the ~~losses~~day ~~from~~before ~~continuing~~the ~~operations~~issuance, ~~and/or~~less ~~net~~the ~~losses~~$0.05 inexercise ~~two~~price offor ~~its~~each ~~three~~such ~~most~~October ~~recent~~2025 ~~fiscal~~Pre-Funded ~~years~~Warrant. The ~~Company~~October ~~reported~~2025 ~~stockholders’~~Pre-Funded ~~equity~~Warrants ofare ~~$160~~freely ~~thousand~~exercisable asfor shares of ~~March~~Common ~~31,~~Stock ~~2024~~upon ~~and~~the ~~has~~receipt ~~had~~of ~~losses~~stockholder ~~from~~approval ~~continuing~~at ~~operations~~the ~~and~~March ~~net~~12, ~~losses~~2026 inspecial ~~each~~meeting of ~~the last three fiscal years~~stockholders.

~~Therefore,~~Recent the Company has become subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide and was required to submit a plan of compliance by May 18, 2024 addressing how it intends to regain compliance with Section 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide by October 18, 2025. On June 4, 2024, the Company received notice from the NYSE American that it had accepted the Company’s plan of compliance and granted a plan period through October 18, 2025. During the plan period, the Company will be subject to quarterly monitoring for compliance with the plan. If the Company does not regain compliance with the NYSE American’s listing standards by October 18, 2025, or if the Company does not make progress consistent with its plan, then the NYSE American may initiate delisting procedures.Developments

January 2026 Private Placement

On January 16, 2026, the Company entered into a Securities Purchase Agreement (the “SPA”) with each of R01, Framework, Tether Investments, S.A. de C.V. (“Tether”) and Sky Frontier Foundation (“Sky Frontier Foundation” and together with R01, Framework and Tether, the “Purchasers”). Pursuant to the SPA, the Company issued and sold pre-funded warrants (the “2026 Pre-Funded Warrants”) to purchase an aggregate of 167,539,227 shares of Common Stock for aggregate gross proceeds of approximately $137.4 million, reflecting the agreed-upon value of the consideration used to determine the number of pre-funded warrants issued under the SPA. The purchase price was $0.85 per 2026 Pre-Funded Warrant, and the 2026 Pre-Funded Warrants are exercisable for shares of Common Stock at an exercise price of $0.05 per underlying share of Common Stock, on a tiered basis, with 20% of the 2026 Pre-Funded Warrants becoming exercisable 6 months after execution of the SPA, 30% of the 2026 Pre-Funded Warrants becoming exercisable 9 months after execution of the SPA and the remaining 50% of the 2026 Pre-Funded Warrants becoming exercisable 12 months after execution of the SPA, upon the receipt of stockholder approval at the March 12, 2026 special meeting of stockholders.

The consideration received consisted of $25.0 million in cash, 35.0 million USDT and 16.0 million USDS stablecoins (with an aggregate value of approximately $51.0 million), and 943,599,690 SKY tokens (with an aggregate value of approximately $61.4 million). The aggregate value of the stablecoins and SKY tokens was determined based on their approximate respective fair values as of the closing date of the placement. The aggregate fair value of the consideration received at closing exceeded the stated gross proceeds under the SPA by approximately $3.4 million.

The SPA grants to each of the Purchasers a consent right over any material amendment, modification, addition, revocation, or change to the Company’s Digital Asset Strategy for a period of twenty-four (24) months from the date the SPA was executed, as long as a Purchaser holds at least fifty percent (50%) of the aggregate number of 2026 Pre-Funded Warrants and/or shares of Common Stock as originally purchased by such Purchaser pursuant to the SPA.

In connection with the SPA, on January 16, 2026, the Company and the Purchasers entered into an Investors’ Rights Agreement (the “IRA”), pursuant to which, among other things, the Company agreed to provide the Purchasers with customary demand rights for their shares of Common Stock underlying the Pre-Funded Warrants and customary piggyback registration rights, as well as certain nomination rights for R01, Framework and Sky Frontier Foundation.

The IRA grants to each of R01, Framework and Sky Frontier Foundation the right to nominate one (1) individual for election to the Board of Directors (the “Nomination Rights”). If any of the parties receiving Nomination Rights cease to beneficially own at least five percent (5%) of the outstanding shares of the Company’s Common Stock, their individual Nomination Rights will terminate.

At-The-Market Offering

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 $100.0 million from time to time through or to Virtu as its sales agent or principal. Sales of Common Stock through Virtu, if any, will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, including without limitation, sales made directly on the New York Stock Exchange or any other existing trading market for the Common Stock. Virtu will use commercially reasonable efforts to sell Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other parameters or conditions the Company may impose). The Company will pay Virtu a commission of up to 2.0% of the gross proceeds from any sale of Common Stock sold through Virtu under the Sales Agreement. The Company has also provided Virtu with customary indemnification rights.

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~~Additionally,~~The ~~the~~Company ~~closing~~is ofnot ~~the~~obligated ~~Avenova Asset Sale and the Wound Care Divestiture may cause the NYSE American~~ to ~~delist~~make ~~our~~any ~~shares~~sales of ~~common~~Common ~~stock~~Stock ~~and~~under the ~~Company~~Sales ~~may not meet NYSE American’s continued listing requirements~~Agreement. ~~This~~The ~~delisting~~Sales Agreement may ~~occur~~be ~~prior~~terminated toby ~~the~~either ~~Dissolution,~~party ~~and/or~~under ~~the~~specified ~~Company being able to pursue another strategic alternative transaction. To the extent the NYSE American does not delist our shares~~circumstances, ~~and~~including ~~the~~material ~~Board~~adverse ~~determines~~changes toaffecting ~~effect~~ the ~~Dissolution, the~~ Company ~~plans~~or ~~to request that our common stock stop trading on~~ the ~~NYSE~~financial ~~American~~markets, onsuspension ~~the effective date~~ of ~~the~~trading, ~~Dissolution~~ or asby ~~soon~~notice ~~thereafter~~from aseither ~~is reasonably practicable~~party.

~~For~~See ~~more~~also ~~information on~~Notes ~~the~~7, ~~NYSE~~“Financing ~~American~~Activities;” ~~Notices~~9, ~~please~~“Common ~~see~~Stock ~~Note~~Warrants 15and Warrant Liabilities,” 10, “Stockholders’ ~~Equity~~Deficit,” and 17, “Subsequent Events” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

~~Our~~Legacy ~~Products~~Wound Care and ~~Marketing~~Eyecare ~~Approach~~Business

InPrior ~~connection~~to ~~with~~adopting ~~the~~our ~~Avenova~~digital ~~Asset~~asset ~~Sale,~~treasury ~~the Wound Care Divestiture and the DERMAdoctor Divestiture~~strategy, the Company ~~disposed~~operated ofas ~~its~~a ~~primary~~pharmaceutical ~~commercial~~company ~~operations.~~focused ~~Limited~~on ~~information~~eyecare ~~for products~~ and ~~marketing approaches associated with the Avenova Assets and~~ wound care products ~~which were reported as continuing operations for the years ended December 31, 2024 and 2023, is provided below~~. ~~Additional information about these and our former DERMAdoctor products and related marketing approach can be found in our prior filings with the SEC.~~

Avenova ~~Branded~~Asset ~~Eyecare Products~~Divestiture

~~Avenova~~On ~~Spray~~January is17, a2025, ~~proprietary~~we ~~form~~completed the sale of ~~hypochlorous~~our ~~acid~~eyecare ~~that~~products ~~acts~~sold asunder anthe ~~antimicrobial~~Avenova ~~solution~~brand and ~~has~~related ~~been~~assets ~~shown to neutralize bacterial toxins in laboratory tests. Because it is a gentle isotonic solution, it is well suited for daily use on~~ (the ~~lids and lashes.~~ “Avenova ~~Spray~~Assets”) ~~offers distinct advantages when compared~~ to ~~alternative~~PRN ~~lid~~Physician ~~and~~Recommended ~~lash regimens that contain soaps~~Nutriceuticals, ~~bleach,~~LLC ~~and other impurities~~(“PRN”), aswhich ~~Avenova~~constituted ~~Spray removes unwanted microorganisms from~~ the ~~skin~~sale ~~without~~of ~~the~~substantially ~~use~~all of ~~these~~our ~~harmful~~then ~~ingredients.~~revenue-generating ~~Avenova~~and ~~Spray’s~~operating ~~target~~assets ~~market is~~ (the ~~millions~~“Avenova ofAsset ~~Americans~~Divestiture”). ~~who~~The ~~suffer~~Avenova ~~from~~Asset ~~minor~~Divestiture ~~irritation~~was ofconsummated ~~the~~pursuant ~~skin~~to ~~around~~ the ~~eye~~Asset ~~(commonly~~Purchase ~~referred~~Agreement, todated asSeptember ~~blepharitis)~~19, as2024, ~~well~~ as ~~anyone who suffers from dry eye (commonly described as a gritty sandy sensation while blinking)~~amended. The ~~Company~~final ~~made~~purchase ~~Avenova~~price ~~Spray~~received ~~available~~by ~~both over-~~the~~-counter~~ ~~and~~Company aswas aapproximately ~~prescription~~$10.6 Wemillion, ~~primarily~~net ~~promoted~~of ~~Avenova~~adjustments. ~~Spray~~For ~~directly~~additional toinformation ~~consumers~~regarding onthe ~~Amazon.com and~~ Avenova~~.com.~~ InAsset ~~total~~Divestiture, ~~this~~please ~~was~~see ~~our~~Note ~~leading~~13, ~~sales~~“Avenova ~~channel~~Asset byDivestiture ~~unit sales~~ and ~~net~~Bridge ~~revenue~~Loan” in ~~2024.~~the ~~Prescription~~Notes ~~Avenova~~to ~~Spray~~Consolidated ~~was~~Financial ~~made~~Statements ~~available~~in atPart ~~optometrists’ and ophthalmologists’ offices~~II, ~~through~~Item ~~our~~8 ~~physician~~of ~~dispensed~~this ~~channel,~~annual ~~and at most retail pharmacies across all 50 states~~report.

~~Support~~PhaseOne from ophthalmologists and optometrists for Avenova Spray was strong. Continuous endorsement of medical professionals for Avenova created a “doctor recommended” halo effect around our brand. This was a key differentiating factor in a crowded consumer space and is a result of its high quality and reliable efficacy. Our physician dispensed channel was particularly important in this regard as it gave patients the opportunity to purchase Avenova Spray conveniently and immediately upon recommendation in the doctor’s office. We believe this also created repeat Avenova Spray customers who subsequently purchased Avenova Spray and other Avenova branded products through other channels.Divestiture

WeOn ~~also~~January ~~made~~8, ~~prescription~~2025, ~~Avenova~~we ~~Spray~~completed ~~accessible nationwide in nearly all retail pharmacies across~~ the ~~United~~sale ~~States~~of ~~through~~our ~~agreements~~wound ~~with~~care ~~McKesson~~product ~~Corporation~~trademarks, ~~Cardinal~~including ~~Health~~NeutroPhase, PhaseOne and ~~AmerisourceBergen~~OmniPhase, ~~Corporation.~~and Werelated ~~built~~inventory ~~our~~to ~~prescription~~Phase ~~business~~One ~~under~~Health aLLC ~~value~~(the ~~pricing~~“PhaseOne ~~model~~Divestiture”). WeFollowing ~~maintained a rebate program for electronic payment transactions and in~~ the ~~form~~PhaseOne ~~of instant rebate cards. The rebate cards were intended to be used by patients who either do not have insurance coverage or whose insurance coverage did not cover Avenova Spray~~Divestiture, ~~thereby~~our ~~lowering~~legacy ~~the~~wound ~~price~~care ~~for~~business ~~the~~has ~~patient~~been atsignificantly ~~the pharmacy~~reduced.

WeExit ~~also~~of ~~had agreements with select preferred pharmacy networks through our Partner Pharmacy Program. These agreements provided greater control over~~ the ~~patient~~China ~~experience~~NeutroPhase atProduct ~~consistent contract pricing. Our Partner Pharmacy Program also ensured that proper insurance reimbursement occurred, and that our patients received the best possible price.~~Line

-Following 9the -PhaseOne Divestiture, the Company continued to manufacture wound care products domestically in the United States for export to China through its distribution relationship with Chongqing Pioneer Pharma Holdings Limited (“Pioneer”). In October 2025, as part of our strategic shift to operate as a digital asset treasury company, we made a decision to exit our involvement in the China NeutroPhase product line, which represented our remaining legacy wound care activity. We may continue limited production and sales to Pioneer during a transition period as we wind down this activity.

~~Table~~The Company is incorporated under the laws of ~~Contents~~the State of Delaware.

~~Because~~Discontinued dry eye is a complex condition, in addition to Avenova Spray, we offered a complementary portfolio of scientifically developed products for each step of the standard at home treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, NovaWipes by Avenova, Avenova Warm Eye Compress to soothe the eyes, and the i-Chek by Avenova to monitor physical eyelid health.Operations

~~NeutroPhase~~The historical financial results of the divested businesses outlined above are reflected as discontinued operations in the Consolidated Financial Statements included in this annual report. See Notes 13, “Avenova Asset Divestiture and Bridge Loan,” 14 “PhaseOne ~~Branded~~Divestiture”, ~~Wound~~15, ~~Care~~“DERMAdoctor ~~Products~~Divestiture” and 16, “Summary of Discontinued Operations” to the Consolidated Financial Statements in Part II, Item 8 of this annual report for additional details.

We also manufactured and sold our proprietary form of hypochlorous acid for the wound care market. Consisting of higher concentrations of hypochlorous acid, our wound care products were used for the cleansing and irrigation of intraoperative pocket lavage, before subcutaneous closure, stage I to IV pressure injuries, stasis ulcers, leg ulcers, diabetic foot ulcers, first-degree and second-degree burns, post-surgical wounds, grafted and donor sites, minor burns, superficial abrasions, wounds, and moistening absorbent wound dressings. We marketed our wound care products through NeutroPhase and PhaseOne brands prior to completing the Wound Care Divestiture.

Both NeutroPhase and PhaseOne historically competed in a crowded wound cleanser market with many older and lower-priced products with similar uses, such as Vashe and Betadine Surgical Scrub. However, we believed our wound care solutions had distinct competitive advantages because they were made without the toxic chemicals found in other products. Our wound care products were gentle, non-irritating, and non-sensitizing to skin and new tissue. Prior to selling the Wound Care Trademarks in the Wound Care Divestiture, PhaseOne was distributed through commercial partners in the United States, and NeutroPhase was distributed in China by Chongqing Pioneer Pharma Holdings Limited (“Pioneer”), who is also a stockholder of our Company.

Following the Wound Care Divestiture, we are continuing to manufacture our wound care products under remaining contractual obligations to our distribution partner in China, which we anticipate fulfilling in the second quarter of 2025.

Customers, Manufacturing and Suppliers

In connection with the Avenova Asset ~~Sale~~Divestiture, the ~~Wound~~PhaseOne ~~Care~~ Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations. ~~Limited~~Information ~~information~~ for customers, manufacturing and suppliers associated with the ~~Avenova Assets and the~~ Company’s ~~wound care business which were reported as continuing operations for the years ended December 31, 2024 and 2023 is provided below. Additional information about these and our~~ former ~~DERMAdoctor~~businesses ~~customers, product manufacturing and suppliers~~ can be found in our prior filings with the SEC.

The Company made Avenova branded products available on Amazon.com, Walmart.com and Avenova.com. Online sales accounted for the majority of Avenova Spray revenue. Internationally, the Company made Avenova Spray available in Australia through a distribution partner.

For Avenova Spray, we outsourced manufacturing to a contract manufacturer with facilities located in the United States. We maintained a good relationship with our Avenova Spray manufacturer and such manufacturer had adequate manufacturing capacity to satisfy our demands. Sales of our wound care products formerly sold under the NeutroPhase and PhaseOne brands relied solely on distribution partners in China and the U.S., respectively.

Intellectual Property

In connection with the Avenova Asset ~~Sale~~Divestiture, the ~~Wound~~PhaseOne ~~Care~~ Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary trademarks, trade secrets and know-how. Prior to completing each of these transactions, we sought to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets and proprietary know-how and technological innovation to operate, without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights. We relied on and used reasonable business activities to protect trade secrets, such as confidentiality/invention rights agreements with employees, confidentiality agreements with manufacturers, proprietary expertise and product formulations, continuing innovation efforts and techniques, and other know-how to develop and maintain a competitive position.

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Research and Development

The completion of the Avenova Asset ~~Sale~~Divestiture, the ~~Wound~~PhaseOne ~~Care~~ Divestiture and the DERMAdoctor Divestiture have all had a substantial impact on our Research and Development, as our business and operations have been significantly reduced. As a result, we are currently not conducting research and development. A majority of previous research and development activities were focused on compliance with ongoing regulatory and maintenance requirements related to our former products. ~~For the years ended December 31, 2024 and 2023, we incurred total research and development expenses of approximately $42 thousand and $34 thousand, respectively.~~

Seasonality

In connection with the Avenova Asset ~~Sale~~Divestiture, the ~~Wound~~PhaseOne ~~Care~~ Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations.Additional ~~Limited~~ information ~~for~~about ~~seasonality~~these ~~associated with the Avenova Assets~~ and our ~~wound~~former ~~care~~Avenova ~~products which were reported as continuing operations for the years ended December 31~~Asset, ~~2024~~PhaseOne and ~~2023, is provided below. Additional information about these and our former~~ DERMAdoctor customers, product manufacturing and suppliers can be found in our prior filings with the SEC.

Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experienced seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other former Avenova branded products, experienced less seasonality and more consistent sales throughout the year ended December 31, 2024.

Our former NeutroPhase and PhaseOne branded products were sold through wholesale distribution relationships with third parties such as Pioneer and Phase One; therefore, we received periodic large orders that resulted in large chunks of revenue that were received in irregular intervals during the year. We do not expect this seasonality to impact the manufacture of our wound care products under remaining contractual obligations to our distribution partner in China.

Our Capital Requirements

AsTo ahelp ~~result~~address ofour ~~the~~needs ~~completion~~for ofliquidity ~~the Avenova Asset Sale, the Wound Care Divestiture~~ and ~~the~~capital ~~DERMAdoctor~~to ~~Divestiture,~~fund our ~~business~~operations ~~and~~in ~~operating~~2025, ~~expenses have significantly changed and will continue to change if~~ we ~~complete~~completed ~~the~~a ~~Dissolution~~series orof ~~pursue~~financing ~~another~~transactions ~~strategic~~in ~~alternative. Accordingly~~2025, ~~based~~as ondescribed ~~our~~above ~~funds~~in ~~available~~“2025 onFinancing ~~December 31~~Transactions,” ~~2024,~~which asresulted ~~well~~in asour ~~additional cash that the~~ Company ~~received~~raising ~~from the Avenova Asset Sale net proceeds of~~ approximately $1012.5 0 million ~~and~~in ~~the~~gross ~~Wound Care Divestiture of $0~~proceeds.5 ~~million~~Subsequently, ~~management believes that~~ the Company’s ~~existing~~completed ~~cash~~an ~~and~~additional ~~cash~~financing ~~equivalents~~transaction ~~will~~in beJanuary ~~sufficient to enable the Company to meet its planned operating expenses at least through April 2,~~ 2026~~. However~~, ~~there~~in iswhich ~~uncertainty~~it ~~with~~raised ~~respect~~approximately to$137.4 ~~our~~million ~~strategic~~and ~~direction,~~which ~~as the Dissolution~~ is ~~subject~~described toin stockholder approval and we are also exploring other potential strategic alternatives that may be available to us, and, as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the ~~Company~~section toentitled ~~expend~~“Recent ~~cash~~Developments” ~~significantly faster than currently anticipated because of factors beyond its control~~above.

ToAs ~~help~~a ~~address~~result ~~our~~of ~~needs~~the ~~for~~completion ~~liquidity~~of the Avenova Asset Divestiture, the PhaseOne Divestiture and ~~capital~~the toDERMAdoctor ~~fund~~Divestiture, our ~~operations~~business inand ~~2024~~operating ~~prior~~expenses tohave ~~completing~~significantly ~~the~~changed. ~~Avenova~~Accordingly, ~~Asset~~based ~~Sale,~~on ~~the~~funds ~~Wound~~available ~~Care~~as ~~Divestiture,~~of inDecember ~~addition~~31, to2025, ~~the~~aggregate ~~net~~gross cash proceeds ~~that~~of weapproximately ~~received~~$25.0 ~~upon~~million ~~completing~~from the ~~DERMAdoctor~~January ~~Divestiture~~2026 inPrivate ~~March 2024~~Placement, wenet ~~also~~cash ~~completed~~generated ~~two~~from ~~financing~~the ~~transactions~~conversion inof ~~2024,~~all ~~which~~of ~~resulted~~the stablecoins received in ~~our~~the ~~Company~~January ~~raising~~2026 ~~approximately~~Private Placement into U.S. dollars, and $413.15 million in gross cash proceeds from issuances under the 2026 ATM Program between January 20, 2026 and March 16, 2026, management believes that the Company’s existing cash and cash equivalents will be sufficient to fund its planned operating expenses at least through March 19, 2027.

-All 11the -stablecoins received in the January 2026 Private Placement were converted into U.S. dollars to support operating liquidity, and a significant portion was deployed to acquire additional SKY tokens. Subsequent to the January 2026 Private Placement and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens.

~~Table~~Governmental, ofRegulatory, ~~Contents~~and Accounting Considerations

~~2024~~The ~~Financing~~legal ~~Transactions~~and regulatory landscape applicable to blockchain-based networks and network-native units like SKY 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.

OnDigital ~~July~~assets ~~26,~~held ~~2024,~~by the Company ~~entered~~will ~~into~~be ansubject ~~underwriting agreement with Ladenburg Thalmann & Co., Inc., as the sole underwriter, relating~~ to ~~the~~evolving ~~issuance~~accounting ~~and sale in a public offering (the “2024 Public Offering”) of: (i) 1~~standards,~~158,566 shares~~ ~~of common stock~~ and ~~2,041,814 pre-funded~~ ~~warrants,~~changes in ~~lieu~~market ofvalue shares of common stock (the “July 2024 Pre-Funded Warrants”), (ii) 3,200,380 Series F-1 warrants to purchase up to 3,200,380 shares of common stock (the “Series F-1 Warrants”), (iii) 3,200,380 Series F-2 warrants to purchase up to 3,200,380 shares of common stock (the “Series F-2 Warrants”) and ~~(iv) 3,200,380 Series~~protocol ~~F-3~~participation ~~warrants~~may toresult purchase up to 3,200,380 shares of common stock (the “Series F-3 Warrants,” and together with the Series F-1 Warrants and Series F-2 Warrants, the “July 2024 Warrants”). The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $3.9 million, without taking into account any underwriting discounts and commissions. A portion of the proceeds from the 2024 Public Offering were used to repay the remaining $598 thousand that we owed on our Original Issue Discount Senior Secured Convertible Debentures (the “Secured Convertible Notes”) during the third quarter of 2024. As of September 30, 2024, all of the pre-funded warrants issued in ~~the~~volatility ~~2024 Public Offering had been exercised, resulting~~ in the Company’s ~~issuing 2,041,814 shares~~financial ~~of common stock~~results. ~~In connection with such exercises, the Company received net proceeds of approximately $20 thousand.~~

InThe ~~June~~completion ~~2024,~~ of the ~~Company~~Avenova ~~entered~~Asset ~~into~~Divestiture, athe ~~warrant~~PhaseOne ~~reprice~~Divestiture ~~transaction~~and (the ~~“2024~~DERMAdoctor ~~Warrant~~Divestiture ~~Reprice~~and ~~Transaction”)~~our ~~with~~decision ~~certain~~to ~~existing~~exit ~~holders~~our ofinvolvement ~~(i)~~in ~~warrants~~the ~~that~~China weNeutroPhase ~~issued~~product inline ~~September~~have ~~2022~~had and will continue to ~~purchase~~have ~~common~~a ~~stock,~~substantial ~~(ii)~~impact ~~Series~~on ~~A-1~~the ~~warrants~~government ~~issued~~regulations inthat ~~November~~we ~~2022~~are subject to. ~~purchase~~We ~~common~~were ~~stock,~~previously ~~(iii)~~subject ~~Series~~to ~~B-1~~extensive ~~warrants~~government ~~that~~regulation, weprincipally ~~issued~~by inthe ~~May~~FDA ~~2023~~and tostate ~~purchase~~and ~~common~~local ~~stock,~~authorities ~~and~~in ~~(iv)~~the ~~Series~~United ~~B-2~~States ~~warrants~~and ~~issued~~by comparable agencies in ~~May~~foreign ~~2023~~countries prior to ~~purchase~~these ~~common~~transactions. ~~stock~~As ~~(collectively~~a ~~(i)~~result ~~through~~of ~~(iv)~~our significantly reduced business and operations, which primarily consist of the ~~“Participant~~manufacture ~~Warrants”).~~and ~~The~~supply ~~participants~~of ~~agreed~~our wound care products to ~~exercise~~fulfill a ~~portion~~contractual ofobligation ~~their~~that ~~respective~~has ~~Participant~~since ~~Warrants~~been atcompleted, aas ~~reduced~~well ~~exercise~~as ~~price~~limited ofmanufacturing ~~$2.50~~on ~~per~~an ~~share.~~as-needed ~~The~~basis ~~Participant~~for ~~Warrants~~a ~~were~~short ~~exercised~~period for anour ~~aggregate~~distribution ~~of 90~~partner in China,~~381 shares~~ ofwe ~~common~~are ~~stock,~~subject ~~resulting~~to substantially less government regulation. Additional information about these regulations can be found in ~~gross~~our ~~proceeds~~prior offilings ~~approximately~~with $0the SEC.~~2 million.~~

See also Notes 11, “Financing Activities;” 14, “Common Stock Warrants and Warrant Liabilities” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

Government Regulation

The completion of the Avenova Asset Sale, the Wound Care Divestiture and the DERMAdoctor Divestiture all had and will have a substantial impact on the government regulations that we are subject to. We were previously subject to extensive government regulation, principally by the FDA and state and local authorities in the United States and by comparable agencies in foreign countries prior to these transactions. As a result of our significantly reduced business and operations, which primarily consist of the manufacture and supply of our wound care products under remaining contractual obligations to our distribution partner in China, we are subject to substantially less government regulation. Additional information about these regulations can be found in our prior filings with the SEC.

Human Capital

As of December 31, ~~2024~~2025, on a consolidated basis, we had a total of 144 employees, 132 of whom were full-time employees and ~~1 who was a part-time employee. Since the completion of the Avenova Asset Sale, as of April~~ 2, ~~2025, we have reduced the number of employees to a total of 4 employees, 3 of whom are full-time employees and 1~~ who iswere a part-time ~~employee~~employees. None of our employees are represented by labor unions or covered by collective bargaining agreements. We ~~comply with the latest employment best practices and~~ consider our relationship with our employees to be good.

Facilities

Our principal executive office is located in Emeryville, California. We are party to an Office Lease (the “Lease”), dated August 24, 2016, as subsequently amended on January 24, 2022, pursuant to which we lease approximately 7,675 rentable square feet of real property located on the eleventh floor (Suite 1150) at 2000 Powell Street, Emeryville, California 94608 from KBSIII Towers at Emeryville, LLC (the “Landlord”), for our principal executive offices. The expiration date of the Lease is July 31, 2027, unless terminated earlier pursuant to the provisions of the Lease. Prior to completing the Avenova Asset ~~Sale~~Divestiture, our office and administration facilities were suitable and adequate for our then current operations and purpose. As a result of our significantly reduced business and operations ~~and due to the potential Dissolution~~, we are currently ~~intend~~exploring ~~to explore~~ options to reduce the costs of the Lease, which will include subleasing the office space that will be subject to the Landlord’s approval.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our corporate website, located at www.novabay.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website is not part of this annual report on Form 10-K. The SEC also maintains an Internet site that contains reports, proxy, information statements and other information regarding issuers at http://www.sec.gov.

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ITEM 1A.

RISK FACTORS

Our Company is subject to a number of risks, the most important of which are discussed below. You should consider carefully the following risks in addition to the other information contained in this annual report and our other filings with the SEC (including the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on ~~March~~February 1910, ~~2025~~2026 (as may be supplemented, the “Special Meeting Proxy Statement”)) before deciding to buy, sell or hold our common stock. If any of the following risks actually occur, our business plan, financial condition and the market price of our common stock could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment. The risks and uncertainties described below are not the only ones facing our Company, but those that we consider to be material. These risks and uncertainties take into account ~~the~~our ~~completed~~recently ~~Avenova~~adopted ~~Asset~~blockchain-based ~~Sale~~strategy ~~and the Wound Care Divestiture~~ under the heading “Risks ~~Relating~~related to Our ~~Business~~Blockchain-Based Strategy,” as well as the ~~potential~~completed ~~that~~Avenova weAsset ~~will~~Divestiture ~~effect~~and the ~~Dissolution~~PhaseOne ofDivestiture ~~our Company or pursue other strategic alternatives, including a Potential Strategic Transaction (as defined below)~~ under the heading “Risks Relating to ~~the~~Our ~~Potential Dissolution of our Company and Potential Strategic Transaction~~Business.” Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our ~~business~~blockchain-based strategy, ~~the potential Dissolution of~~ our ~~Company~~business, ~~any other strategic alternatives,~~ or ownership of our common stock. It is important to note that our past financial performance will not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Please also read carefully the section in this annual report above entitled “Special Note Regarding Forward-Looking Statements.”

~~Risks~~Risk ~~Relating~~Factor ~~to Our Business~~Summary

AsThe aprincipal ~~result~~risks ofthat ~~the~~could ~~completion~~materially ~~of the Avenova Asset Sale~~ and ~~the~~adversely ~~Wound~~affect ~~Care~~us ~~Divestiture~~include, weamong noothers, ~~longer~~the ~~have a significant revenue generating business.~~following:

~~Prior~~Risks toRelated the Avenova Asset Sale, our principal assets, product offerings and business primarily consisted of the production and commercialization of Avenova products, which was responsible for a majority of our revenue from 2015 until the completion of the Avenova Asset Sale. After completion of the Avenova Asset Sale and the Wound Care Divestiture in January 2025, our business operations and ability to ~~generate~~Our ~~revenue~~Blockchain-Based has been significantly reduced with a few remaining employees, limited operations, including fulfilling remaining contractual obligations for the manufacture and delivery of wound care products and performance of the services contemplated by the PRN Transition Services Agreement. Accordingly, until we either commence the Dissolution or complete an alternative strategic transaction, we will be generating minimal revenue and without currently having a significant underlying business to generate meaningful revenue, particularly when compared to our historic financial performance.Strategy:

~~The~~● ~~cash~~We ~~proceeds~~have ~~from~~adopted ~~the~~a ~~Avenova~~blockchain-based ~~Asset~~asset ~~Sale~~strategy ~~and~~with ~~the~~a ~~Wound~~focus ~~Care~~on ~~Divestiture~~SKY, ~~will~~and ~~continue~~we tomay be ~~used~~unable to ~~fund~~successfully ~~our~~implement ~~expenses~~this ~~and~~new ~~ongoing liabilities until we are able to commence the Dissolution or pursue another strategic alternative, which will deplete our remaining cash assets~~strategy.

~~Until~~● weThe ~~are~~Sky ~~able~~network ~~to wind down our remaining business and operations through the Dissolution process~~ (or weSky ~~pursue~~Protocol) ~~another~~involves ~~strategic~~significant ~~alternative~~risks ~~available~~that ~~to us, which could include bankruptcy proceedings, then~~ we ~~will~~are ~~continue~~unable incurring expenses for our continuing operations, including the ongoing disclosure and compliance obligations as a public reporting company, such as the preparation and filing of this annual report, and utilize the cash on hand that is comprised primarily of the proceeds from the Avenova Asset Sale and the Wound Care Divestiture to ~~fund those expenses and to satisfy our liabilities~~control. As a result, the longer it takes to complete the Dissolution or pursue another strategic alternative, the more our remaining cash assets will be depleted and limit potential distributions to stockholders, if any.

We● ~~remain~~Our ~~liable~~historical ~~for~~financial ~~claims~~statements ~~and~~do ~~expenses~~not ~~that~~reflect ~~may~~the ~~arise~~potential ~~related~~variability toin ~~our~~earnings ~~business~~that ~~operations~~we ~~prior~~may toexperience in the ~~completion~~future ofrelating ~~the~~to ~~Avenova~~our ~~Asset~~SKY ~~Sale~~holdings and ~~the Wound Care Divestiture~~activities.

~~Pursuant~~● toSKY’s ~~the~~status ~~Purchase~~as ~~Agreement~~an ~~for~~asset ~~the~~that ~~Avenova~~may ~~Asset~~potentially ~~Sale~~be ~~and~~deemed ~~the Trademark Acquisition Agreement for the Wound Care Divestiture, NovaBay generally retained pre-closing liabilities related~~ to ~~the~~be ~~operation~~offered ~~of its eye care~~ and ~~wound~~sold ~~care~~as ~~business,~~a ~~which~~“security” ~~may~~in ~~include~~any ~~amounts~~relevant ~~owed~~jurisdiction, toas ~~our~~well ~~suppliers~~as ~~and potential claims related to products we sold or~~ the ~~marketing~~status of ~~our~~SKY-related products ~~during~~and ~~the~~services ~~time~~that we ~~operated such business. While we are not aware of any such liabilities that~~ may beengage ~~material and have adequately accrued for these liabilities, there can be no assurances that additional expenditures will not be incurred~~ in ~~resolving these liabilities~~, ~~which~~including ~~may~~staking ~~impact our financial condition~~ and ~~the~~other ~~amount~~protocol ofparticipation ~~proceeds~~activities, ~~available~~is ~~(if~~subject ~~any)~~to inregulatory ~~the Dissolution~~uncertainty.

●

Regulatory uncertainty surrounding blockchain-based assets within emerging financial infrastructure and network-based markets, including potential classification as securities and the risk of investment company status, could adversely affect our business, financial condition, and results of operations.

●

We face risks relating to the use of third-party trading platforms in connection with our SKY-focused strategy.

●

Our financial results and the market price of our common stock may be affected by the prices of the assets held by us, and evolving accounting standards may increase earnings volatility and reporting complexity.

●

A cyberattack or other malicious attack on the SKY Protocol could have a material impact on the value of SKY held by the Company.

●

We face risks relating to the custody of our SKY tokens.

●

Decentralized finance arrangements may expose us to risks.

●

Our SKY strategy exposes us to risk of non-performance by counterparties.

●

Our ability to generate income from our blockchain-based asset holdings is subject to significant uncertainty.

●

Political or economic crises may motivate large-scale sales of blockchain-based assets.

●

Proof-of-stake blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of time as traditional proof-of-work blockchains.

●

SKY can be subject to extreme price volatility, and declines in its value could materially and adversely affect our financial condition.

●

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.

●

The reliance on open-source code by blockchain-based asset networks exposes us to risks related to competitive networks and products built on such code.

●

There are risks relating to USDS and the acceptance of stablecoins as a payment method.

●

The emergence or growth of other digital assets could have a negative impact on the price of SKY and adversely impact our business.

●

Stablecoins such as USDS face significant competitive and regulatory challenges.

●

If interest rates rise or other opportunities in external DeFi protocol or traditional finance become more attractive, our digital asset strategy may underperform or become unsustainable.

●

The Company’s digital asset holdings may not be able to serve as a source of liquidity.

●

Taxation of blockchain-based assets is complex and evolving.

●

Our blockchain-based asset strategy business model has multiple layers of corporate finance risks.

●

Our blockchain-based asset treasury strategy and any decision to hold blockchain-based assets may increase our exposure to market volatility and potential uninsured losses.

●

The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.

●

The concentration of our blockchain-based asset holdings enhances the risks inherent in our treasury strategy.

●

Investors in our January 2026 Private Placement have certain consent rights that may influence our Digital Asset Strategy.

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Risks Relating to Our Business:

●

Our quarterly operating results, revenues, and expenses may fluctuate significantly.

●

Significant disruptions of information technology systems or breaches of information security could adversely affect our businesses.

●

If we fail to fully comply with privacy and data protection laws and regulations, we could incur significant civil and criminal penalties and liabilities, suffer reputational damage, and adverse publicity.

●

Employee or agent misconduct, or our failure to comply with anti-bribery and other laws or regulations, could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

●

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results.

●

Business disruptions could materially adversely affect our operating results or result in a material weakness in our internal controls that could adversely affect the market price of our stock.

●

If we are unable to recruit or retain skilled personnel, or if we lose the services of our current leadership, our business, operating results, and financial condition could be materially adversely affected.

●

We may be unable to raise additional capital when needed or on acceptable terms, and future financings may be highly dilutive.

●

We no longer have a significant revenue generating wound care business.

●

We remain liable for claims, expenses and contingent liabilities that may arise related to our business operations prior to the completion of the Avenova Asset Divestiture and the PhaseOne Divestiture.

●

We may be subject to litigation, which is expensive and could divert our attention.

Risks Relating to Owning Our Common Stock

●

The price of our common stock may fluctuate substantially, which may result in losses to our stockholders.

●

Provisions of our charter, by-laws and Delaware law may have anti-takeover effects that could prevent a change in control even if the change in control would be beneficial to our stockholders.

●

Offers of new securities or availability for sale of a substantial number of shares of our common stock may cause the price of our publicly traded securities to decline, and our common stock may trade at a discount to our net asset value.

●

We are subject to the continued listing standards of the NYSE American.

●

We may issue additional shares of equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.

●

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

●

Our stockholders may experience significant dilution as a result of the potential exercise of outstanding pre-funded warrants.

●

We do not expect to pay dividends or repurchase stock in the future.

●

Changes in our senior executive management team could adversely affect our ability to operate our business.

The summary above is qualified in its entirety by the more complete risk factors set forth below.

Risks Related to Our Blockchain-Based Strategy

We have adopted a blockchain-based asset strategy with a focus on SKY, and we may be unable to successfully implement this new strategy.

We have adopted a blockchain-based asset acquisition strategy primarily dedicated to SKY, including staking and other decentralized finance activities. There is no assurance that we will be able to successfully implement this new strategy or operate SKY-related activities at the scale or profitability currently anticipated. This also requires that we implement different security protocols. There is no assurance that we will be able to execute this strategy by building out the needed infrastructure within the timeframe that we currently anticipate. Errors by key management could result in significant loss of funds and reduced rewards. As a result, our shift towards SKY could have a material adverse effect on our business and financial condition.

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The Sky network (or Sky Protocol) involves significant risks that we are unable to control.

The Sky Protocol (formerly known as MakerDAO) is a decentralized protocol developed around the USDS stablecoin that is managed by Sky ecosystem governance. It is a non-custodial, blockchain-based software protocol consisting of open-source, self-executing, autonomous smart contracts that are currently deployed on the Ethereum blockchain.

USDS is the native stablecoin of the Sky Protocol. USDS was introduced in late 2024 as an upgraded version of the DAI stablecoin. USDS is intended to maintain a soft 1:1 reference value relative to the U.S. dollar by maintaining collateral within the ecosystem through protocol-defined economic mechanisms and market-based incentives. In particular, users generate USDS by depositing approved collateral (e.g., ETH) into Sky Protocol “vaults” and borrowing USDS against it. Each vault has a minimum collateralization ratio to help ensure the borrowed USDS is excessively backed by the collateral’s USD value. If the collateral value falls below the threshold, an automatic liquidation is triggered: the collateral is sold to repay USDS, aiming to prevent under-collateralization. This mechanism is intended to keep USDS properly backed at all times and helps maintain the peg.

The value and utility of SKY and USDS are highly dependent on the performance, stability and continued adoption of the Sky Protocol, which is subject to significant technical, market, governance, regulatory and operational risks. The Sky Protocol is a complex, evolving digital asset protocol involving smart contracts, on-chain governance, algorithmic and market-based mechanisms, third-party integrations and decentralized infrastructure. Any failure, disruption or degradation of this ecosystem could materially and adversely affect the value, liquidity and functionality of SKY, USDS and any products or services built on the protocol. Exploitation of such weaknesses could result in the loss of user funds, disruption of protocol operations, unintended issuance or destruction of USDS, incorrect liquidations, or other outcomes that could materially impair the ecosystem and reduce confidence in SKY and USDS.

USDS is designed to maintain a stable value relative to the U.S. dollar through collateralization, protocol incentives, liquidation mechanisms and market participation. These mechanisms may fail to operate as intended during periods of extreme market volatility, rapid changes in collateral valuations, liquidity shortages, system congestion, governance delays, or sustained market stress. If confidence in USDS declines or redemptions exceed available liquidity, USDS may trade at a significant discount to its intended peg. Any prolonged or material de-pegging event could trigger a loss of confidence in the Sky ecosystem and materially impair the value and adoption of both USDS and SKY, which would have a material adverse effect on the value of the Company’s holdings.

USDS is backed by digital asset collateral whose market values may decline rapidly and unpredictably. Sharp declines in collateral prices may cause collateralization ratios to fall below required thresholds, triggering large-scale liquidations. Liquidations executed during periods of illiquidity or market stress may fail to recover sufficient value to support the outstanding USDS supply, potentially resulting in losses to the protocol and contributing to a de-pegging of USDS. The protocol’s ability to maintain the stability of USDS and support market activity depends on the availability of sufficient on-chain and off-chain liquidity. During periods of heightened volatility or market disruption, liquidity may evaporate, impairing redemptions, liquidations, collateral conversions and price discovery. Insufficient liquidity could exacerbate losses, contribute to prolonged de-pegging of USDS and undermine confidence in the ecosystem.

Governance of the Sky Protocol is conducted through ownership and voting of SKY. A small number of holders may control a substantial portion of the voting power, allowing them to exert significant influence over protocol parameters, economic incentives, risk management policies, collateral types, interest rates and other core functions. Governance outcomes may be unpredictable, may not align with the interests of all participants, and may materially alter the risk profile, economics or functionality of the ecosystem.

Sky Star Agents, informally called Stars, are decentralized projects within Sky Ecosystem, designed to enable focused, fast-moving innovation and development within the Sky Protocol. They are created by their founders or joint partners, who define the strategy and operating processes of the Star while also specifying the business logic and innovation goals. Stars may pursue initiatives, implement software, or engage in activities that are experimental, untested, or otherwise subject to significant technological, legal, regulatory, and operational uncertainties. Failures, vulnerabilities, malfunctions, exploits, governance disputes, misaligned incentives, fraud, misconduct, regulatory violations, or financial losses at the Star level could impair the functionality, reputation, adoption, and perceived integrity of the Sky ecosystem as a whole. Any material adverse developments involving one or more Stars may undermine confidence in the Sky Protocol, reduce demand for SKY, disrupt ecosystem growth, and result in losses for the Company.

Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our SKY holdings and activities. Accordingly, it may be difficult to evaluate the Company’s business and future prospects, and the Company may not be able to achieve or maintain profitability in any given period.

We purchase blockchain-based assets, including SKY, the price of which has been, and will likely continue to be, highly volatile. Our financial results and the market price of our common stock could be materially adversely affected if the price of SKY decreased substantially, as it has in the past, including as a result of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements.

Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of SKY.

The price of SKY has historically been subject to significant price fluctuations and is highly volatile.

Because we intend to purchase additional SKY in future periods and increase our overall holdings of SKY, we expect that the proportion of our total assets represented by SKY holdings will increase in the future. We may also in the future purchase other blockchain-based assets with similar exposure to volatility. As a result, volatility in our earnings in future periods may be significantly more than what we experienced in prior periods, and it may be difficult to evaluate the Company’s business and future prospects. We may also need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our blockchain-based assets are impaired.

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WeSKY’s ~~are~~status ~~subject~~as an asset that may potentially be deemed to ~~contingent~~be ~~liabilities~~offered and sold as a “security” in any relevant jurisdiction, as well as the status of SKY-related products and services that we may engage in, including staking and other protocol participation activities, is subject to regulatory uncertainty, and if the ~~Avenova~~Company ~~Asset~~is ~~Sale~~unable ~~and~~to properly characterize such products or services, the ~~Wound~~Company ~~Care~~may ~~Divestiture~~be ~~that~~subject ~~could~~to ~~have~~regulatory ascrutiny, ~~material~~inquiries, ~~adverse~~investigations, ~~effect~~fines onand other penalties, which may adversely affect our business, operating results and financial condition.

~~Pursuant~~The toSEC ~~the~~and ~~Purchase~~its ~~Agreement~~staff ~~for~~in the ~~Avenova~~past ~~Asset~~have ~~Sale,~~taken the ~~purchase~~position ~~price~~that ~~is subject to~~ a ~~post-closing~~range ~~working capital adjustment, upward or downward, that will be limited to an amount~~ of updigital ~~to $500~~assets,~~000.~~ ~~The~~as ~~Net~~well ~~Working~~as ~~Capital~~products ~~Adjustment will be mutually determined by us~~ and ~~PRN~~services ~~commencing~~related ~~April 17, 2025 (ninety (90) days after the closing of the Avenova Asset Sale). If the Net Working Capital Adjustment is determined~~ to bedigital ~~in favor of PRN~~assets, itmay ~~would~~fall ~~reduce~~within ~~up to~~ the ~~full~~definition ~~amount~~ of ~~the $500,000 that was placed into~~ an ~~escrow~~investment ~~account~~contract atthat ~~the~~is ~~closing~~offered ofor ~~the~~sold ~~Avenova~~as ~~Asset~~a ~~Sale~~“security” ~~until~~under the ~~six~~U.S. ~~(6)~~federal ~~month~~securities ~~anniversary of closing, or July 17, 2025~~laws. AsIn ~~part~~connection ofwith ~~the~~our ~~Avenova~~business ~~Asset Sale~~strategy, we ~~also~~expect ~~agreed~~ to ~~indemnify~~hold ~~PRN~~SKY ~~for~~and ~~breaches~~may ofengage ~~any representation, warranty, or covenant made by us~~ in ~~the~~Sky-related ~~Purchase Agreement~~activities, ~~for~~including ~~losses~~participating ~~arising out of or~~ in ~~connection~~staking ~~with excluded assets~~ or ~~excluded~~delegation ~~liabilities,~~arrangements and ~~for~~receiving ~~certain~~staking ~~other~~or ~~matters,~~protocol ~~subject~~rewards. ~~to,~~Each inof ~~certain~~these ~~cases,~~activities ~~customary~~involves ~~deductibles and caps and exceptions to such deductibles and caps, including in~~ the ~~case~~use of ~~fraud.~~SKY ~~Successful~~in ~~indemnification~~ways ~~claims~~that byhave ~~PRN~~not ~~would~~been ~~first reduce~~ the ~~Escrow,~~subject ~~and~~of ~~thereafter,~~definitive ~~NovaBay~~regulatory ~~would be directly responsible for any indemnification claims~~guidance.

~~Separately~~The legal test for determining whether any given digital asset, ~~pursuant~~product toor ~~the~~service ~~Trademark~~that ~~Acquisition~~is ~~Agreement~~offered ~~for~~and ~~the~~sold ~~Wound~~is ~~Care~~an ~~Divestiture,~~investment wecontract ~~also~~was ~~agreed~~set toforth ~~provide~~in ~~limited~~the ~~indemnification~~1946 toU.S. ~~Phase~~Supreme ~~One~~Court ~~for~~case ~~losses~~SEC ~~arising~~v. ~~from~~W.J. Howey Co. and requires a ~~third~~highly complex, fact-~~party~~driven ~~claim~~analysis. ~~involving~~Accordingly, awhether ~~material~~SKY, ~~breach~~or any SKY-related product or ~~nonperformance~~service ofthat ~~representations,~~we ~~warranties,~~may ~~covenants~~engage in, ~~agreements~~would ultimately be deemed to be offered or sold as a security is uncertain and ~~obligations~~difficult ofto ~~the~~predict, ~~Company~~notwithstanding ~~contained~~any inconclusions ~~the~~we ~~Trademark~~may ~~Acquisition~~draw ~~Agreement~~based on our internal, risk-based assessments. ~~Our~~Further, ~~liability~~even ~~for~~if ~~indemnification~~SKY ofis ~~Phase~~not ~~One~~determined ~~for~~to ~~any~~be a security, certain SKY-related activities, such ~~losses~~as isstaking, ~~limited~~delegation, tolending, ~~50%~~reward ofor yield-generating programs, or the ~~purchase~~provision ~~price~~of ~~for~~services ~~the~~that ~~Wound~~facilitate ~~Care~~such ~~Trademarks~~activities, could be deemed to constitute securities offerings or ~~$250~~derivatives ~~thousand~~or to involve regulated intermediaries under applicable securities laws.

~~Any~~Regulatory ~~Net~~uncertainty ~~Working~~surrounding ~~Capital~~blockchain-based ~~Adjustment~~assets inwithin ~~favor~~emerging offinancial ~~PRN~~infrastructure orand ~~successful~~network-based ~~claims~~markets, ~~for~~including ~~indemnification~~potential ~~made~~classification byas ~~PRN~~securities ~~will~~and ~~reduce~~ the ~~Escrow~~risk ~~payable~~of toinvestment uscompany ~~or otherwise be payable by us from our cash assets~~status, ~~and~~could ~~any~~adversely ~~successful~~affect ~~claims for indemnification made by Phase One will be payable by us from~~ our ~~cash assets~~business, ~~which,~~financial ~~in any of these circumstances~~condition, ~~would further reduce the amount of our cash assets~~ and ~~the~~results ~~amount~~ of ~~cash that may ultimately be available for distribution to our stockholders in the Dissolution or otherwise, if any~~operations.

WeBlockchain-based ~~may~~assets, besuch ~~subject~~as SKY and other tokens and protocols, are relatively novel, and the application of U.S. federal and state securities laws, the Investment Company Act of 1940, as amended (the “1940 Act”), and other legal and regulatory frameworks to ~~litigation~~such assets remains unsettled. While proposed legislation-such as the Digital Asset Market Clarity Act of 2025-seeks to establish a more definitive framework for distinguishing between digital commodities and digital securities and to clarify the jurisdictional boundaries between the Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”), ~~which~~such islegislation ~~expensive~~has not yet been enacted and ~~could~~remains ~~divert~~subject ~~our~~to ~~attention~~change. As a result, the regulatory treatment of blockchain-based assets continues to be uncertain.

AsRegulators ain ~~result of having completed~~ the ~~Avenova~~United ~~Asset~~States ~~Sale~~or ~~and~~in ~~the~~foreign ~~Wound~~jurisdictions ~~Care~~may ~~Divestiture~~interpret or ~~addressing~~enforce ~~our~~ existing ~~obligations~~laws and ~~outstanding~~regulations ~~liabilities~~in toways ~~third~~that ~~parties~~adversely oraffect ~~otherwise in connection with~~ the ~~Dissolution~~classification, ~~we may be subject to potential litigation~~transferability, ~~including commercial litigation~~ or ~~claims~~value ~~by holders~~ of ~~our~~blockchain-based ~~securities~~assets, ~~including~~or ~~securities~~may ~~class~~adopt ~~action~~new ~~litigation.~~laws Weor ~~recently~~pursue ~~settled~~enforcement ~~disputes~~or ~~with~~judicial ~~three~~actions ~~warrant holders of the Company~~ that ~~resulted~~materially inimpact ~~the~~network-based ~~aggregate~~markets. ~~net~~While ~~payment~~it ofis ~~$1,466,511~~our tointention ~~such warrant holders, which amount reflects a reduction of the aggregate exercise price paid by such warrant holders~~ to ~~the~~acquire ~~Company~~and indeploy ~~connection~~blockchain-based ~~with~~assets ~~such~~that ~~settlement~~are ofnot ~~$348,337.~~securities ~~Litigation~~and ~~could~~that ~~also~~would ~~arise~~not ~~from~~expose ~~our~~us ~~prior operations, and related~~ to ~~products~~regulatory ~~sold~~scrutiny, ~~before~~ the ~~completion~~legal ofuncertainty ~~the~~in ~~Avenova~~this ~~Asset~~area ~~Sale~~may ~~and~~cause ~~the~~us ~~Wound~~to ~~Care Divestiture~~miscalculate. ~~Any~~If ~~such~~any ~~claims,~~blockchain-based ~~with~~assets orwe ~~without~~hold ~~merit,~~ or ~~litigation~~acquire ~~initiated~~are ~~against~~later usdetermined ~~could~~to ~~result~~constitute in“securities” ~~substantial~~under ~~costs~~applicable ~~and~~law, ~~divert~~we ~~our~~could ~~remaining~~become ~~management~~subject ~~resources~~to ~~and~~additional ~~attention~~regulatory ~~from~~obligations ~~completing the Dissolution in a timely manner~~ or ~~pursuing another strategic alternative~~restrictions, ~~which~~including ~~could~~under ~~increase our expenses, ultimately decrease~~ the ~~amount~~federal ofsecurities ~~our~~laws ~~cash~~ and ~~other assets available for distribution (if any) to our stockholders as part of~~ the ~~Dissolution~~1940 ~~and possibly force us into a bankruptcy situation~~Act.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that the Company will be an “investment company,” as such term is defined in the 1940 Act, and it does not intend to register as an “investment company” under the 1940 Act.

While the SEC has not stated a view as to whether SKY is or is not a “security” for purposes of the federal securities laws, a determination by the SEC or a court of competent jurisdiction that SKY or any other digital assets we may hold or interact with is a security, either retroactively or prospectively, could lead to our meeting the definition of “investment company” under the 1940 Act, if the portion of our assets that consists of investments in such digital assets exceeds the 40% limit prescribed in the 1940 Act, which would subject us to significant additional regulatory requirements that could have a material adverse effect on our business and operations and may also require us to change the manner in which we conduct our business. In addition, such a determination could adversely affect the market price of SKY and in turn adversely affect the market price of the Company’s common stock.

To avoid classification as an investment company, as such term is defined in the 1940 Act, we monitor our asset composition and income and may be required to take responsive actions, including disposing of blockchain-based assets that we might otherwise hold for the long term, deploying capital into non-investment assets, incurring debt, issuing equity, or entering into other financing arrangements that may not be favorable to our business. These measures could be costly, disruptive, or executed under unfavorable market conditions, and there is no assurance that they would be successful in enabling us to remain outside the scope of the 1940 Act.

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~~Significant~~Further, ~~disruptions~~state ofregulators ~~information~~may ~~technology~~conclude ~~systems~~that orthe ~~breaches~~blockchain-based ofassets ~~information~~we ~~security~~hold ~~could~~are ~~adversely~~securities ~~affect~~under ~~our~~state ~~businesses~~laws, requiring us to comply with state-specific securities regulations. States like California have stricter definitions of “investment contracts” than the SEC, increasing the risk of additional regulatory scrutiny.

WeThe ~~relied~~U.S. ~~upon~~federal ~~information~~government, ~~technology~~states, ~~systems~~regulatory toagencies, ~~historically~~and ~~operate~~foreign ~~eye~~countries ~~care~~may ~~and~~also ~~wound~~enact ~~care~~new ~~businesses,~~laws and weregulations, ~~continue~~or topursue ~~use~~regulatory, ~~such~~legislative, ~~systems~~enforcement inor ~~our~~judicial ~~performance~~actions, ofthat ~~the~~could ~~PRN~~materially ~~Transition~~impact ~~Services Agreement. In~~ the ~~ordinary~~price ~~course~~ of ~~business,~~SKY weor ~~have~~the ~~collected,~~ability ~~stored and transmitted large amounts~~ of ~~confidential~~individuals ~~information~~or ~~(including,~~institutions ~~but~~such ~~not~~as ~~limited~~us to, ~~personal~~own ~~information~~or ~~and~~transfer ~~intellectual~~SKY ~~property),~~ and weutilize ~~continue~~blockchain-based toapplications ~~deploy~~on ~~and~~networks ~~operate~~such anas ~~array~~SKY. ofFor ~~technical~~example, ~~and~~the ~~procedural~~U.S. ~~controls~~executive tobranch, ~~maintain~~the SEC, the ~~confidentiality~~European ~~and~~Union’s ~~integrity~~Markets ofin ~~such~~Crypto ~~confidential~~Assets ~~information.~~Regulation, Weamong ~~also~~others, have ~~outsourced~~been ~~aspects~~active ofin ~~our~~recent ~~operations to third parties~~years, ~~including~~and ~~significant~~in ~~elements~~the ofUnited ~~our~~Kingdom, ~~information~~the ~~technology~~Financial ~~infrastructure~~Services and, asMarkets aAct ~~result,~~2023 webecame ~~have~~law. ~~managed~~It ~~independent~~is ~~vendor~~not ~~relationships~~possible ~~with~~to ~~third~~predict ~~parties~~whether, ~~who may~~ or ~~could~~when, ~~have~~any ~~access~~of tothese ~~our~~developments ~~confidential~~will ~~information.~~lead ~~The~~to ~~size~~Congress ~~and~~granting ~~complexity~~additional ofauthorities ~~our~~to ~~information~~the ~~technology~~SEC, ~~and~~CFTC, ~~information~~or ~~security~~other ~~systems~~regulators, ~~and~~or ~~those~~whether, ofor ~~our~~when, ~~third-party~~any ~~vendors~~other ~~with~~federal, ~~whom~~state weor ~~contract,~~foreign ~~make~~legislative ~~such~~bodies ~~systems~~will ~~potentially~~take ~~vulnerable~~any tosimilar ~~service~~actions. ~~interruptions~~It oris toalso ~~security~~not ~~breaches~~possible ~~from~~to ~~inadvertent~~predict orthe ~~intentional~~nature ~~actions~~of byany ~~our~~such ~~employees~~additional ~~or vendors~~authorities, orhow ~~from~~additional ~~attacks~~legislation byor ~~malicious~~regulatory ~~third~~oversight ~~parties.~~might ~~Such~~impact ~~attacks~~the ~~are~~ability of ~~ever~~blockchain-~~increasing~~based ~~levels~~asset ofmarkets ~~sophistication~~to ~~and~~function ~~are~~or ~~made~~the bywillingness ~~groups and individuals with a wide range~~ of ~~motives~~financial and ~~expertise,~~other ~~including~~institutions ~~organized~~to ~~criminal~~continue ~~groups,~~to ~~“hacktivists,”~~provide ~~nation~~services ~~states~~to ~~and~~the ~~others.~~blockchain-based ~~While~~assets weindustry, ~~have~~nor ~~invested~~how inany ~~the~~new ~~protection~~regulations ofor ~~data~~changes ~~and~~to ~~information~~existing ~~technology,~~regulations ~~there~~might ~~can~~impact bethe novalue ~~assurance~~of ~~that~~blockchain-based ~~our~~assets ~~efforts~~generally ~~will~~and ~~prevent~~SKY ~~service~~specifically. ~~interruptions~~The orconsequences ~~security~~of ~~breaches.~~increased ~~Any~~regulation ~~such~~of ~~interruption~~blockchain-based orassets ~~breach~~and ofblockchain-based ~~our~~asset ~~systems~~activities could adversely affect ~~us and/or result in~~ the ~~loss~~market price of ~~critical~~SKY ~~or sensitive confidential information or intellectual property,~~ and ~~could~~in ~~result~~turn inadversely ~~financial,~~affect ~~legal,~~the ~~business~~market ~~and~~price ~~reputational~~of ~~harm~~our tocommon usstock.

~~Risks~~In ~~Relating~~addition, the evolving regulatory environment surrounding blockchain-based assets has introduced complications related to ~~the~~insurance ~~Potential~~coverage ~~Dissolution~~and ofmarket perception. For example, our ~~Company~~engagement in blockchain-based asset activities may result in increased costs for director and ~~Potential~~officer ~~Strategic~~liability ~~Transaction~~insurance or limit our ability to obtain such coverage on acceptable terms. Further regulatory developments-whether through legislation, rulemaking, enforcement, or judicial decisions-could continue to impose operational, legal, and financial risks that adversely impact our blockchain-based asset strategy and broader business performance.

~~There~~We ~~can~~face berisks norelating ~~guarantees~~to ~~that~~ the ~~Dissolution~~use ~~will~~of bethird-party ~~completed~~trading ~~and,~~platforms ifin ~~not~~connection ~~completed,~~with itour ~~may~~SKY-focused ~~be very difficult for us to identify strategic alternatives to maximize the remaining value for NovaBay and its stockholders~~strategy.

~~The~~We ~~Dissolution~~use isthird-party ~~subject~~trading toplatforms, ~~approval~~which bywe ~~our~~believe ~~stockholders~~are reputable, ~~which~~as well as reputable over-the-counter brokers to purchase SKY and other tokens that we ~~are~~may ~~seeking~~use atin the ~~New~~future. ~~Special~~As ~~Meeting.~~part ~~While~~of our process in determining transactions with third-party exchanges, we ~~continue~~search tofor ~~believe~~reputable exchanges that ~~the~~have ~~Dissolution~~industry isstandard ~~currently~~policies ~~the~~and ~~best~~procedures ~~opportunity~~in ~~for~~place usregarding todata ~~maximize~~security ~~the~~and ~~remaining~~customer ~~value~~diligence ofrelated ~~the~~to ~~Company~~anti-money ~~for~~laundering, ~~our~~Office ~~stockholders,~~of ~~there~~Foreign ~~are~~Assets ~~risks~~Control sanctions compliance, and ~~uncertainties~~know-your-customer asrules toand ~~whether~~regulations. ~~stockholders~~If ~~will~~any ~~approve~~of ~~the~~these ~~Dissolution~~third-party atexchanges ~~the~~no ~~New~~longer ~~Special~~meet ~~Meeting,~~our ~~including~~standards ~~taking~~or ~~into~~if ~~consideration~~there ~~that~~is wea ~~were~~decrease ~~not~~in ~~able~~reputable tothird-party ~~obtain~~exchanges, ~~stockholder~~we ~~approval~~may ~~for~~need ~~the~~to ~~Dissolution~~find atadditional ~~our~~counterparties ~~previously~~and ~~held~~enter ~~special~~into ~~meeting~~additional ofagreements ~~stockholders~~that ~~convened~~could be on ~~November~~less ~~22,~~favorable ~~2024~~terms, ~~and~~which ~~subsequently~~could ~~adjourned~~have ~~and~~a ~~finally~~material ~~reconvened~~adverse effect on ~~January~~our 30business, ~~2025~~financial condition or the results of our operations.

IfIn itaddition, isthere ~~not~~has ~~completed~~been ~~for~~increasing ~~any~~focus ~~reason,~~on wethe ~~may~~extent ~~have~~ to ~~continue~~which ~~our~~blockchain-based ~~limited~~assets ~~business~~can ~~operations~~be ~~while~~used ~~exploring~~to ~~other~~launder ~~strategic~~the ~~alternatives~~proceeds ~~that~~of ~~are~~illegal ~~available~~activities, tofund ~~return~~criminal ~~capital~~or toterrorist ~~stockholders~~activities, inor acircumvent ~~manner~~sanctions ~~intended~~regimes, toincluding ~~maximize~~those ~~value.~~sanctions ~~Given~~imposed ~~our~~in ~~past~~response ~~voting challenges with respect~~ to the ~~Dissolution,~~ongoing weconflict ~~have~~between ~~engaged~~Russia aand ~~financial~~Ukraine ~~advisor~~and tosanctions ~~explore~~programs ~~additional~~administered ~~strategic~~by ~~options,~~the ~~which~~U.S. ~~may~~Department ~~include~~of ~~mergers,~~the ~~reverse~~Treasury’s ~~mergers,~~Office ~~strategic~~of ~~partnerships,~~Foreign ~~and~~Assets ~~licensing~~Control ~~and sub-licensing transactions~~ (“~~Potential Strategic Transaction~~OFAC”)~~. However~~, ~~particularly~~including inthose ~~light~~relating ofto ~~our~~countries ~~limited~~such ~~business~~as ~~operations~~Iran, ~~our~~North ~~recent~~Korea ~~completion~~and ofSyria. ~~the~~If ~~Avenova~~we ~~Asset~~are ~~Sale~~found ~~and~~to ~~the~~have ~~Wound~~purchased ~~Care~~any ~~Divestiture (constituting substantially all~~ of our ~~assets),~~SKY ~~our~~from ~~announced~~bad ~~intent~~actors tothat ~~complete~~have ~~the~~used ~~Dissolution,~~SKY ~~and~~to ~~the~~launder ~~generally~~money ~~competitive~~or ~~market~~persons ~~for~~subject ~~such~~to ~~a Potential Strategic Transaction~~sanctions, ~~our~~we ~~efforts to identify other business strategies~~ may be ~~hindered~~subject ~~and~~to weregulatory ~~may~~proceedings ~~not~~and beany ~~able~~further totransactions ~~identify~~or andealings ~~alternate~~in ~~transaction~~SKY onby ~~the~~us ~~necessary~~may ~~timing~~be ~~before~~restricted ~~our~~or ~~cash runs out~~prohibited.

~~Even~~Our iffinancial weresults ~~are able to identify~~ and ~~pursue~~the amarket ~~Potential~~price ~~Strategic~~of ~~Transaction,~~our ~~any~~common ~~such~~stock ~~alternatives~~ may ~~not~~be ~~result~~affected inby ~~greater (or even equivalent) stockholder value than~~ the ~~proposed~~prices ~~Dissolution and such alternatives may entail additional risks and costs. As a result~~ of ~~such~~the ~~risks~~assets orheld ifby ~~we do not identify a Potential Strategic Transaction~~us, ~~there~~and isevolving aaccounting ~~high~~standards ~~probability that, in such situation, we~~ may ~~have~~increase toearnings ~~cease~~volatility ~~all~~and ~~operations,~~reporting ~~make an assignment for the benefit of any creditors, turn NovaBay over to a third-party management company or liquidator or file for bankruptcy protection~~complexity. ~~If we fail to successfully execute the Dissolution or a Potential Strategic Transaction, our shareholders may lose their entire investment.~~

As part of our capital allocation strategy for assets not required for working capital, we intend to acquire SKY and may acquire other blockchain-based assets. The price of blockchain-based assets has historically experienced significant volatility and fluctuations, which could materially impact the fair value of our portfolio and cause substantial variability and volatility in our reported earnings. The application of GAAP to crypto assets is evolving and remains subject to interpretation and possible changes, which could require retrospective adjustments or impact our financial statements in the future.

If investors view the value of our common stock as linked to our blockchain-based asset holdings, fluctuations in the value of these assets may significantly influence the market price of our common stock. A decline in our blockchain-based asset portfolio value could adversely affect the market price of our common stock and our financial results.

There can be no assurance that our blockchain-based asset acquisition strategy will achieve its intended financial or risk management objectives. We may incur unexpected losses, increased volatility in reported earnings, or adverse regulatory or accounting consequences as a result of this strategy.

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WeA ~~cannot~~cyberattack ~~assure~~or ~~you~~other asmalicious toattack on the ~~amount~~SKY ofProtocol ~~distributions,~~could ifhave ~~any,~~a tomaterial beimpact ~~made~~on tothe ~~our~~value ~~stockholders~~of SKY held by the Company.

ToSKY ~~the~~and ~~extent~~other weblockchain-based ~~proceed~~assets ~~with~~and the ~~Dissolution,~~entities wethat ~~cannot~~provide ~~predict~~services ~~with certainty the timing, amount, or number of distributions, if any,~~ to ~~our~~participants ~~stockholders.~~in Asblockchain ofecosystems ~~February~~have 28been, ~~2025, we had approximately $10.4 million in cash~~ and ~~cash~~may equivalents. We currently estimate that we will expend between $6.8 million and $9.9 million after March 1, 2025, which would be used to pay all expenses (including operating expenses up until the filing of a certificate of dissolution with the Secretary of State of the State of Delaware (the “Certificate of Dissolution”) in ~~accordance with~~ the ~~Delaware~~future ~~General Corporation Law (the “DGCL”)) and other known~~be, ~~non-contingent~~subject ~~liabilities,~~to ~~and~~security ~~which also includes reasonable provision for expenses of liquidation and potential~~breaches, contingent or unknown liabilities as required by Delaware law. We currently estimate that the aggregate amount of liquidating distributions to stockholders will be between $0.7 million and $5.6 millioncyberattacks, or ~~between~~other ~~$0.13~~malicious ~~and $0~~activities.97 ~~per~~For ~~share of common stock (based on 5~~example,~~831,269~~ ~~shares~~in ofOctober ~~common~~2021 ~~stock~~it ~~and~~was ~~other~~reported ~~equity~~that ~~outstanding~~hackers asexploited ofa ~~March~~flaw ~~18, 2025). This amount may be paid~~ in ~~one or more distributions. Any such distributions would not occur until after~~ the ~~Certificate~~account ofrecovery ~~Dissolution~~process ~~is filed,~~ and westole ~~cannot~~from ~~predict~~ the ~~timing~~accounts ~~or amount~~ of ~~any~~at ~~such~~least ~~distributions~~6,000 orcustomers ~~whether any such distributions will occur, as uncertainties as to the ultimate amount~~ of ~~our liabilities,~~ the ~~operating~~Coinbase ~~costs and amounts to be set aside for claims~~exchange, ~~obligations~~although ~~and provisions during~~ the ~~liquidation~~flaw ~~and~~was ~~winding-up~~subsequently ~~process,~~fixed and ~~the~~Coinbase ~~related~~reimbursed ~~timing~~affected tocustomers. ~~complete such transactions~~Similarly, ~~make~~in itNovember ~~impossible to predict with certainty the actual net cash amount~~2022, ifhackers ~~any,~~exploited ~~that~~weaknesses ~~will~~in ~~ultimately be available for distribution to stockholders or~~ the ~~timing~~security ofarchitecture ~~any such distributions. Examples~~ of ~~uncertainties that could reduce~~ the ~~value~~FTX ofTrading ~~distributions~~blockchain-based toasset ~~our~~exchange stockholders include: (i) our incurrence of expenses relating to the Dissolution being different than estimated; (ii) unanticipated costs relating to the defense, satisfaction or settlement of lawsuits or other claims that may be threatened against us or our current or former directors or officers; (iii) amounts necessary to resolve claims, including unforeseen claims, of any creditors or other third parties; and ~~(iv)~~reportedly ~~delays~~stole inover ~~the Dissolution or other winding up process~~$400.0 Inmillion ~~addition,~~in asblockchain-based weassets ~~wind down, we will continue to incur expenses~~ from the remaining operations, such as operating costs, severance payments, payments to any continuing employees or consultants, lease rental payments, directors’ and officers’ insurance, taxes, legal, accounting and financial advisory fees and expenses related to our filing obligations with the SEC, which will reduce amounts that will be available for distribution to our stockholders, if anycustomers. WeA ~~have~~successful ~~attempted~~security tobreach estimate reasonable reserves for such liabilities, obligations, expenses and claims against us; however, those estimates may be inaccurate. Accordingly, stockholders may receive substantially less than the amount that we currently estimate that they may receive, or ~~they~~cyberattack ~~may~~could ~~receive~~result ~~no distribution at all.~~in:

We● ~~intend to rely on the “safe harbor” procedures under Sections 280 and 281(~~a) ofpartial ~~the DGCL to, among other things, obtain an order from the Delaware Court of Chancery establishing the amount and form of security for pending claims for which the Company is a party, contingent~~ or ~~unmatured~~total ~~contract~~loss ~~claims for which the holder declined the Company’s offer~~ of aour ~~security, and unknown claims that,~~ blockchain-based on facts known to the Company, are likely to arise or become known within three (3) years of filing of the Certificate of Dissolution (or such longer period of time as the Delaware Court of Chancery may determine) (the “Court Order”), and pay or make reasonable provision for our uncontested known claims and expenses and establish reserves for other claims as required by the Court Order and the DGCL. We expect to distribute all of our remaining assets in ~~excess~~a ofmanner ~~the~~that ~~amount~~may tonot be ~~used~~covered by usinsurance toor ~~pay claims and fund~~ the ~~reserves~~liability ~~required~~provisions ~~by the Court Order and pay our operating expenses through the completion~~ of the ~~dissolution~~custody ~~and~~agreements ~~winding-up~~with ~~process to our stockholders. The Court Order will reflect~~ the ~~Delaware~~custodians ~~Court~~who ofhold Chancery’s own determination as to the amount and form of security reasonably likely to be sufficient to provide compensation for all known, contingent and potential future claims against us. There can be no assurances that the Delaware Court of Chancery will not require us to withhold additional amounts in excess of the amounts that we believe are sufficient to satisfy our ~~potential~~blockchain-based ~~claims and liabilities. Accordingly, our stockholders may not receive any distributions of our remaining~~ assets ~~for a substantial period of time, if at all, after satisfaction of all claims.~~;

As● aharm ~~result of these and other factors, we cannot assure you as~~ to ~~any amounts, if any, to be distributed to~~ our ~~stockholders~~reputation ~~if the Board proceeds with the Dissolution. If our stockholders do not approve the Dissolution at the New Special Meeting, we will not be able to proceed with the Dissolution~~ and ~~no liquidating distributions will be made.~~brand;

We● ~~cannot~~improper ~~predict~~disclosure ~~the~~of ~~timing~~data and violations of ~~the~~applicable ~~distributions~~data toprivacy ~~stockholders.~~and other laws; or

~~Our~~● ~~current~~significant ~~intention~~regulatory ~~is that~~scrutiny, ~~if the Dissolution is approved by our stockholders and the Board proceeds with the Dissolution~~investigations, ~~then the Certificate of Dissolution would be filed as soon as practical following the New Special Meeting; however~~fines, ~~ultimately~~penalties, ~~the~~and ~~decision~~other oflegal, ~~whether or not to proceed with the Dissolution will be made by the Board in its sole discretion. If our stockholders approve the Plan of Dissolution~~regulatory, ~~the~~contractual ~~Board~~and ~~has~~financial ~~not set a deadline to make its decision to proceed with the effectiveness of the Dissolution. No further stockholder approval would be required to effect the Dissolution.~~exposure,

~~Under the DGCL~~Further, ~~before a dissolved corporation may make~~ any ~~distribution~~actual toor ~~its~~perceived ~~stockholders,~~data itsecurity ~~must~~breach ~~pay~~ or ~~make~~cybersecurity ~~reasonable~~attack ~~provision~~directed toat ~~pay~~other ~~all~~companies ofwith ~~its~~blockchain-based ~~claims~~assets ~~and~~or ~~obligations,~~companies ~~including~~that ~~all~~operate ~~contingent,~~blockchain-based ~~conditional~~asset ornetworks, ~~unmatured~~regardless ~~contractual~~of ~~claims~~whether ~~known~~we toare ~~the~~directly ~~corporation~~impacted, ascould ~~determined~~lead ~~by the Board and pursuant~~ to ~~the~~a ~~“safe~~general ~~harbor”~~loss ~~procedures~~of ~~approved~~confidence byin the ~~Court~~broader ~~Order.~~SKY Weecosystem ~~can provide no assurance as to if~~ or ~~when any such distribution will be made, and we cannot provide any assurance as to the amount to be paid to each stockholder~~ in ~~any such distribution, if one is made. The Board intends to seek to distribute funds to our stockholders as quickly as possible, as permitted by~~ the ~~DGCL,~~use ~~and~~of ~~will take all reasonable actions to optimize~~ the ~~distributable~~SKY ~~value~~network to ~~our~~conduct ~~stockholders.~~financial ~~We anticipate that distributions~~transactions, ifwhich ~~any,~~could tonegatively ~~our~~impact stockholders will be made in cash, and may be made at any time with initial distributions to stockholders anticipated to occur in nine (9) to twelve (12) months from the effective time of the Dissolution (the “Effective Time”)us.

Attacks upon systems across a variety of industries, including industries related to SKY, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and blockchain-based assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, unauthorized parties could attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine conflict and conflicts in the Middle East, including the Israel-Hamas conflict, or other future geopolitical conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the SKY ecosystem, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.

We face risks relating to the custody of our SKY tokens, including the loss or destruction of private keys required to access our SKY tokens and cyberattacks or other data loss relating thereto.

Certain blockchain-based digital assets, including SKY, rely on cryptographic private keys to control access and transferability. Although the Company utilizes institutional-grade custody solutions and security infrastructure, the loss, destruction, or compromise of private keys or related credentials could result in the permanent loss of access to digital assets, and such losses may not be recoverable through the underlying network or any third party. Similarly, if a holder’s private key is compromised, a cyber-attacker could potentially drain their assets, and there would be no recourse available through the SKY network.

We custody our digital tokens with qualified custodians to the extent possible and may also utilize institutional-grade wallet and security infrastructure that is not itself a qualified custodian from time to time to facilitate protocol participation, staking, governance, or other operational activities. In particular, certain protocol-level activities, including staking, are expected to require use of non-qualified custodial or non-custodial wallet infrastructure, which may expose the Company to additional operational and security risks. There can be no assurance that any custodian or cybersecurity tools that we may utilize in the future will not experience a cyberattack, operational failure, or other compromise of its systems.

Although certain custodians or service providers we engage generally maintain insurance coverage for certain types of losses and blockchain-based assets, there can be no assurance that such coverage will be sufficient to fully cover potential losses, that such coverage will be maintained in the future, or that such coverage will respond to all forms of loss or compromise. To the extent the private keys for the custodial wallet holding our blockchain-based assets are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the assets held in the related digital wallet. Furthermore, digital wallets held on our behalf could be compromised as a result of a cyberattack, and blockchain-based assets and blockchain technologies have been, and may in the future continue to be, subject to security breaches, cyberattacks, or other malicious activities.

As of December 31, 2025, our agreements with our service providers, Kraken and Fireblocks, do not provide for insurance protections for our SKY holdings under their control. Additionally, we do not maintain separate insurance to cover our potential SKY losses. Therefore, our SKY holdings are subject to a particularly high risk of loss.

If the SKY network is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the SKY network may be disrupted, which in turn may prevent us from depositing or withdrawing SKY from our accounts or otherwise effecting transactions of SKY. Such disruptions could include, for example: the price volatility of SKY; the insolvency, business failure, interruption, default, failure to perform, security breach or other problems of participants, custodians or others; the closing of trading platforms of SKY due to fraud, failures, security breaches or otherwise; or network outages or congestion, power outages or other problems or disruptions affecting the SKY network. Any disruption of the SKY network could materially impact the operation of decentralized finance on the network, resulting in the inability of the Company to transfer or sell SKY, and the price of SKY.

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~~The~~Decentralized ~~precise~~finance ~~timing~~arrangements ofmay ~~any~~expose ~~distributions~~us to ~~our~~risks ~~stockholders~~of ~~will~~smart ~~depend~~contract ~~on and could be delayed due to many factors~~risk, ~~including~~operational ~~without~~failures ~~limitation, the time it takes to obtain the Court Order~~ and ~~whether~~cybersecurity a creditor or other third party seeks an injunction against the making of additional distributions to stockholders on the basis that the amounts to be distributed are needed to satisfy our liabilities or other obligations to the extent not previously reserved forthreats. ~~As a result of these and other factors, we are unable to predict the timing of distributions, if any are made, to our stockholders.~~

~~The~~From ~~Board~~time to time, we may ~~determine~~generate income through the use of blockchain-based assets including SKY or stablecoins in decentralized protocols including decentralized finance (“DeFi”) applications. DeFi applications include over-collateralized borrow-lend vaults, token-exchange pools, and other financial or commercial arrangements. Although these protocols are largely designed to limit counterparty risk in transactions, they introduce novel risks relating to software code bugs, liquidation risks, and governance risks. These protocols are designed to operate in decentralized environments but can be subject to failures or exploits. In addition: (a) network congestion or downtime can increase the likelihood of asset loss or liquidation; (b) the volatility of blockchain-based assets deployed into DeFi applications may increase the likelihood of liquidation due to market downturns, liquidity crises, governance attacks or other exploits, leading to substantial financial losses; (c) the uncertainty in the accounting treatment of certain DeFi applications; (d) DeFi applications generally operate on a user-to-protocol basis where a user of a DeFi application does not know the identity of other parties utilizing the DeFi application; and (e) the use of monitoring and forensics software to ~~proceed~~mitigate ~~with~~risks of engaging in DeFi applications may not prevent the ~~Dissolution~~Company from engaging in DeFi pools that are also used by bad actors or sanctioned persons.

~~Even~~As ifpart of our token management strategy, we may engage in staking, re-staking, or other activities that may involve the ~~Dissolution~~use isof ~~approved~~“smart bycontracts” ~~our~~or ~~stockholders~~decentralized atapplications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the ~~New~~existence ~~Special~~of ~~Meeting~~an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the ~~Board~~smart ~~may~~contract ~~determine~~or decentralized application, inpotentially ~~the~~leading ~~exercise~~to a loss of ~~its~~our ~~fiduciary~~tokens. ~~duties~~Like all software code, ~~not~~smart tocontracts ~~proceed~~are ~~with~~exposed to the ~~Dissolution.~~risk Ifthat the ~~Board~~code ~~elects~~contains toa ~~pursue~~bug ~~any~~or ~~strategic~~other ~~alternative~~security vulnerability, which can lead to loss of assets that are held on or transacted through the ~~Dissolution~~contract or decentralized application. Smart contracts and decentralized applications may contain bugs, ~~including~~security avulnerabilities, ~~Potential~~technical ~~Strategic~~vulnerabilities, ~~Transaction~~exploits, ~~our~~liquidation ~~stockholders~~risks, ~~may~~governance ~~not~~risks, ~~receive~~or ~~any~~poorly ofdesigned ~~the~~permission ~~funds~~structures that ~~might~~could ~~otherwise~~result bein ~~available~~the ~~for~~irreversible ~~distribution~~loss toof our ~~stockholders~~blockchain-based assets. ~~The~~In ~~decision~~addition, ofcertain ~~whether~~smart contracts are upgradable or ~~not~~subject to ~~proceed~~certain ~~with~~governance ~~the~~controls ~~Dissolution~~which ~~will~~could beresult ~~made~~in byunforeseen code errors, asset or account freezing, or the ~~Board~~loss of blockchain-based assets. A vulnerability in ~~its~~a ~~sole~~smart ~~discretion~~contract could create an unintended and ~~the~~unforeseeable ~~Board~~consequence that has ~~not~~adverse ~~set~~financial aconsequences, ~~deadline~~such toas ~~make~~the ~~its~~loss ~~decision~~of or inability to ~~proceed~~access funds. There is no assurance that the smart contracts we integrate with or ~~abandon~~rely ~~the~~upon ~~Dissolution~~will ~~after~~function ~~stockholder~~as ~~approval~~intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.

Our ~~stockholders~~SKY ~~may~~strategy beexposes ~~liable~~us to ~~our~~risk ~~creditors for part or all~~ of ~~the~~non-performance ~~amount~~by ~~received from us in our liquidating distributions if reserves are inadequate~~counterparties.

~~Under~~Our ~~the~~SKY ~~DGCL,~~strategy weexposes ~~would~~us beto ~~required,~~the inrisk ~~connection~~of ~~with~~non-performance ~~the~~by ~~Dissolution~~counterparties, towhether ~~pay~~contractual or ~~make~~otherwise. ~~reasonable~~Risk ~~provision for payment~~ of ~~our~~non-performance ~~liabilities~~includes ~~and~~inability ~~obligations.~~or Torefusal ~~the~~of ~~extent~~a ~~the~~counterparty ~~Dissolution is approved by stockholders and the Board determines~~ to ~~proceed~~perform ~~with~~because ~~the~~of ~~Dissolution, we will establish~~ a ~~reserve,~~deterioration ~~consisting~~in ~~of cash or other assets that we believe will be adequate for~~ the ~~satisfaction~~counterparty’s offinancial ~~all~~condition ~~of our current known expenses~~ and ~~unknown,~~liquidity ~~contingent and/~~or ~~conditional~~for ~~claims~~any ~~and~~other ~~liabilities~~reason. ~~The~~For ~~estimated~~example, ~~amount~~our ofexecution ~~the reserve is established by the Board~~partners, ~~and approved by the Delaware Court of Chancery; however~~custodians, ~~such~~or ~~estimated~~other ~~amount~~counterparties ~~may~~might ~~not~~fail ~~be adequate~~ to ~~cover~~perform ~~all~~in ofaccordance ~~our~~with ~~claims and obligations. Under~~ the ~~DGCL,~~terms ~~if we fail to create an adequate contingency reserve for payment~~ of our ~~expenses,~~agreements ~~claims~~with ~~and obligations~~them, ~~each~~which ~~stockholder~~ could beresult ~~held~~in ~~liable for payment to our creditors for claims. However, to the extent the “safe harbor” procedures under Sections 280 and 281(~~a) loss of ~~the DGCL are followed as we plan to~~SKY, a ~~stockholder~~loss ~~will not be liable for any claim in excess~~ of the ~~lesser~~opportunity ~~of (a) the stockholders’ pro rata share of the claim and (b) the amount distributed~~ to ~~the~~generate ~~stockholder~~funds, ~~and only with respect to claims that began before the expiration of a post-dissolution period of at least three (3) years (~~or ~~longer~~other ~~as the Delaware Court of Chancery shall in its discretion direct)~~losses.

IfOur primary counterparty risk with respect to our ~~stockholders~~SKY ~~vote~~is ~~against~~custodian performance obligations under the ~~Dissolution~~custody ~~pursuant~~arrangements we have entered into. A series of relatively recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the ~~Plan~~blockchain-based asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, FTX Trading and Genesis Global Capital, among others, and the filing and subsequent settlement of ~~Dissolution~~a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, weits ~~may~~parent ~~pursue~~company ~~other~~Digital ~~strategic~~Currency ~~alternatives;~~Group, ~~which~~Inc., ~~may~~and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to blockchain-based asset ownership and trading. Although these bankruptcies, closures and liquidations have not ~~result~~resulted in ~~greater~~any (loss or ~~even~~misappropriation ~~equivalent)~~of ~~stockholder~~our ~~value~~SKY, ~~than~~nor ~~the~~have ~~proposed~~such ~~Dissolution~~events adversely impacted our access to our SKY, legal precedent created in these bankruptcy and other proceedings may ~~entail~~increase ~~additional~~the ~~risks~~risk ~~and~~of ~~costs~~future (erulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.g. Additional bankruptcies, ~~bankruptcy)~~closures, liquidations, regulatory enforcement actions or other events involving participants in the blockchain-based assets industry in the future may further negatively impact the adoption rate, price, and use of SKY, limit the availability to us of financing collateralized by SKY, or create or expose additional counterparty risks.

IfWhile our ~~stockholders~~custodians doare ~~not~~subject ~~approve~~to ~~the~~regulatory ~~Dissolution~~regimes orintended to protect customers in the ~~Board~~event ~~does~~of ~~not~~a ~~proceed~~custodial ~~with~~bankruptcy, ~~the~~receivership ~~Dissolution~~or similar insolvency proceeding, weno ~~will~~assurance ~~continue~~can ~~our~~be ~~corporate~~provided ~~existence~~that ~~and~~our ~~the~~custodially-held ~~Board~~SKY will ~~continue~~not tobecome ~~explore~~part ~~what,~~of the custodian’s insolvency estate if ~~any,~~one ~~strategic~~or ~~alternatives~~more ~~are~~of ~~available~~our custodians enters bankruptcy, ~~including~~receivership aor ~~Potential~~similar ~~Strategic~~insolvency ~~Transaction~~proceedings. Additionally, toif ~~return~~we ~~capital~~pursue any strategies to ~~stockholders~~create inincome astreams ~~manner~~or ~~intended~~otherwise togenerate ~~maximize~~funds ~~value~~using inour ~~light~~SKY ofholdings, ~~its~~we ~~discontinued~~would ~~business~~become ~~activities~~subject to additional counterparty risks. Any ~~Potential~~significant ~~Strategic~~non-performance ~~Transaction~~by orcounterparties, ~~other~~including ~~strategic~~in ~~alternative~~particular ~~that~~the custodians with which we ~~may~~custody ~~pursue~~substantially ~~and~~all ~~complete~~of isour ~~subject~~SKY, tocould have a ~~number~~material ofadverse ~~risks~~effect on our business, ~~including~~prospects, ~~risks~~financial ~~related~~condition, ~~to:~~and operating results.

● whether such transaction can be identified in a timely manner and completed;

● the successful integration with a potential transaction partner following the closing of any such transaction;

● depleting our remaining cash resources whether prior to or following a Potential Strategic Transaction;

● litigation resulting from a Potential Strategic Transaction;

● continuing to have insufficient revenues to offset expenses after completing a Potential Strategic Transaction;

● challenges maintaining our internal standards, controls, procedures and policies;

● entering markets in which we have no prior experience and where we may not succeed; and

● any impairment of intangible assets, such as goodwill, or depreciation and amortization expenses associated with the Potential Strategic Transaction.

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AsOur aability ~~result,~~to ifgenerate ~~some~~income orfrom ~~all~~our ofblockchain-based ~~such~~asset ~~risks~~holdings ~~occur, it~~ is ~~unlikely~~subject ~~that~~to asignificant ~~Potential Strategic Transaction or other strategic alternative would result in greater stockholder value than the Dissolution~~uncertainty, and ~~pursuing~~revenue aopportunities ~~Potential~~may ~~Strategic Transaction, if we are~~ not ~~successful,~~develop ~~may result in our Company seeking bankruptcy protection~~ or ~~protection~~may ~~under~~fail ~~other~~to ~~insolvency~~perform ~~laws~~as expected.

IfAs part of our strategy, we ~~proceed~~intend to evaluate or participate in reward-generating activities associated with ~~the~~SKY. ~~Dissolution,~~SKY ~~our~~presents ~~stockholders~~distinct ~~will~~risks ~~not~~that bemay ~~able~~limit our ability to ~~buy~~earn returns, or ~~sell~~result ~~shares~~in oflosses. ~~our~~SKY ~~common~~supports ~~stock~~staking, ~~after~~and we ~~close~~intend ~~our~~to ~~stock~~stake ~~transfer~~SKY, ~~books~~for atwhich efforts we may receive rewards. However, staking reward rates are unpredictable. Staking reward rates are variable and are determined by the ~~Effective~~current ~~Time~~issuance parameter of rewards (how many rewards are distributed, as determined by Sky Ecosystem Governance) and the ~~Dissolution~~current market price of SKY tokens at the time of calculation. Furthermore, adoption timelines and liquidity levels remain uncertain, and trading volumes are materially lower than those of more established blockchain-based assets.

IfSecurity ~~stockholders~~risks ~~approve~~are ~~the~~also ~~Dissolution~~present, ~~and~~including the ~~Board~~risk ~~determines~~of tohacking. ~~proceed~~Hacking ~~with~~risk ~~the~~refers ~~Dissolution,~~to wethe ~~intend~~potential tofor ~~close~~malicious ~~our~~actors ~~stock~~to ~~transfer~~exploit ~~books~~or ~~and~~gain ~~discontinue~~unauthorized ~~recording~~access ~~transfers~~to ofthe ~~our~~Sky.money ~~common~~front-end ~~stock~~user atinterface, ~~the~~or ~~Effective~~even ~~Time~~certain parts of the ~~Dissolution~~Sky asProtocol. ~~set~~This ~~forth~~could inlead ~~the~~to ~~Certificate~~theft of ~~Dissolution.~~assets, ~~After~~manipulation weof ~~close~~data, ~~our~~or ~~stock~~disruption ~~transfer~~of ~~books,~~services. weThere ~~will~~also ~~not~~exists ~~record~~the ~~any~~potential ~~further~~for ~~transfers~~attackers to take advantage of ~~our~~weaknesses ~~common~~or ~~stock~~flaws onin ~~our~~the ~~books~~Sky.money ~~except~~front-end byuser ~~will~~interface, ~~intestate~~smart ~~succession~~contracts, or ~~operation~~associated ofprotocols, ~~law.~~which ~~Therefore,~~could ~~shares~~result ofin ~~our~~financial ~~common~~losses, ~~stock~~data ~~will~~breaches, ~~not~~or besystem ~~freely~~malfunctions. ~~transferable~~The ~~after~~potential ~~such~~for ~~date.~~phishing Asand aimpersonation ~~result~~also ofexists, ~~the~~wherein ~~closing~~malicious ofactors ~~the~~may ~~stock~~create ~~transfer~~fake ~~books~~websites, ~~all~~social ~~liquidating~~media ~~distributions~~accounts, inor other online presences that closely mimic the ~~Dissolution~~Sky.money ~~will~~front-end beuser ~~made~~interface, ~~pro~~which ~~rata~~could lead to ~~the~~users ~~stockholders~~inadvertently ofproviding ~~record~~sensitive asinformation, ofsuch ~~the~~as ~~Effective~~private ~~Time~~keys ofor ~~the~~seed ~~Certificate~~phrases, ofor ~~Dissolution,~~interacting with ~~distribution~~fraudulent ~~(if~~interfaces ~~any)~~that ~~anticipated~~result ~~to occur~~ in ~~nine~~the ~~(9)~~signing toof ~~twelve~~malicious ~~(12)~~transactions, ~~months~~thereby ~~from~~compromising ~~the~~our ~~Effective~~assets ~~Time~~or data.

~~Further~~Because ~~stockholder~~SKY ~~approval~~tokens ~~will~~have ~~not~~no bephysical ~~required~~existence inbeyond ~~connection~~the ~~with~~record of transactions on the ~~implementation~~SKY network, a variety of technical factors related to the ~~Plan~~SKY network could also impact the price of ~~Dissolution,~~SKY. ~~including~~The liquidity of SKY may also be reduced and damage to the ~~sale~~public perception of SKY may occur, if financial institutions were to deny or ~~disposition~~limit ofbanking ~~all~~services to businesses that hold SKY, provide SKY-related services or ~~substantially~~accept ~~all~~SKY as payment, which could also decrease the price of ~~our~~SKY. ~~assets~~In ~~following~~addition, any failure to properly monitor and upgrade the ~~Effective~~SKY ~~Time~~network ofcould adversely affect the ~~Dissolution~~SKY ~~pursuant~~network toand negatively affect the ~~Plan~~price of ~~Dissolution~~SKY.

The ~~approval~~community-driven ofgovernance ~~the~~model ~~Dissolution~~that bySKY ~~the~~operates ~~requisite~~under ~~vote~~may ofalso ~~our~~create ~~stockholders~~risks. atThis governance model allows holders of the ~~New~~protocol's ~~Special~~governance ~~Meeting~~token ~~will~~to ~~grant~~influence ~~full~~changes ~~and~~to ~~complete~~the ~~authority~~protocol. While this decentralized approach aims to ensure that the ~~Board~~protocol ~~and~~evolves ~~executive~~in ~~officers~~the best interest of its users, ~~without~~it ~~further~~may ~~stockholder~~introduce ~~action~~certain risks. For instance, tothere ~~decide~~is ~~whether~~a possibility that the community might advocate for changes that negatively impact some users or introduce instability to ~~proceed~~the ~~with~~system. Additionally, the ~~Dissolution~~decentralized ~~pursuant~~policymaking process could potentially be delayed in reacting to urgent issues, potentially leaving the ~~Plan~~protocol ofvulnerable ~~Dissolution~~during incritical ~~accordance~~periods. ~~with~~This ~~any~~process ~~applicable~~could ~~provision~~also be attacked or manipulated by malicious actors. This could occur where, for example, an attacker attempts to accumulate a large number of ~~Delaware~~governance ~~law~~tokens to push through harmful proposals. IfA wesuccessful ~~proceed~~attack ~~with~~could ~~the~~be ~~Dissolution~~severe, ~~then~~potentially ~~following~~leading to changes in protocol parameters that benefit the ~~Effective~~attacker ~~Time,~~at wethe ~~may~~expense ~~sell~~of other users, ~~distribute~~thereby negatively impacting their positions or ~~otherwise~~the ~~dispose~~overall stability of ~~our~~the ~~remaining~~system. ~~non-cash~~Furthermore, ~~assets~~there ~~without~~exists ~~further~~the ~~stockholder~~potential ~~approval.~~for Asa concentration of decision-making power within a ~~result,~~small ~~after~~group ~~the~~of ~~Effective~~participants ~~Time,~~in the ~~Board~~Sky ~~may,~~Protocol's insystem. ~~order~~This toconcentration ~~maximize~~could ~~value~~lead ~~for~~to ~~our~~decisions ~~stockholders~~that ~~and~~primarily ~~creditors,~~benefit ~~authorize~~these ~~actions~~major instakeholders, ~~implementing~~potentially at the ~~Plan~~expense of ~~Dissolution~~smaller participants. This could lead to changes in protocol parameters, ~~including~~fee ~~the~~structures, ~~specific~~or ~~terms~~risk ~~and~~management ~~prices~~strategies ~~for~~that may not align with the ~~sales~~needs ~~and~~of ~~dispositions~~all users. Furthermore, a concentration of ~~its~~governance ~~remaining~~power ~~assets~~might be more susceptible to external pressures, ~~with~~potentially ~~which~~impacting ~~stockholders~~the ~~may~~protocol's ~~not~~long-term ~~agree~~stability and decentralization ethos.

IfFurther, wehacks ~~proceed~~and ~~with~~other security breaches targeting the ~~Dissolution~~core infrastructure of blockchain networks or major participants, ~~our~~such ~~stockholders~~as ~~may~~exchanges ~~not~~and becustodians, ~~able~~could toseverely ~~recognize~~impact athe ~~loss~~reputation ~~for~~and Umarket confidence in these networks.S. ~~federal~~Exploits ~~income~~of ~~tax~~protocol-level ~~purposes~~vulnerabilities ~~until~~could ~~they~~also ~~receive~~compromise the integrity of the cryptocurrency blockchains, resulting in a ~~final~~substantial ~~distribution~~loss ~~from~~of usvalue.

IfThe ~~stockholders~~success ~~approve~~and ~~the~~growth ~~Dissolution~~of ~~and~~cryptocurrency ~~the~~assets ~~Board~~depend ~~determines~~significantly toon ~~proceed~~their ~~with~~continued ~~the Dissolution~~security, ~~distributions~~stability ~~made~~and ~~pursuant~~scalability. toAny ~~the~~technical ~~Plan~~failures, ofconsensus ~~Dissolution~~breakdowns, ~~are~~governance ~~intended~~disputes toor beregulatory ~~treated~~interventions asthat ~~received~~diminish byconfidence ~~a stockholder~~ in ~~exchange for~~ the ~~stockholder’s~~networks ~~shares~~or ofimpair ~~our~~their ~~common~~functionality ~~stock.~~could ~~Accordingly,~~lead ~~the amount of any such distribution allocable~~ to a ~~block~~material ofdecline ~~shares~~in oftheir ~~our~~market ~~common~~prices, ~~stock~~which ~~owned~~could bymaterially aand ~~U.S.~~adversely ~~stockholder~~impact ~~will~~our ~~reduce the stockholder’s tax basis in such shares~~business, ~~but~~financial ~~not~~condition ~~below~~and ~~zero.~~results ~~Any~~of ~~excess amount allocable to such shares will be taxable as capital gain~~operations. ~~Such~~A ~~gain~~sustained ~~generally~~or ~~will~~significant bedecrease ~~taxable~~in asthe ~~long-term~~price ~~capital~~or ~~gain~~liquidity ifof ~~the~~cryptocurrencies, ~~shares~~whether ~~have~~due ~~been~~to ~~held~~51% ~~for~~attacks, ~~more~~forks, ~~than~~hacks, ~~one~~network ~~year.~~disruptions ~~Any~~or ~~tax~~other ~~basis~~adverse ~~remaining~~events, incould anegatively ~~share~~impact of our ~~common~~business, ~~stock~~financial ~~following~~condition, ~~the~~and ~~final~~results ~~liquidating distribution by the Company will be treated as a capital loss. The deductibility~~ of ~~capital losses is subject to limitations~~operations. ~~You~~Furthermore, ~~should~~even ~~consult your tax advisor as to~~ the ~~particular~~perception ~~tax~~that ~~consequences~~any of ~~the~~these ~~Dissolution~~events tocould ~~you,~~occur ~~particularly~~may ~~due~~lead to ~~the~~significant ~~tax~~market ~~treatment~~volatility ofand ~~any~~price ~~liquidating~~declines, ~~distribution~~adversely ~~varying~~affecting ~~among~~our ~~different stockholders~~business, ~~including~~financial ~~the~~condition ~~applicability~~and results of ~~any~~operations ~~U.S.~~and ~~federal,~~the ~~state,~~price ~~local~~of ~~and~~our ~~non-U.S.~~common ~~tax laws~~stock.

The ~~loss~~liquidity of ~~members~~SKY ofmay ~~our~~also ~~senior~~be ~~executive~~impacted ~~management~~to ~~team~~the ~~could~~extent ~~adversely~~that ~~affect~~changes ~~our~~in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to ~~operate~~provide ~~our~~services ~~remaining~~for ~~business~~SKY and ~~administer~~other ~~the~~blockchain-based ~~Dissolution process~~assets.

~~Our~~In ~~ability~~light toof ~~operate~~these ~~our remaining business and administer the Dissolution process in a cost effective and efficient manner~~risks, tothere ~~the~~can ~~extent~~be ~~our~~no ~~stockholders~~assurance ~~approve~~that ~~the~~we ~~Dissolution~~will ~~and~~be ~~the~~able ~~Board determines~~ to ~~proceed~~generate ~~with~~meaningful ~~the~~or ~~Dissolution,~~sustainable ~~depends,~~revenue infrom ~~large part, on the continued service of our senior executive management team, including our Chief Executive Officer, Justin M~~SKY. ~~Hall,~~Any ~~and~~failure ~~our~~to ~~Interim~~do ~~Chief~~so ~~Financial~~could ~~Officer,~~adversely ~~Tommy~~affect ~~Law. Following the sale of substantially all of~~ our ~~assets~~operating ~~as a result of the Avenova Asset Sale~~results, our remaining senior executive officers and employees: (i) have been performing the post-closing services under the terms of the PRN Transition Services Agreement; (ii) are currently managing our remaining business operations and supporting our Company’s identification and evaluation of potential strategic alternatives; and (iii) are expected to provide certain support to our Company in connection with the Dissolutionliquidity, ~~to the extent the Dissolution is approved by stockholders~~ and ~~the~~ability ~~Board determines~~ to ~~proceed~~execute ~~with the Dissolution. Accordingly, the loss of one or both of~~ our ~~remaining senior executive officers would adversely impact our ability to operate the remaining~~ business ~~and may result in delays or potential inefficiencies, with respect to the Dissolution process, to the extent it proceeds~~strategy.

~~Resources~~Political ~~may~~or beeconomic ~~wasted~~crises inmay ~~searching~~motivate ~~for~~large-scale ~~Potential~~sales ~~Strategic~~of ~~Transactions~~blockchain-based ~~that are not completed~~assets, which ~~could~~would ~~materially~~result ~~adversely~~in ~~affect~~a ~~stockholder~~reduction ~~value,~~in ~~including~~values ~~distributions~~and asmaterially ~~part~~and ofadversely ~~the~~affect ~~Dissolution (if any)~~us.

~~As disclosed~~Cryptocurrencies, ~~simultaneously~~as ~~with~~an ~~our~~alternative ~~Company~~to ~~pursuing~~fiat ~~the~~currencies ~~Dissolution,~~that weare ~~have~~backed ~~also~~by ~~engaged~~central agovernments, ~~financial~~are ~~advisor~~subject to ~~explore~~supply ~~any~~and ~~Potential~~demand ~~Strategic~~forces ~~Transactions~~based ~~that~~upon ~~may~~the bedesirability ~~available,~~of ~~which is~~ an ~~ongoing~~alternative, ~~expense~~decentralized tomeans ~~the Company. Any investigation~~ of abuying ~~specific~~and ~~Potential~~selling ~~Strategic~~goods ~~Transaction~~ and ~~the negotiation~~services, ~~drafting~~ and ~~execution~~it ofis ~~relevant~~unclear ~~agreements,~~how ~~disclosure~~such ~~documents~~supply and ~~other~~demand ~~instruments~~will ~~would~~be ~~require~~impacted ~~substantial~~by ~~management~~geopolitical ~~time~~events. ~~and~~For ~~attention and substantial costs for accountants~~example, ~~attorneys,~~political ~~and~~or ~~others.~~economic ~~Furthermore,~~crises ifcould wemotivate ~~reach~~large-scale anacquisitions ~~agreement~~or ~~relating~~sales toof ablockchain-based ~~specific~~assets ~~Potential~~either ~~Strategic Transaction~~globally, weregionally ~~may~~or ~~fail~~locally. toLarge-scale ~~complete~~sales ~~the~~of ~~transaction~~certain ~~for~~blockchain-based ~~any~~assets ~~number~~would ofresult ~~reasons,~~in ~~including~~a ~~those~~reduction ~~beyond~~in ~~our~~their ~~control.~~value ~~Any~~and ~~such~~could ~~event~~materially ~~will~~and ~~result~~adversely inaffect aour ~~loss~~investment toand ustrading ofstrategies, the ~~related~~value ~~costs~~of ~~incurred~~our ~~which~~assets, ~~could~~our ~~reduce~~business, ~~distributions~~financial tocondition ~~stockholders (if any)~~ and ~~materially~~results ~~adversely~~of ~~affect~~operations, ~~subsequent~~and ~~attempts~~the toprice ~~identify~~of ~~and~~our ~~effect~~common ~~another business opportunity~~stock.

Our disposal of historical assets and operations through the Avenova Asset Sale and the Wound Care Divestiture could result in our Company becoming a “shell company” if we do not complete the Dissolution or an Alternative Strategic Transaction. As a result, we may ultimately become subject to more stringent reporting requirements, offering limitations and resale restrictions.

Although we currently have our significantly reduced business, that includes fulfilling remaining contractual obligations for the manufacture and delivery of wound care products and performance of the services contemplated by the PRN Transition Services Agreement, such business may no longer be conducted in the near future and our business operations and assets would consist primarily of any remaining cash and cash equivalents. As such, we could be a “shell company” under SEC rules and regulations, and, in such event, if we do not receive approval for or proceed with the Dissolution, and instead engage in a Potential Strategic Transaction, it is possible that certain requirements for shell company business combinations could be applicable, which include:

● the potential future combined company needing to file a Form 8-K to report the Form 10 type information after closing the combination transaction with the SEC reflecting its status as an entity that is not a shell company;

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Table of Contents

●Proof-of-stake usblockchains ~~and~~are ~~the~~a ~~potential~~relatively ~~future~~recent ~~combined~~innovation, ~~company~~and have not ~~being~~been ~~eligible~~subject to ~~use~~as awidespread ~~Form~~use ~~S-3~~or ~~until~~adoption 12over ~~full~~as ~~calendar~~long ~~months~~of ~~after~~a ~~closing~~period of ~~the~~time ~~combination~~as ~~transaction;~~traditional proof-of-work blockchains.

●Certain blockchain-based assets, such as Bitcoin, use a “proof-of-work” consensus algorithm. The genesis block on the ~~potential~~Bitcoin ~~future~~blockchain ~~combined~~was ~~company~~mined ~~needing~~in 2009, and Bitcoin’s blockchain has been in operation since then. Many newer blockchains enabling smart contract functionality, including the current Ethereum network following the completion of its transition to ~~wait~~a atproof-of-stake ~~least~~model 60in ~~calendar~~2022, ~~days~~use ~~after~~a ~~closing~~newer consensus algorithm known as “proof-of-stake.” SKY is an ERC-20 token deployed on the ~~merger~~Ethereum toblockchain, ~~file~~meaning that the Sky Protocol and SKY depend upon the stability of Ethereum’s underlying proof-of-stake consensus mechanism. While their proponents believe that they may have certain advantages, the “proof-of-stake” consensus mechanisms and governance systems underlying many newer blockchain protocols and their associated blockchain-based assets have not been tested at scale over as long of a ~~Form~~period Sof time or subject to as widespread use or adoption as, for example, Bitcoin’s proof-8of-work consensus mechanism has. This could lead to these blockchains, and their associated blockchain-based assets, having undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network participants, technical disruptions, or a wide variety of other problems, any ~~equity~~of ~~plans~~which could cause these blockchains not to function as intended, lead to outright failure to function entirely causing a total outage or ~~awards;~~disruption ~~and~~of network activity, or to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value of the associated blockchain-based assets, including the Company’s assets.

●SKY and the ~~potential~~health ~~future~~of ~~combined~~the ~~company~~Sky ~~being~~Protocol andepend ~~“ineligible~~on ~~issuer”~~the Ethereum Proof-of-Stake consensus mechanism for ~~three~~transaction ~~years~~finality ~~following~~and ~~the~~smart ~~closing~~contract execution. If Ethereum’s consensus layer were compromised, including as a result of ~~the~~validator ~~combination~~attacks, ~~transaction~~slashing cascades, ~~which~~or ~~will~~network ~~prevent~~forks, such compromises would directly and negatively impact the ~~combined~~functionality ~~company~~and transferability of SKY and Sky Protocol operations, including staking, governance, and USDS issuance. Arising from ~~(i)~~SKY’s ~~incorporating~~dependence byon ~~reference~~the inEthereum ~~its~~consensus ~~Form~~mechanism, ~~S-1~~the ~~filings~~cost and timeliness of interacting with Sky Protocol contracts, ~~(ii)~~including ~~using~~staking aand ~~free~~governance ~~writing~~participation ~~prospectus~~can be affected by underlying Ethereum gas costs and network congestion. In addition, over the long term, there can be no assurance that the proof-of-stake blockchain on which the Company’s assets rely will achieve widespread scale or ~~(iii)~~adoption ~~taking~~or ~~advantage~~perform successfully; any failure to do so could negatively impact our business, financial condition and results of ~~well~~operations and the price of our common stock. If Ethereum’s proof-~~known~~of-stake ~~seasoned~~consensus ~~issuer~~mechanism ~~status~~were ~~despite~~compromised, ~~its~~SKY ~~public~~functionality ~~float~~and value could be materially adversely affected.

~~The~~SKY ~~foregoing~~can ~~SEC~~be ~~requirements~~subject ~~could~~to ~~increase~~extreme ~~our~~price orvolatility, ~~the potential future combined company’s time~~ and ~~cost~~declines ofin ~~raising~~its ~~capital,~~value ~~offering~~could ~~stock~~materially ~~under equity plans,~~ and ~~complying~~adversely ~~with~~affect ~~securities~~our ~~laws~~financial condition.

~~Risks~~Blockchain-based ~~Relating~~assets remain a highly volatile asset class characterized by rapid price swings and structural features that amplify risk. The sector is novel and experimental, with many protocols and networks still in early stages of development. Market activity is often driven by high levels of leverage and significant retail participation, which can accelerate both rallies and drawdowns. While larger, more liquid assets such as Bitcoin tend to ~~Owning~~exhibit ~~Our~~comparatively ~~Common~~greater ~~Stock~~stability, volatility increases markedly with newer or less established tokens. These dynamics make blockchain-based assets inherently speculative and subject to sharp fluctuations in value, underscoring the need for careful monitoring and risk management in any allocation.

The growth of the blockchain-based assets industry in general, and the use and acceptance of SKY in particular, may also impact the price of ~~our~~SKY ~~common~~and ~~stock~~is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of the SKY network and SKY may ~~fluctuate~~depend, ~~substantially~~for instance, ~~which~~on ~~may~~public ~~result~~familiarity with blockchain-based assets, ease of buying, accessing or gaining exposure to SKY, institutional demand for SKY as an investment asset, the participation of traditional financial institutions in ~~losses~~the blockchain-based assets industry, consumer demand for SKY as a means of payment, and the availability and popularity of alternatives to ~~our~~SKY. ~~stockholders~~Even if growth in SKY adoption occurs in the near or medium term, there is no assurance that SKY will continue to grow over the long term.

~~The~~These ~~stock~~risks ~~prices~~include ofthe ~~our~~potential ~~Company~~for ~~and~~monetary ~~many~~loss ~~other~~arising ~~companies~~as ina ~~our~~result of market ~~segment~~volatility, ~~have~~smart ~~generally~~contract ~~experienced wide fluctuations in response to various factors. Broad economic~~vulnerabilities, ~~market~~ and ~~industry~~other ~~factors~~unforeseen ~~may~~risks ~~negatively~~that ~~affect~~may ~~the~~have ~~market~~a ~~price~~material ofadverse ~~our~~effect ~~common~~on ~~stock~~SKY. ~~The~~There ~~market~~is ~~price~~also ofmarket ~~our~~risk, ~~common~~or ~~stock~~the ispotential ~~further~~for ~~likely~~loss due to bethe ~~volatile,~~overall ~~particularly~~performance ~~given~~of the ~~completion~~cryptocurrency ofmarkets. ~~the~~The ~~Avenova~~value ~~Asset~~of ~~Sale~~SKY ~~and~~can ~~our~~be ~~determination~~affected toby ~~continue~~broader ~~pursuing~~market ~~the Dissolution~~trends, ~~and~~potentially ~~could~~impacting ~~fluctuate~~the invalue ~~response~~of ~~to,~~SKY ~~among other things:~~holdings.

●SKY ~~our~~has ~~cash~~historically ~~position;~~exhibited significant volatility. Between October and December 2024, SKY rose from $0.04363 to $0.1014, an increase of over 132% in less than two months. SKY then declined to $0.0343 in February 2025. Later, in 2025, SKY rose to $0.09965 in July before falling to $0.03683 in October, a decline of approximately 63%. SKY then rose to $0.06927 by December 2025. In January 2026, around the time of the January Private Placement, SKY was trading at $0.06505 per token. As of March 16, 2026, SKY was trading at $0.07838 per token. These extreme swings reflect the speculative nature of activity surrounding SKY and are typical for emerging networks, where limited adoption, concentrated ownership, and speculative trading contribute to elevated volatility compared to more established blockchain-based assets.

● actual or anticipated variations in our expenses, particularly as we pursue the Dissolution or any Potential Strategic Transaction;

● any unanticipated contingent liabilities or litigation that may arise; and

● adverse developments with respect to the Dissolution or any other Potential Strategic Transaction.

Our common stock will likely be delisted from the NYSE American, and in connection with the Dissolution we plan to initiate steps to exit from certain reporting requirements under the Exchange Act. If the exit process is protracted, we will continue to bear the expense of being a public reporting company despite having no source of revenue.

Our common stock is currently registered under the Exchange Act, which requires that we comply with certain public reporting and proxy statement requirements. Compliance with these requirements is costly and time-consuming; however, it aids in information being widely publicly available to our stockholders and has historically been beneficial in capital raise transactions.

The Avenova Asset Sale constituted the sale of substantially all of our assets. Under the NYSE American continued listing requirements, the completion of the sale of substantially all of our assets may cause the NYSE American to delist our shares. Further, pursuant to a Deficiency Letter received from the NYSE American on April 18, 2024, we are currently subject to the procedures and requirements of Section 1009 of the Company Guide related to not meeting the NYSE American’s continued listing standards related to stockholders’ equity, which also may cause the NYSE American to commence delisting procedures. Our NYSE listing is currently subject to a plan of compliance through October 18, 2025. While we are subject to this plan, the Company is subject to quarterly monitoring for compliance with the plan. If the Company does not regain compliance with the NYSE American’s listing standards by October 18, 2025, or if the Company does not make progress consistent with its plan, then the NYSE American may initiate delisting procedures. To the extent the NYSE American does not delist our shares and the Board determines to effect the Dissolution after having received stockholder approval at the New Special Meeting, we plan to notify FINRA of our impending dissolution and request that our common stock stop trading on the NYSE American on the effective date of the Dissolution or as soon thereafter as is reasonably practicable. Whether or not the Dissolution is completed, and regardless of whether our shares are delisted from the NYSE American, we will have an obligation to continue to comply with the applicable reporting requirements of the Exchange Act until we have exited from such reporting requirements.

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Table of Contents

WeIn ~~plan~~addition, tosocial ~~initiate~~media ~~steps~~posts toand ~~exit~~other ~~from~~statements ~~such~~and ~~reporting~~actions ~~requirements~~by inprominent ~~order~~individuals tohave ~~curtail~~resulted ~~expenses;~~in ~~however,~~outsized ~~such~~movements ~~process~~in ~~may~~the bemarket ~~protracted~~price ~~and~~of ~~we may be required to continue to make~~ certain ~~filings~~blockchain-based ~~with the SEC~~assets. ~~Accordingly,~~It weis ~~will~~possible ~~continue to incur expenses~~ that ~~will~~future ~~reduce~~statements ~~any~~by ~~amount~~individuals ~~available~~concerning ~~for~~certain ~~distribution,~~blockchain-based ~~including~~assets ~~expenses~~will ofhave ~~complying~~disproportionate ~~with~~impacts ~~public~~on ~~company~~the ~~reporting~~market ~~requirements~~price ~~and~~of ~~paying~~certain ~~our~~blockchain-based ~~service providers, among others~~assets. ~~If our reporting obligations cease, publicly available information about us will be substantially reduced.~~

ToOur ~~the~~financial ~~extent~~results ~~the NYSE American delists our common stock from trading on its exchange~~ and the ~~Dissolution~~market isprice ~~not~~of ~~approved or implemented or is otherwise delayed, we will not be eligible to apply to list~~ our ~~securities~~listed ~~on the NYSE American or on another national~~ securities ~~exchange~~would ~~due~~be toadversely ~~our inability to currently meet the initial listing standards applicable to a newly listed company~~affected, and ~~we could face significant material adverse consequences, including during any period between such delisting and the effective date of the Dissolution, such as reduced liquidity for~~ our ~~securities,~~business ~~limited availability of market quotations for our securities~~ and afinancial ~~determination~~condition ~~that~~would ~~our~~be ~~common~~negatively ~~stock is a “penny stock~~impacted,” ~~which~~if ~~will~~the ~~require~~price ~~brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level~~ of ~~trading~~SKY ~~activity~~decreased ~~in the secondary trading market for our securities~~substantially, ~~and~~including aas ~~substantial impairment on our ability to raise additional funds in connection with~~ a ~~Potential~~result ~~Strategic Transaction, if needed.~~of:

~~Further,~~● ~~the~~decreased ~~National~~user Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is currently listed on the NYSE American, our common stock qualifies as covered securities under such statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, ifinvestor ~~there~~confidence ~~is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities~~ in ~~a particular case. If we were no longer listed on the NYSE American~~SKY, ~~our~~including ~~common~~due ~~stock would not be a covered security and we would be subject~~ to ~~regulation~~the invarious ~~each~~factors ~~state~~described ~~in which we offer our securities.~~herein;

~~Our~~● ~~stockholders~~negative ~~may~~publicity, ~~experience~~media ~~significant~~or ~~dilution~~social asmedia acoverage, ~~result~~or sentiment due to events in or relating to, or perception of, SKY or the ~~conversion~~broader blockchain-based assets industry, for example, additional filings for bankruptcy protection or bankruptcy proceedings of ~~the~~major ~~Series~~blockchain-based Basset ~~Preferred~~industry ~~Stock~~participants, ~~and~~such as the ~~potential~~bankruptcy ~~exercise~~proceeding of ~~outstanding~~FTX ~~common~~Trading ~~stock~~and ~~purchase~~its ~~warrants.~~affiliates;

We● ~~have~~competition afrom ~~significant~~other ~~number~~blockchain-based ofassets ~~Company securities~~ that ~~are~~exhibit orbetter ~~will~~speed, besecurity, ~~convertible~~scalability, ~~and/~~or ~~exercisable~~energy ~~into shares of our common stock. As of March 25~~efficiency, ~~2025, these Company securities include 131 shares of Series B Preferred Stock~~ that ~~are~~feature ~~convertible~~other ~~into~~more ~~15,065~~favored ~~shares of common stock~~characteristics, ~~Unsecured Convertible Notes~~ that are ~~convertible~~backed ~~into~~by ~~107~~governments,~~146~~ ~~shares~~including ofthe ~~common stock and common stock warrants exercisable for 4,753,613 shares of common stock~~U. ~~As of March 25, 2025, we had 5,816,204 shares of common stock issued and outstanding~~S. ~~Accordingly~~government, ~~upon the conversion~~ or ~~exercise~~reserves ~~(as applicable)~~ of ~~some~~fiat ~~or all of the Series B Preferred Stock~~currencies, ~~convertible~~or ~~notes and common stock warrants, as well as the exercise of stock options and other equity based awards~~ that ~~have~~represent ~~been~~ownership or ~~will~~security beinterests ~~issued~~in ~~and/or~~physical granted by us, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders could experience significant dilution. If such dilution were to occur ahead of the Dissolution, distributions to stockholders (if any) would reduce as a result of such dilution.assets;

We● ~~have~~a ~~not~~decrease ~~paid~~in ~~dividends~~the orprice ~~repurchased~~of ~~stock~~other inblockchain-based assets, including stablecoins, or the ~~past~~crash ~~and~~or dounavailability ~~not~~of ~~expect~~stablecoins tothat ~~pay~~are ~~dividends~~used oras ~~repurchase~~a ~~stock~~medium of exchange for SKY purchase and sale transactions, to the extent the decrease in the ~~future,~~price ~~and~~of ~~any~~such ~~return~~other onblockchain-based ~~investment~~assets or the unavailability of such stablecoins may because ~~limited~~a todecrease in the ~~value~~price of ~~our~~SKY ~~stock.~~or adversely affect investor confidence in blockchain-based assets generally;

We● ~~have~~developments ~~never~~relating ~~paid~~to ~~cash~~the ~~dividends~~Sky onProtocol, orincluding ~~repurchased~~(i) ~~shares~~changes ~~of,~~to ~~our~~the ~~common~~Sky ~~stock~~Protocol ~~and~~that doimpact ~~not~~its ~~anticipate~~security, ~~paying~~speed, ~~cash~~scalability, ~~dividends~~usability, or ~~repurchasing~~value, ~~shares~~such ofas ~~our~~changes ~~common~~to ~~stock in~~ the ~~foreseeable~~cryptographic ~~future,~~security ~~unless~~protocol inunderpinning ~~connection~~the ~~with~~Sky anetwork, ~~Potential~~changes ~~Strategic Transaction. While we anticipate making distributions~~ to ~~stockholders in connection with~~ the ~~Dissolution,~~maximum wenumber ~~do not anticipate paying any dividends or repurchasing any shares~~ of ~~our~~Sky ~~Series~~outstanding, Bchanges ~~Preferred~~to ~~Stock before~~ the ~~Dissolution~~mutability ~~or if the Dissolution is not completed. If we pay dividends on our shares~~ of ~~common stock~~transactions, wechanges ~~are~~relating ~~required~~ to ~~pay dividends on our Series B Preferred Stock on an as converted basis. The payment of dividends on, or~~ the ~~repurchase~~size of ~~shares~~Sky ofblocks, ~~our common stock or Series B Preferred Stock will depend on our financial condition~~ and ~~other~~similar ~~business~~changes, ~~and~~(ii) ~~economic~~failures ~~factors~~to ~~affecting~~make usupgrades atto ~~such time as our Board may consider relevant. If we do not pay dividends or repurchase stock or if~~ the ~~Dissolution~~Sky isProtocol ~~not~~to ~~completed~~adapt ~~with related distributions~~ to ~~stockholders~~security, ~~holders~~technological, oflegal ~~our~~or ~~common~~other ~~stock~~challenges, ~~will~~and ~~experience~~(iii) achanges ~~return~~to onthe ~~their~~Sky ~~investment~~Protocol inthat ~~our~~introduce ~~shares~~software ~~only~~bugs, ifsecurity ~~our~~risks ~~stock price appreciates~~ or ifother ~~part~~elements ofthat aadversely ~~Potential~~affect ~~Strategic Transaction.~~SKY;

●

disruptions, failures, unavailability, or interruptions in service of trading venues for Sky;

●

the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of blockchain-based asset custodians, trading venues, lending platforms, investment funds, or other blockchain-based asset industry participants, such as the filing for bankruptcy protection by blockchain-based asset trading venues FTX Trading and BlockFi and blockchain-based asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the blockchain-based asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry in 2023, and the exit of Binance from the U.S. market as part of its settlement with the Department of Justice and other federal regulatory agencies;

●

regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of Sky, or that adversely affect the operations of or otherwise prevent blockchain-based asset custodians, trading venues, lending platforms or other blockchain-based assets industry participants from operating in a manner that allows them to continue to deliver services to the blockchain-based assets industry;

●

transaction congestion and fees associated with processing transactions on the SKY network;

●

macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations;

●

developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the SKY network becoming insecure or ineffective; and

●

changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, the adverse impacts attributable to the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict, and the broadening of the Israel-Hamas conflict to other countries in the Middle East.

There can be no assurance that the value of SKY will not decrease substantially or remain highly volatile. Any such declines could materially and adversely affect the value of our blockchain-based assets, our financial condition, and our results of operations.

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.

The regulatory regime for blockchain-based assets in the U.S. and elsewhere is uncertain. The Company may be unable to effectively react to proposed legislation and regulation of blockchain-based assets, which could adversely affect its business.

If regulatory changes or interpretations require us to register as a money services business with The Financial Crimes Enforcement Network (FinCEN) under the U.S. Bank Secrecy Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable. If we decide to cease certain operations in response to new regulatory obligations, such actions could occur at a time that is unfavorable to investors.

Multiple states have implemented or proposed regulatory frameworks for blockchain-based asset businesses. Compliance with such state-specific regulations may increase costs or impact our business operations. Further, if we or our service providers are unable to comply with evolving federal or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.

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The reliance on open-source code by blockchain-based asset networks exposes us to risks related to competitive networks and products built on such code, the failure of individuals to maintain that code, and discovery of security vulnerabilities that could threaten the ability of such networks to operate.

Blockchain-based asset networks are open-source projects and, although there may be an influential group of leaders in the network community, generally there is no official developer or group of developers that formally controls the blockchain-based asset network. Without guaranteed financial incentives, there may be insufficient resources to address emerging issues, upgrade security or implement necessary improvements to the network in a timely manner. If the blockchain-based asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies and reduced trust, all of which could negatively impact the blockchain-based assets’ long-term viability and our business.

There are risks relating to USDS, the stablecoin underpinning the entire ecosystem. A material or prolonged de-pegging of USDS would lead to losses of our SKY holdings.

Stablecoins are digital assets designed to have a stable value over time as compared to typically volatile digital assets and are typically marketed as being pegged to the value of a referenced asset, normally a fiat currency, such as the U.S. dollar. However, the stability and reliability of stablecoins are not guaranteed and depend on various factors beyond our control, including the financial health of the issuing entity, the adequacy and liquidity of reserve assets, and the effectiveness of the underlying stabilization mechanisms. If a stablecoin that we accept, such as USDS, experiences a significant devaluation or “de-pegging” event, where its value deviates materially from its intended peg, we may incur losses on payments already received, face disruptions in transaction processing, or lose customer confidence, all of which could negatively impact our financial condition and reputation. Stablecoins are not subject to any deposit insurance protection scheme, and the presence of fiat currency reserves is not a guarantee for redemption. There is a possibility that the assets held in reserves are not sufficient or may not be available for redemption at times of extremely high demand. Volatility spikes in the cryptocurrency markets also might lead to occasions where the price of a stablecoin deviates from the underlying fiat currency.

Given the role that stablecoins, like USDS, play in global digital asset markets, their fundamental liquidity can have a dramatic impact on the broader digital asset market, including the market for SKY. Because a large portion of the digital asset market still depends on stablecoins such as USDS, there is a risk that a disorderly “de-pegging” or a run on USDS could lead to dramatic market volatility in, and/or materially and adversely affect the prices of, digital assets more broadly.

There are other risks associated with the acceptance of stablecoins as a payment method.

The regulatory environment surrounding stablecoins remains uncertain and rapidly evolving. Legislatures and regulatory bodies, including foreign authorities, continue to evaluate whether stablecoins constitute securities, commodities, or other regulated financial instruments. New laws, regulations, or enforcement actions could impose significant compliance obligations on us, such as anti-money laundering and know-your-customer requirements, restrict our ability to accept certain stablecoins altogether, result in unfavorable changes in use, transfer, and redemption of stablecoins, or impose tax liabilities upon stablecoin holders. Noncompliance with such regulations, even unintentional, could result in fines, penalties, legal proceedings, and reputational harm. Furthermore, if a stablecoin issuer on which we rely is deemed non-compliant with applicable laws, it could disrupt our payment operations or expose us to liability as a downstream user.

Accepting stablecoins also introduces operational and cybersecurity risks. The blockchain networks and digital wallets we use to process and store stablecoin transactions may be vulnerable to hacking, phishing attacks, software bugs, and network failures. A security breach or technical failure could result in the loss or theft of stablecoin funds, for which we may have limited recourse due to the decentralized and irreversible nature of blockchain transactions. Moreover, reliance on third-party service providers, such as cryptocurrency exchanges or custodians, to facilitate stablecoin transactions introduces counterparty risk. If these providers, or any stablecoin issuers, experience insolvency, operational disruptions, or fraudulent activity, our ability to process payments or convert stablecoins to fiat currency could be impaired, potentially leading to financial losses or liquidity constraints.

Additional risks relate to the market acceptance of stablecoins. If customers or vendors lose confidence in stablecoins due to volatility, scandals, or legislative or regulatory actions, demand for our stablecoin payment option could decline, forcing us to incur costs to adapt our payment infrastructure or revert to traditional payment methods. Conversely, if we cease accepting stablecoins in response to these risks, we may alienate a segment of our customer base that prefers cryptocurrency payments, potentially reducing our market competitiveness.

Popular stablecoins are reliant on the U.S. banking system and U.S. treasuries, and the failure of either to function normally could impede the function of stablecoins or lead to outsized redemption requests, and therefore could adversely affect the value of our common stock.

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The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of SKY and adversely impact our business.

Because a substantial portion of our assets will be concentrated in SKY as part of our strategy, the emergence or growth of competing digital assets or stablecoins could materially adversely affect our financial condition. Digital assets backed by private or public sector entities, including governments, financial institutions, or consortiums, may gain broader adoption or regulatory acceptance, which could reduce demand for SKY.

Additionally, central banks in some countries have explored or started to introduce digital forms of legal tender. For example, China’s central bank digital currency project was made available to consumers in January 2022, and certain government officials in the United States, the European Union, and Israel have discussed the potential creation of new central bank digital currencies. Whether or not they incorporate blockchain or similar technology, central bank digital currencies, as legal tender in the issuing jurisdiction, could also compete with, or replace USDS and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of SKY to decrease, which could have a material adverse effect on our business, prospects, financial condition and operating results.

Stablecoins such as USDS face significant competitive and regulatory challenges that could undermine their success and, in turn, the value of SKY.

The market for stablecoins is intensely competitive. USDS competes with more established issuers, which benefit from scale, liquidity, and institutional trust, as well as with emerging products like yield-bearing tokens and potential bank-issued stablecoins. If USDS fails to achieve significant adoption among institutional or retail users, its credibility may diminish, undermining confidence in the Sky ecosystem and the value of SKY.

Stablecoins also face heightened regulatory scrutiny. USDS presents novel risks that may cause regulators to classify it as a security, derivative, or other regulated instrument. Any such classification could limit its use, distribution, or exchange support. In addition, negative publicity affecting stablecoins generally, or adverse events involving major stablecoins could spill over into the Sky ecosystem and reduce demand for USDS.

Intense competition, adverse regulatory developments, or negative market sentiment affecting stablecoins could materially undermine USDS’s role in the Sky ecosystem, reduce confidence in SKY’s long-term value, and negatively affect our business, financial condition, and results of operations.

If interest rates rise or other opportunities in external DeFi protocol or traditional finance become more attractive, our digital asset strategy may underperform or become unsustainable.

Our digital asset strategy is designed to generate revenue through activities such as staking and other protocol-based economic participation. A significant portion of the SKY held by the Company may be used as collateral or otherwise locked to support our validator operations or other infrastructure software and services. These activities are highly sensitive to prevailing interest rates, changes in market structure, shifts in risk appetite, the relative attractiveness of such income in DeFi protocols or traditional finance, and shifts in risk appetite across markets.

If interest rates rise or alternative opportunities, whether in DeFi or traditional finance, become more attractive relative to the returns generated by our strategy, our operations may underperform or become unsustainable. Additionally, locking digital assets as collateral for staking may reduce our flexibility to reallocate capital in response to changing market conditions, potentially increasing opportunity costs or exposing us to elevated counterparty or protocol-specific risks. Any sustained decline in staking rewards, or increased competition for on-chain revenue-generating opportunities, may materially and adversely affect our financial performance and liquidity.

The Company’s digital asset holdings will be less liquid than its cash and cash equivalents and may not be able to serve as a source of liquidity for the Company.

A substantial part of the Company’s assets will be its digital asset holdings. Historically, the market for digital assets, including SKY, have been characterized by significant volatility in price, limited liquidity and trading volumes, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our digital assets at favorable prices or at all. As a result, our digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, digital assets held by custodians, including our custodians, do not typically enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans, bonds or other capital raising transactions collateralized by our unencumbered digital assets or otherwise generate funds using our digital asset holdings, including during times of market instability or when the price of such assets has declined significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions using unencumbered digital assets as collateral, or otherwise generate funds using our digital asset holdings, or if we are forced to sell our digital assets at a significant loss, in order to meet our debt obligations, or our working capital requirements, our business and financial condition could be negatively impacted.

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In addition, companies operating in the cryptocurrency sector have historically faced challenges in securing and maintaining banking relationships. Some financial institutions remain hesitant to provide services to businesses engaged in digital asset activities due to regulatory uncertainty, compliance concerns, and perceived risks associated with digital assets. This reluctance could limit our ability to access essential banking services, process transactions, or efficiently convert digital assets to fiat currency. If financial institutions restrict or discontinue banking services for crypto-related businesses, it could disrupt our operations and negatively impact our liquidity and financial position.

Taxation of blockchain-based assets is complex and evolving.

The tax treatment of utility blockchain-based assets and other crypto assets is complex, evolving, and may be uncertain or subject to differing interpretations by taxing authorities globally and in the United States. The Internal Revenue Service (“IRS”) and other tax authorities have issued limited guidance specifically addressing the classification, reporting, and taxation of transactions involving utility tokens, including their acquisition, holding, use, and disposition.

As a result, we may be subject to adverse tax consequences, including but not limited to: unexpected tax liabilities; additional tax reporting obligations; withholding taxes; penalties and interest for noncompliance; and the risk of audits or disputes with tax authorities regarding the timing, amount, or character of income, gain, loss, or deduction related to our blockchain-based asset holdings.

Furthermore, changes in tax laws, regulations, or enforcement policies could increase our tax burden or affect the tax efficiency of our blockchain-based asset acquisition strategy. Such changes could also require us to modify our investment, accounting, or operational practices, potentially resulting in increased costs or reduced returns.

There can be no assurance that tax authorities will not challenge the tax treatment of our blockchain-based asset holdings or that such challenges would not have a material adverse effect on our financial condition, results of operations, or cash flows.

In addition, the U.S. federal income tax treatment of rewards from staking blockchain-based assets such as SKY or utilizing liquid staking tokens remains uncertain and is currently the subject of debate and regulatory attention. Under current guidance by the IRS, staking rewards and transaction fees may be treated as ordinary income upon receipt, although additional guidance is expected pursuant to the President’s Working Group July 2025 report “Strengthening American Leadership in Digital Financial Technology.” 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.

Our blockchain-based asset strategy business model has multiple layers of corporate finance risks.

Our blockchain-based asset strategy has multiple layers of risk based on corporate finance principles and blockchain mechanics, including but not limited to the following:

●

Potential Premium Collapse: Our blockchain-based asset treasury relies on equity premiums to raise capital accretively. If share prices fall below net asset value (“NAV”), treasury accumulation on our balance sheet may slow down or halt. Decreasing premiums paid for our shares may signal a lack of investor enthusiasm for our blockchain-based asset treasury strategy.

●

Liquidity and Macro Sensitivity: Blockchain-based asset treasury company equities are typically high-beta assets.

●

Dilution Fatigue: Repeated capital raises through ATMs and PIPEs may desensitize investors. Without yield growth or NAV accretion, new issuances risk being seen as opportunistic liquidity events rather than long-term expansion.

Together, these risks form the structural challenges of our blockchain-based asset treasury strategy. Its success depends on maintaining perpetual premium expansion in a market that is inherently cyclical.

Our blockchain-based asset treasury strategy and any decision to hold blockchain-based assets may increase our exposure to market volatility and potential uninsured losses.

Market conditions and operational needs may necessitate longer holding periods, increasing exposure to price swings. If we hold SKY or other blockchain-based assets under our treasury strategy, we would be exposed to additional volatility, regulatory, and market structure risks specific to those assets. We are currently exposed to potential uninsured losses to the extent blockchain-based asset balances exceed the custodian’s applicable insurance coverage.

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Our failure to securely store and manage our fiat currencies and blockchain-based assets could adversely affect our business, operating results and financial condition.

We hold cash and store blockchain-based assets for our treasury and hold fiat and digital assets for corporate investment and operating purposes. In addition, we store the majority of blockchain-based assets at third-party custodians for asset management products.

Securely storing cash and blockchain-based assets is integral to the trust we build with our stockholders and our customers. We believe our policies, procedures, operational controls and controls over financial reporting protect us from material risks surrounding the storing of these assets and conflicts of interest. Our controls over financial reporting include, among others, controls over the segregation of corporate blockchain-based assets, controls over the investment and staking processes of our treasury, and controls over blockchain-based asset withdrawals. Our financial statements and disclosures, as a whole, will be available through periodic filings on a quarterly basis, and compliant with annual audit requirements of Article 3 of Regulation S-X.

Any inability by us to maintain our procedures, perceived or otherwise, could harm our business, operating results and financial condition. Any material failure by us or our partners to maintain the necessary controls, policies, procedures or to manage the blockchain-based assets we hold for our own investment and operating purposes could also adversely affect our business, operating results and financial condition. Further, any material failure by us or our partners to maintain the necessary controls or to manage blockchain-based assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, and result in significant penalties and fines and additional restrictions, which could adversely affect our business, operating results and financial condition.

We may make, or otherwise be subject to, trade errors.

Errors may occur with respect to trades executed on our behalf. Trade errors can result from a variety of situations, including, for example, when the wrong asset is purchased or sold or when the wrong quantity is purchased or sold. Trade errors frequently result in losses, which could be material. To the extent that an error is caused by a third party, we may seek to recover any losses associated with the error, although there may be contractual limitations on any third party’s liability with respect to such error.

Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues experience greater risk of fraud, market manipulation and other deceptive marketing practices, as well as security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.

Digital asset trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many digital asset trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in digital asset trading venues, including prominent exchanges that handle a significant volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.

Negative perception, a lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset trading venues, lending institutions, institutional investors, custodians, or other major participants in the digital asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greater volatility in the price of digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.

The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.

Digital asset transactions are generally irreversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.

Although we plan to transfer digital assets, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.

To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to seek recourse or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.

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The concentration of our blockchain-based asset holdings enhances the risks inherent in our treasury strategy.

As of March 16, 2026, our SKY holdings represent approximately 90% of our total assets and approximately 9% of the total supply of SKY available in the market. The concentration of our SKY holdings limits the risk mitigation that we could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in our blockchain-based asset strategy. If there is a significant decrease in the price of SKY, we will experience a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.

Investors in our January 2026 Private Placement have certain consent rights that may influence our Digital Asset Strategy.

Pursuant to the terms of the SPA for the January 2026 Private Placement, investors in that transaction that continue to hold at least 50% of their originally purchased pre-funded warrants and/or the underlying shares thereto have consent rights, for a period of 24 months following the closing date, over any material amendment, modification, addition to, or revocation of our Digital Asset Strategy. We have also granted certain investors each the right to nominate an individual for election to our Board of Directors, which rights are more fully described in Item 13, “Certain Relationships and Related Transactions, and Director Independence” of this annual report. As a result, these stockholders may have the ability to influence certain matters affecting our business, including our Digital Asset Strategy.

One of the investors, Sky Frontier Foundation, is an independent foundation whose stated mission is to support the innovation, development, and acceleration of the Sky Ecosystem. Because our Digital Asset Strategy currently involves the acquisition and holding of SKY, Sky Frontier Foundation’s interests may not always align with the interests of the Company or our other stockholders. Sky Frontier Foundation may prefer to withhold consent for proposed changes to our Digital Asset Strategy that could reduce our relative exposure to SKY, USDS or other Sky Ecosystem-related digital assets, even if the Digital Asset Strategy Advisory Committee determines that such changes would be in the best interests of our stockholders or would reduce risk to the Company. This potential divergence of interests, together with Sky Frontier Foundation’s board nomination right, could affect our ability to respond to developments in the digital asset markets, adjust our treasury holdings, or modify our positions in Sky Ecosystem-related assets, which could adversely affect our business, results of operations and financial condition.

Risks Relating to Our Business

Our quarterly operating results, revenues, and expenses may fluctuate significantly, which could have an adverse effect on the market price of our listed securities.

For many reasons, including those described below, our operating results, revenues, and expenses may vary significantly in the future from quarter to quarter. These fluctuations could have an adverse effect on the market price of our listed securities.

Fluctuations in Quarterly Operating Results. Our quarterly operating results may fluctuate, in part, as a result of:

●

fluctuations in the price of SKY, of which we have significant holdings and with respect to which we expect to continue to make significant future purchases, and potential fair value changes associated therewith;

●

any sales by us of our SKY at prices above or below their carrying value, which would result in our recording gains or losses upon sale of our SKY;

●

regulatory, commercial, and technical developments related to SKY or the Sky Protocol, or digital assets more generally;

●

the incurrence of fixed interest charges or dividend obligations on preferred stock; and

●

the impact of war, terrorism, infectious diseases, natural disasters and other global events, and government responses to such events, on the global economy and the market for and price of SKY.

Limited Ability to Adjust Expenses. We base our operating expense budgets on expected revenue trends and strategic objectives. Many of our expenses, such as interest expense on our debt, tax liabilities, office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected shortfall in our cash flow. Accordingly, we may be required to take actions to pay expenses, such as selling SKY or using proceeds from equity or debt financings, some of which could cause significant variation in operating results in any quarter.

Based on the above factors, we believe quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the market price of our listed securities may fall.

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Significant disruptions of information technology systems or breaches of information security could adversely affect our businesses.

We relied upon information technology systems to historically operate eye care and wound care businesses, and we continue to use such systems. In the ordinary course of business, we have collected, stored and transmitted large amounts of confidential information (including, but not limited to, personal information and intellectual property), and we continue to deploy and operate an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. We also have outsourced aspects of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we have managed independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, “hacktivists,” nation states and others. While we have invested in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any such interruption or breach of our systems could adversely affect us and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us.

Complex local, state, federal and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. These privacy, consumer protection, and data protection laws and regulations are quickly evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations and enforcement. Complying with these laws and regulations is costly and can delay or impede the development of new services or the continued use of existing services or data.

If we fail or are perceived to have failed to comply with applicable privacy, consumer protection, and data protection laws, or to properly respond to or honor individual requests under such laws, we may face enforcement actions, regulatory investigations, and oversight, consent orders limiting our ability to use data or requiring data or model disgorgement, or claims for damages by guests and other affected parties. The matters could result in regulatory fines, civil actions, reputational harm, any of which could materially adversely effect on our operations, financial performance, and business. The amount and scope of insurance we maintain may not cover all types of claims that may arise.

Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one of our employees or agents could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with various procurement regulations, regulations regarding the protection of confidential information and personal data, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing of labor and other costs in contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting, environmental laws, and any other applicable laws or regulations. For example, the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these regulations and laws, and we take precautions to prevent and detect misconduct. However, since our internal controls are subject to inherent limitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions. As a result, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees or agents. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines and penalties, including substantial monetary penalties under data privacy laws, and suspension or debarment from contracting, any or all of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions.

If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting, which could harm our business and the trading price of our stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports. If we cannot maintain effective controls and reliable financial reports, our business and operating results could be harmed. We continue to work on improvements to our internal controls over financial reporting. Any failure to implement and maintain internal controls over our financial reporting or difficulties encountered in the implementation of improvements in our controls, could cause us to fail to meet our reporting obligations. Any failure to improve our internal controls over financial reporting or to address identified weaknesses in the future, if they were to occur, could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock.

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Business disruptions, including interruptions, delays, or failures of our systems, third-party data center hosting facility, or other third-party services, as a result of geopolitical tensions, acts of terrorism, natural disasters, pandemics, and similar events, could materially adversely affect our operating results or result in a material weakness in our internal controls that could adversely affect the market price of our stock.

We manage certain critical internal processes using a third-party data center hosting facility located in the United States and other third-party services. Any disruptions or failures of our systems or the third-party hosting facility or other services that we use, including as a result of a natural disaster, fire, cyberattack (including the potential increase in risk for such attacks due to cyberwarfare or other malicious cyber activity associated with geopolitical conflicts, including the ongoing Russia-Ukraine conflict and conflicts in the Middle East, including the Israel-Hamas conflict), act of terrorism, geopolitical conflict (including any potential conflict involving China and Taiwan), pandemic, the effects of climate change, or other catastrophic event, as well as power outages, telecommunications infrastructure outages, a decision by one of our third-party service providers to close facilities that we use without adequate notice or to materially change the pricing or terms of their services or other unanticipated problems with our systems or the third-party services that we use, such as a failure to meet service standards, could severely impact our ability to conduct our business operations or result in a material weakness in our internal control over financial reporting, any of which could materially adversely affect our future operating results.

Our future success depends on our continuing ability to attract, train, assimilate, and retain personnel that are highly skilled regarding blockchain-based assets. There is significant competition for qualified employees in the crypto space, and we may not be able to retain our current key employees or attract, train, assimilate, and retain other highly skilled personnel in the future, particularly at times when we undergo significant headcount reductions. Our future success also depends in large part on the continued service of our current leadership. If we were unable to attract, train, assimilate, and retain the highly skilled personnel we need, or we were to lose the services of our leadership, our business, operating results, and financial condition could be materially adversely affected.

We may be unable to raise additional capital when needed or on acceptable terms, and future financings may be highly dilutive.

Our growth plans and our ability to respond to market opportunities depend on access to equity or debt financing and cash flows from operations. Market conditions for blockchain-based asset-related issuers may limit capital availability or increase dilution and financing costs. Future securities offerings, including under our shelf registration statement and prospectus supplements, may significantly dilute existing stockholders and depress our stock price.

Auditor transitions and internal control remediation may result in delays, increased costs, or identification of material weaknesses.

We have and may in the future undergo an auditor transition. Such a transition in auditor may increase the risk of delays, additional costs, and identification of control deficiencies. If we identify material weaknesses or significant deficiencies in internal control over financial reporting, we may incur substantial remediation costs, and our ability to report timely and accurately could be impacted.

As a result of the completion of the Avenova Asset Divestiture and the PhaseOne Divestiture, we no longer have a significant revenue generating wound care business.

Prior to the Avenova Asset Divestiture, our principal assets, product offerings and business primarily consisted of the production and commercialization of Avenova products, which was responsible for a majority of our revenue from 2015 until the completion of the Avenova Asset Divestiture. After completion of the Avenova Asset Divestiture and the PhaseOne Divestiture in January 2025, our business operations and ability to generate revenue from our wound care business has been significantly reduced. Our remaining activities consist primarily of limited operations with no dedicated employees, outsourced manufacturing and delivery of a wound care product to fulfill a contractual obligation that has since been completed, as well as limited manufacturing on an as-needed basis. In October 2025, as part of our strategic shift to operate as a digital asset treasury company, we decided to exit our involvement in the China NeutroPhase product line, which represented our remaining legacy wound care activity. Accordingly, we will be generating minimal revenue from our wound care business when compared to our historic financial performance and will rely on our other business units for revenue generation.

In connection with the Avenova Asset Divestiture and the PhaseOne Divestiture, NovaBay generally retained pre-closing liabilities related to the operation of its eye care and wound care business, which may include amounts owed to our suppliers and potential claims related to products we sold or the marketing of our products during the time we operated such business. While we are not aware of any such liabilities that may be material and have adequately accrued for these liabilities, there can be no assurances that additional expenditures will not be incurred in resolving these liabilities, which may impact our financial condition.

In relation to the Avenova Asset Divestiture, we also agreed to indemnify PRN for breaches of any representation, warranty, or covenant made by us in the underlying asset purchase agreement, for losses arising out of or in connection with excluded assets or excluded liabilities, and for certain other matters, subject to, in certain cases, customary deductibles and caps and exceptions to such deductibles and caps, including in the case of fraud. Successful indemnification claims by PRN would first reduce the amount held in escrow for such claims, and thereafter, NovaBay would be directly responsible for any indemnification claims.

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Separately, in relation to the PhaseOne Divestiture, we also agreed to provide limited indemnification to Phase One Health LLC (“Phase One”) for losses arising from a third-party claim involving a material breach or nonperformance of representations, warranties, covenants, agreements and obligations of the Company relating to the PhaseOne Divestiture. Our liability for indemnification of Phase One for any such losses is limited to 50% of the purchase price for our wound care product trademarks (NeutroPhase, PhaseOne and OmniPhase), or $250 thousand in aggregate.

We may be subject to litigation, which is expensive and could divert our attention.

As a result of having completed the Avenova Asset Divestiture and the PhaseOne Divestiture, we may be subject to potential litigation, including commercial litigation or claims by holders of our securities, including securities class action litigation. For example, in March 2025, the Company entered into three (3) separate confidential settlement and release agreements to settle certain disputed matters relating to warrants held by each of the parties to the agreements. In connection with these agreements, certain warrants were repurchased by the Company for $1.8 million. Litigation could also arise from our prior operations, and related to products sold, before the completion of the Avenova Asset Divestiture and the PhaseOne Divestiture. Any such claims, with or without merit, or litigation initiated against us could result in substantial costs and possibly force us into a bankruptcy situation.

Risks Relating to Owning Our Common Stock

The price of our common stock may fluctuate substantially, which may result in losses to our stockholders.

The stock prices of our Company and many other companies in our market segment have generally experienced wide fluctuations in response to various factors. Broad economic, market and industry factors may negatively affect the market price of our common stock. The market price of our common stock is further likely to be volatile, particularly given the completion of the Avenova Asset Divestiture and the transition of our business, and could fluctuate in response to, among other things:

●

our cash position;

●

our blockchain-based asset holdings;

●

volatility in the blockchain-based asset market and the regulation thereof by government entities;

●

changes to our blockchain-based asset strategy;

●

announcement of additional capital raising transactions;

●

regulatory, commercial and technical developments related to SKY or the Sky Protocol;

●

quarterly variations in our results of operations or those of our competitors;

●

announcements about our earnings that are not in line with analyst expectations;

●

announcements by us or our competitors of acquisitions, dispositions, significant contracts, commercial relationships, or capital commitments;

●

recommendations by securities analysts or changes in earnings estimates and our ability to meet those estimates;

●

investor perception of our Company;

●

announcements by our competitors of their earnings that are not in line with analyst expectations;

●

the volume of shares of our common stock and other securities available for public sale;

●

sales or purchases of stock by us or by our stockholders and issuances of awards under our equity incentive plan;

●

general economic conditions and slow or negative growth of related markets, including as a result of war, terrorism, infectious diseases, natural disasters and other global events, and government responses to such events;

●

actual or anticipated variations in our expenses; and

●

any unanticipated contingent liabilities or litigation that may arise.

Provisions of our charter, by-laws and Delaware law may have anti-takeover effects that could prevent a change in control even if the change in control would be beneficial to our stockholders.

Provisions of our charter, by-laws and Delaware law could make it more difficult for a third party to control or acquire us, even if doing so would be beneficial to our stockholders, including our board of directors having the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director and the ability of our board of directors to issue, without stockholder approval, shares of undesignated preferred stock.

Further, as a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us.

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Offers of new securities or availability for sale of a substantial number of shares of our common stock, including as a result of the exercise of outstanding warrants may cause the price of our publicly traded securities to decline.

Sales of a significant number of shares of our common stock in the public market could depress the market price of our common stock. The shares of common stock underlying the pre-funded warrants issued January 16, 2026, represents, in the aggregate, approximately 87% of the total number of shares of common stock outstanding as of January 16, 2026. Upon conversion or exercise, as the case may be, of those securities, the shares of common stock we issue upon such conversion or exercise could be sold into the public market, and such sales could be significant and have an adverse impact on the price of our common stock.

Our common stock may trade at a discount to our net asset value, and investors could experience losses unrelated to the performance of our underlying blockchain-based asset holdings.

The market price of our common stock may not reflect, and at times may trade materially below, our NAV per share. A variety of factors may cause the trading price of our common stock to deviate from our NAV, including overall market conditions, investor sentiment toward blockchain-based assets or our business model, the liquidity and volatility of the specific blockchain-based assets we hold, the availability and cost of capital to market participants, the level of short interest in our common stock, actual or perceived governance or operational risks, and the absence of any redemption or exchange feature that would allow shareholders to realize NAV directly. As a result, the market price of our common stock may be influenced by factors other than the value of our underlying assets alone and there can be no assurance that our common stock will trade at or near NAV.

If our common stock trades at a discount to NAV, investors who sell shares may receive less than the value of our underlying assets per share, and the discount could impair our ability to raise capital on favorable terms. We may from time to time consider capital markets transactions, financing arrangements or other corporate actions intended to address any discount, but we are under no obligation to take such actions and any such actions, if implemented, may be limited in scope or effectiveness.

We are subject to the continued listing standards of the NYSE American and our failure to satisfy these criteria may result in de-listing of our common stock.

Our common stock is listed on the NYSE American. In order to maintain these listings, we must maintain certain share prices, financial and share distribution targets, including maintaining a minimum amount of shareholders’ equity and a minimum number of public shareholders. In addition to these objective standards, the NYSE American may delist the securities of any issuer (i) if, in its opinion, the issuer’s financial condition and/or operating results appear unsatisfactory; (ii) if it appears that the extent of public distribution or the aggregate market value of the security has become so reduced as to make continued listing on the NYSE American inadvisable; (iii) if the issuer sells or disposes of principal operating assets or ceases to be an operating company; (iv) if an issuer fails to comply with the NYSE American’s listing requirements; (v) if an issuer’s securities sell at what the NYSE American considers a “low selling price” and the issuer fails to correct this via a reverse split of shares after notification by the NYSE American; or (vi) if any other event occurs or any condition exists which, in the opinion of the NYSE American, makes continued listing inadvisable. The Company was notified by NYSE American on April 18, 2024 and May 28, 2024 that it was not in compliance with the continued listing standards of the NYSE American Company Guide set forth in Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the Company Guide, requiring a listed company to have stockholders’ equity of (i) at least $2.0 million if it has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years; (ii) at least $4.0 million if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years; and (iii) at least $6.0 million if it has reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively. While we successfully resolved such deficiency in October 2025 in connection with a compliance plan agreed to with NYSE American, if we fail to maintain continued listing standards and the NYSE American delists our common stock, investors may face material adverse consequences, including, but not limited to, a lack of trading market for our securities, reduced liquidity, decreased analyst coverage of our securities, and an inability for us to obtain any additional financing to fund our operations that we may need.

We may issue additional shares of our common stock, other series or classes of preferred stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.

IfWe ~~we do not proceed with the Dissolution, we~~ may issue additional shares of our common stock, other series or classes of preferred stock, ~~in addition to our Series B Preferred Stock,~~ units, warrants or other equity securities of equal or senior rank in the future in order to fund our operations, provide working capital and for other purposes, including in connection with, among other things, ~~executing upon a Potential Strategic Transaction,~~ repricing of warrants or other outstanding securities. These issuances of additional securities shall occur without stockholder approval in most circumstances. Our issuance of additional shares of our common stock, preferred stock or other equity securities of equal or senior rank could have the following effects:

●

your proportionate ownership interest in NovaBay will decrease;

●

the relative voting strength of each previously outstanding share of common stock may be diminished; and/or

●

the market price of your shares of common stock may decline.

~~Offers~~- or29 availability for sale of a substantial number of shares of our common stock, including as a result of the conversion of the Series B Preferred Stock, conversion of the Unsecured Convertible Notes and/or the exercise of outstanding warrants may cause the price of our publicly traded securities to decline.-

~~Sales~~Table of a significant number of shares of our common stock in the public market could depress the market price of our common stock. For example, sales of shares of common stock that are issuable upon conversion of the Series B Preferred Stock, the conversion of the Unsecured Convertible Notes and/or the exercise of outstanding warrants may cause the price of our publicly traded securities to decline. The shares of common stock underlying the shares of Series B Preferred Stock, the Unsecured Convertible Notes and outstanding warrants represent, in the aggregate, approximately 84% of the total number of shares of common stock outstanding as of March 25, 2025. Upon conversion or exercise, as the case may be, of those securities, the shares of common stock we issue upon such conversion or exercise could be sold into the public market, and such sales could be significant and have an adverse impact on the price of our common stock. Additionally, such conversion or exercise could make it more difficult for us to raise additional financing in connection with a Potential Strategic Transaction through the sale of equity or equity-related securities in the future at a time and/or at a price that we deem reasonable or appropriate, or at all.Contents

If we become a “shell company,” the holders of our restricted securities and control securities will not be able to sell their securities in reliance on Rule 144.

We may become a “shell company,” as that term is defined by the applicable federal securities laws. Applicable provisions of Rule 144 specify that during that time that we are a “shell company” and for a period of one year thereafter, holders of our restricted securities cannot sell those securities in reliance on Rule 144. This restriction may have potential adverse effects on certain holders converting our Series B Preferred Stock, the Unsecured Convertible Notes or exercising warrants before the Dissolution or any future efforts to raise additional capital through unregistered offerings to the extent needed in connection with a Potential Strategic Transaction.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards and other pre-change tax attributes (such as research and development tax credits) to offset ~~its~~ post-change taxable income ~~may~~is besubject ~~limited~~to annual limitations. Since our formation, we have raised capital through the issuance of capital stock on ~~many~~numerous occasions which, ~~combined~~together with ~~the purchasing stockholders’~~ subsequent ~~disposition~~transfers of ~~those~~our ~~shares,~~stock ~~may~~by stockholders, have resulted in ~~one~~ownership orshifts ~~more~~within ~~changes~~the meaning of ~~control, as defined by~~ Section 382 ~~of the Code~~. We ~~have~~believe ~~not~~that ~~currently~~we ~~completed~~experienced aan ~~study~~ownership ~~to assess whether any~~ change ofduring ~~control~~2025 ~~has~~and, ~~occurred~~accordingly, orour ~~whether~~pre-change ~~there~~NOLs ~~have~~and ~~been~~other ~~multiple~~tax ~~changes~~attributes ofare ~~control~~expected ~~since~~to ~~our~~be ~~formation,~~subject ~~due~~ to ~~the~~ significant ~~complexity~~limitations ~~and~~under ~~cost~~Section ~~associated with such study~~382. IfWe we have ~~experienced~~not ayet ~~change~~completed ofa ~~control~~formal atstudy ~~any~~to ~~time~~determine ~~since~~the ~~our~~precise ~~formation,~~amount ~~our~~of ~~NOL~~the ~~carryforwards~~applicable ~~and~~limitation. ~~tax~~As ~~credits~~a ~~may~~result, ~~not~~our beability ~~available,~~to orutilize ~~their~~pre-change ~~utilization~~NOLs ~~could~~and beother ~~subject~~tax toattributes anin ~~annual~~future ~~limitation~~periods ~~under~~may ~~Section~~be ~~382~~materially restricted. In addition, ~~since~~future wechanges ~~may~~in ~~complete~~our astock ~~Potential~~ownership, ~~Strategic~~some ~~Transaction,~~of which ~~may~~are ~~include~~outside ~~raising~~of ~~additional~~our ~~capital~~control, wecould ~~may~~result ~~undergo further ownership changes~~ in ~~the~~an ~~future.~~additional Ifownership ~~we earn net taxable income, our ability to use our pre-~~change ~~NOL~~under ~~carryforwards~~Section ~~to offset United States federal taxable income may be subject to limitations~~382, which could ~~potentially~~further ~~result~~limit inthe ~~increased~~availability ~~future~~of our tax ~~liability to us~~attributes.

-Our 21stockholders may experience significant dilution as a result of the potential exercise of outstanding pre-funded warrants.

We have a significant number of Company pre-funded warrants that are or will be exercisable into shares of our common stock. As of March 16, 2026, there were pre-funded warrants exercisable for 168,620,309 shares of common stock. As of March 16, 2026, we had 26,625,029 shares of common stock issued and outstanding. Accordingly, upon the exercise of some or all of the pre-funded warrants, as well as the exercise of stock options and other equity based awards that have been or will be issued and/or granted by us, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders could experience significant dilution.

We do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

We do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on our financial condition and other business and economic factors affecting us at such time as our Board may consider relevant.

Changes in our senior executive management team could adversely affect our ability to operate our business segments.

Our ability to operate our blockchain-based strategy and our wound care business in a cost effective and efficient manner depends, in large part, on the continued service of our senior executive management team and the experience they bring to this segment. Furthermore, our ability to operate and manage our blockchain-based strategy depends upon our ability to attract and retain highly qualified personnel, including members of our executive team or other key personnel. The loss of the services of any of our executive officers or key employees, or our inability to find suitable replacements, could result in significant disruptions to our operations and management of our digital assets.

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ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 1C.

CYBERSECURITY

Risk Management and Strategy

Many aspects of our business ~~are~~depend ~~dependent~~on ~~upon~~the availability, integrity, and security of our ~~computer~~information systems, ~~devices~~and digital infrastructure, ~~and~~including ~~networks~~systems used to ~~collect~~record, process, and ~~store~~report ~~data~~financial ~~necessary~~information and to ~~conduct~~support ~~many~~our ~~aspects~~operations ofwithin ~~our~~open ~~business,~~digital ~~including~~financial ~~the~~networks. ~~recording~~Following ~~and~~our ~~reporting~~business ofrealignment ~~commercial~~during and ~~financial~~subsequent ~~information~~to 2025, ~~and~~our ~~payroll.~~operations Weincreasingly ~~rely~~involve onthe ~~standard~~accumulation ~~operating systems~~ and ~~software~~deployment ~~from~~of ~~established~~operating ~~and~~digital ~~reliable~~assets ~~third~~within ~~parties~~blockchain networks to provide ~~security~~protocol-level services, including ~~Microsoft~~staking, ~~365~~governance participation, validation, and ~~ADP~~related activities. ~~The~~As ~~Company~~a ~~does~~result, ~~not~~our ~~have~~cybersecurity inrisk profile includes risks associated with blockchain-~~house~~based ~~information~~networks, ~~technology~~digital ~~personnel.~~asset ~~Management~~custody, ~~makes~~private-key ~~concerted~~management, ~~efforts~~smart tocontracts, ~~select~~and reliance on third-party ~~software~~service providers ~~with~~that asupport ~~demonstrated~~digital ~~track-record~~asset ofoperations. ~~effectively~~Our ~~addressing~~ cybersecurity ~~concerns.~~risk Inmanagement ~~the~~program ~~event~~is ofinformed aby ~~cybersecurity~~established ~~incident~~security frameworks, wesuch ~~would~~as ~~rely~~the ~~upon~~NIST ~~these~~Cybersecurity ~~providers.~~Framework, Inand ~~light~~includes ofan ~~the~~annual ~~Company's~~enterprise ~~current~~risk ~~size~~assessment that addresses cybersecurity risks. The program encompasses documented policies, procedures, and ~~relatively~~standards ~~low~~governing ~~cyber-risk~~information ~~profile~~security, digital asset management, ~~believes~~and ~~that~~incident ~~reliance~~response. ~~upon~~We ~~experienced~~do not maintain in-house information technology or cybersecurity personnel and instead rely on established third-party providers isfor ~~the~~enterprise ~~most~~software, ~~prudent~~cloud-based services, and ~~cost-effective~~digital ~~course~~asset infrastructure. Management seeks to engage service providers with experience, security practices, and operational controls appropriate to our size, operating model, and risk framework.

Our cybersecurity risk management approach is designed to be proportional to the Company’s scale and complexity and emphasizes preventative controls, access management, and oversight of third-party service providers. In the event of a cybersecurity incident or digital-asset-related security event, we would primarily rely on the incident response, remediation, and recovery capabilities of our service providers, together with oversight by management. The Company maintains cybersecurity insurance coverage designed to address certain losses and liabilities arising from cybersecurity incidents.

Governance

~~Our~~Oversight of cybersecurity risk ~~assessment~~is ~~and~~provided ~~management processes are implemented and maintained~~ by ~~certain~~ Company ~~employees~~management, including our Chief Executive Officer, ~~General Counsel~~ and Chief ~~Compliance~~Financial Officer. Our Board ~~addresses~~of ~~the~~Directors ~~Company’s~~oversees cybersecurity risk ~~management~~ as part of its ~~general~~broader ~~risk~~ oversight ~~function.~~of ~~The~~enterprise ~~Board has access to various reports~~risk, ~~summaries~~including orrisks ~~presentations~~ related to ~~cybersecurity~~technology ~~threats,~~infrastructure ~~risk,~~ and ~~mitigation~~digital asset operations. In ~~its~~connection ~~oversight~~with ~~role~~our business realignment, the Board ishas ~~expected~~established toa ~~specifically~~Digital ~~consider~~Asset ~~risks~~Strategy ~~that~~Advisory ~~relate~~Committee, towhich ~~the~~provides ~~reputation~~additional ofoversight ~~the~~with ~~Company~~respect ~~and~~to ~~the~~risks ~~general~~associated ~~industry in which we operate, including~~ with ~~respect~~the toCompany’s ~~privacy,~~participation ~~information~~in ~~technology~~blockchain ~~and~~networks ~~cybersecurity~~ and ~~threats~~deployment toof ~~technology~~operating ~~infrastructure~~digital assets.

~~Our~~The ~~cybersecurity~~Board ~~risk~~receives ~~management~~updates ~~processes~~from ~~are integrated into our overall approach to risk~~ management. ~~Given~~regarding ~~the~~cybersecurity ~~nature~~risks and ~~size~~related ofmatters ~~our~~as ~~Company,~~appropriate. weEscalation doprocedures ~~not~~are ~~have~~in aplace ~~dedicated~~to ~~enterprise~~ensure ~~risk~~that ~~function,~~cybersecurity ~~but~~incidents ~~our~~are ~~management~~reported ~~regularly considers and evaluates risks~~ to ~~our~~the ~~Company.~~Board Asor ~~part~~any ofrelevant ~~that risk management process~~subcommittees, ~~management~~depending ~~identifies,~~on ~~assesses~~the nature and ~~evaluates~~severity ~~risks~~of ~~impacting~~the ~~our~~incident. ~~operations~~Given ~~across~~ the Company,’s ~~including~~size ~~those~~and ~~risks~~operating ~~related~~model, to cybersecurity, ~~and~~oversight ~~raises~~is ~~them~~integrated ~~for~~into ~~discussion~~the ~~with~~Board’s ~~our~~general ~~employees,~~risk ~~and~~oversight ~~where~~responsibilities itrather isthan ~~determined~~managed tothrough bea ~~appropriate,~~dedicated ~~issues~~cybersecurity ~~are also raised to the Board for consideration~~committee.

ToManagement ~~promote~~considers ~~organization-wide attention to~~ cybersecurity ~~issues,~~risks weas ~~conduct~~part ~~mandatory~~of ~~employee training on cybersecurity and provide ongoing cybersecurity education and awareness, monitoring phishing attacks, and cybersecurity awareness materials. The Company will be evaluating~~ its ~~cybersecurity~~overall ~~governance~~risk ~~and~~management ~~practices~~process and ~~expects~~elevates tomatters ~~make appropriate changes~~ to ~~align with our significantly reduced and changed business and operations following~~ the ~~completed~~Board ~~the~~when ~~Avenova Asset Sale and the Wound Care Divestiture~~appropriate.

Cybersecurity Risks

AsOur ofcybersecurity ~~the~~risks ~~date~~include ofrisks ~~this~~arising ~~annual~~from ~~report,~~unauthorized weaccess ~~are~~to ~~not~~information ~~aware~~systems, ofdata ~~any~~breaches, ~~risks~~malware ~~from~~or ~~cybersecurity~~ransomware ~~threats,~~attacks (including asthose aleveraging ~~result~~artificial ofintelligence), ~~any~~phishing ~~previous~~or ~~cybersecurity~~social-engineering ~~incidents,~~attempts ~~that~~(including ~~have~~AI-generated ~~materially~~content ~~affected~~such ~~our~~as ~~business strategy~~deepfakes), ~~results~~supply ofchain ~~operations~~attacks, orand ~~financial~~failures ~~condition~~ or ~~are~~security ~~reasonably~~incidents ~~likely~~involving tothird-party ~~have~~service ~~such~~providers. aIn ~~material~~addition, ~~effect.~~our ~~However,~~operations ~~the~~within ~~sophistication~~blockchain ofnetworks ~~and~~expose us to risks ~~from~~specific ~~cybersecurity~~to ~~threats~~digital ~~and~~assets, ~~incidents~~including ~~continues~~the toloss, ~~increase~~theft, ~~and~~or ~~the~~compromise ~~preventative~~of ~~actions~~private ~~that~~keys; wevulnerabilities ~~have~~in ~~taken~~smart ~~and~~contracts ~~continue~~or toprotocol-level ~~take~~code; tooutages ~~reduce~~or ~~the~~disruptions ~~risk~~affecting ofblockchain ~~cybersecurity~~networks ~~threats~~or validators; and cybersecurity incidents ~~and~~at ~~protect~~custodians ~~our~~or ~~information~~other ~~systems~~digital ~~and~~asset ~~information~~infrastructure ~~may~~providers. ~~not~~We ~~successfully~~also ~~protect~~recognize ~~against~~that ~~all~~ cybersecurity ~~threats~~insurance ~~and~~coverage ~~cybersecurity~~may ~~incidents.~~have ~~For~~limitations ~~additional~~and ~~information~~may ~~regarding~~not ~~risks~~fully ~~relating~~cover toall ~~cybersecurity,~~losses ~~see~~arising ~~“Item~~from ~~1A—Risk~~such ~~Factors~~incidents.”

A cybersecurity incident or digital-asset-related 22security event could result in financial loss, operational disruption, reputational harm, regulatory scrutiny, legal liability, or other adverse consequences. While we maintain controls and rely on third-party providers designed to mitigate these risks, such measures may not prevent all cybersecurity incidents.

As of the date of this Annual Report, we are not aware of any cybersecurity incidents, including incidents related to our digital asset operations, that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. For additional information regarding cybersecurity-related risks, see “Item 1A—Risk Factors.”

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ITEM 2.

PROPERTIES

Our principal executive offices and administrative operations are located at 2000 Powell Street, Suite 1150, Emeryville, California. In total, we lease approximately 7,675 square feet of office space in the facility pursuant to the Lease expiring on July 31, 2027.

ITEM 3.

LEGAL PROCEEDINGS

OnFrom ~~March~~time 6,to ~~2025~~time, ~~a complaint was filed against~~ the Company bymay ~~Sabby~~be ~~alleging~~involved ain ~~breach~~various oflegal ~~contract~~proceedings ~~claim~~arising in the ~~U.S.~~ordinary ~~District~~course ~~Court for the Southern District~~ of ~~New York involving matters that were disputed by Sabby and us~~business. As ~~disclosed~~of ~~above~~December in31, ~~the~~2025, ~~section~~there ~~“Recent~~were ~~Developments~~no ~~and~~matters ~~Stock Exchange Listing~~that,” ~~and~~in the ~~subheading~~opinion ~~“Settlement Agreements with Certain Warrant Holders” we recently settled our dispute with Sabby, where we made an aggregate payment~~ of $1management,~~125,000~~ towould ~~Sabby~~ultimately toresult ~~purchase~~in ~~its~~liability ~~warrants~~that ~~and~~would ~~Sabby~~have ~~prior~~a tomaterial ~~such~~adverse ~~warrant~~effect ~~purchase~~on ~~exercised certain of its warrants that resulted in~~ the Company’s ~~receiving~~financial ~~an aggregate amount of $174~~position,~~168.~~ Asresults ~~a result~~ of ~~such~~operations ~~settlement,~~or oncash ~~March 10, 2025, Sabby dismissed the complaint filed against the Company with prejudice~~flows. ~~The~~As ~~Company also settled similar disputes with two other warrant holders~~ of the ~~Company.~~date ~~Pursuant~~of tothis ~~such settlement agreements with the other two warrant holders~~filing, wethere ~~made~~were ~~a payment~~no ~~of $344~~matters,~~924~~ toexcept ~~each~~as ofset ~~the~~forth ~~two warrant holders to purchase their respective warrants (together with the payment to Sabby~~below, ~~an aggregate payment of $1~~that,~~814,848)~~ ~~and~~in the ~~two~~opinion ~~warrant holders prior to the purchase~~ of ~~their~~management, ~~warrants~~would ~~each~~ultimately ~~exercised~~result ~~their respective warrants resulting~~ in ~~the~~liability ~~Company~~that ~~receiving~~would ~~$87,084~~have ~~from~~a ~~each~~material ~~warrant~~adverse ~~holder~~effect ~~(together~~on ~~with~~ the ~~exercise~~Company’s byfinancial ~~Sabby~~position, ~~the~~results ~~Company received an aggregate~~ of ~~$348,337~~operations ~~from~~or ~~such~~cash ~~exercises)~~flows.

~~Except~~Legal asProceedings ~~described~~and ~~above,~~Threatened ~~from~~Legal ~~time~~Proceedings toRelated ~~time, the Company may be involved in various legal proceedings arising in the ordinary course of business, prior~~ to ~~completing~~ the ~~Avenova~~January ~~Asset~~2026 ~~Sale,~~Private as a result of having completed the Avenova Asset Sale or as a result of matters that may otherwise arise as the Company pursues the Dissolution and/or other strategic alternatives. As of December 31, 2024, 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.Placement

In connection with the January 2026 Private Placement and following the filing of the definitive proxy statement filed with the SEC on February 10, 2026 (the “Definitive Proxy Statement”), the Company received a class action complaint on behalf of a purported Company stockholder (the “Stockholder Complaint”) alleging breach of fiduciary duty related to claimed deficiencies regarding the disclosures contained in the Definitive Proxy Statement. While the Company believes that the disclosures set forth in the Definitive Proxy Statement complied fully with all applicable law and denies the allegations in the Stockholder Complaint, in order to moot the purported stockholder’s disclosure claims, avoid nuisance and possible expense and disruption to the January 2026 Private Placement, and provide additional information to its stockholders, the Company voluntarily supplemented certain disclosures in the Definitive Proxy Statement on March 2, 2026. On March 17, 2026, the Company filed a motion to dismiss the Stockholder Complaint. The outcome of this matter is uncertain, and the Company cannot reasonably estimate the possible loss or range of loss, if any, at this time.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the NYSE American, under the symbol “NBY.”

Holders

As of March 2516, ~~2025~~2026, there were approximately 94 97 holders of record of our common stock. This figure does not reflect persons or entities that hold their stock in nominee or “street” name through various brokerage firms.

Dividend Policy

We have not paid regular cash dividends on our common stock ~~since~~and do not currently expect to do so in the near future. In 2025, following a comprehensive realignment of our ~~inception~~business, we declared a one-time special cash dividend of $4.00 per share, or approximately $4.8 million in the aggregate, which was paid on September 29, 2025 to stockholders of record as of September 15, 2025. We currently expect to retain future earnings primarily for use in the remaining operations of our business; therefore, we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our financial condition, results of operations, capital requirements, restrictions under any existing indebtedness and other factors the Board deems relevant.

ITEM 6.

[RESERVED]

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ITEM 7.

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 ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements and related notes included in Part II, Item 8 of this annual report. 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 Avenova Asset ~~Sale~~Divestiture, the ~~Wound~~PhaseOne ~~Care~~ Divestiture and future strategic direction of our Company, as well as many other factors, including those set forth under the section entitled “Risk Factors” in Part I, Item 1A. and elsewhere in this annual report, 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 believed 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 annual report, even if new information becomes available in the future.

Overview ~~of Significant Changes and Strategic Direction~~

WeDuring ~~have~~2025, ~~undergone~~we ~~significant~~completed ~~changes to our business and operations beginning in March 2024 as~~ a ~~result~~comprehensive ofrealignment ~~a series~~ of ~~completed~~our ~~transactions, which changes are discussed below and summarized in further detail in this annual report under the section “Recent Developments and Stock Exchange Listing” in Part I, Item 1 above~~business. As apart ~~result~~ of ~~completing~~this ~~these transactions~~realignment, we ~~are~~adopted ~~pursuing~~ a ~~new~~capital ~~direction~~allocation ~~that~~approach ~~may~~focused ~~result~~on inacquiring ~~the Dissolution of our Company or another strategic alternative transaction, which are also discussed below~~ and ~~elsewhere~~holding ineconomically ~~this~~productive ~~annual~~digital ~~report.~~assets ~~Due to the significant changes~~ that ~~have~~enable ~~already~~participation ~~occurred~~in ~~to our business and operations and the future changes that will occur as we pursue the Dissolution or another strategic alternative~~open, ~~our~~decentralized ~~historic~~ financial ~~condition~~networks, ~~results~~subject of operations, and prospects discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” will be materially different than our future financial condition, results of operations and prospects in the near term and in the future. Accordingly, it will be important to ~~read~~applicable about our recent developments and new strategic direction when reading our Management’s Discussion and Analysis of Financial Condition and Results of Operations. As a result of each of the completed transactions discussed below and elsewhere in this annual reportrisk, we have significantly reduced our business operations with limited sources of revenue generation. We were historically focused on the development and sale of scientifically-created and clinically-proven eyecareliquidity, ~~wound care~~governance, and ~~skin~~regulatory ~~care products~~considerations. Our ~~Avenova~~primary ~~Assets~~objective ~~were~~is ~~our~~to ~~leading~~preserve ~~products~~stockholder ~~formulated~~value ~~with our proprietary, stable~~ and ~~pure form of hypochlorous acid and were cleared by the Food and Drug Administration for sale in the United States. As described in additional detail below~~, ~~subsequent~~over ~~to December 31~~time, ~~2024,~~seek onopportunities ~~January 17, 2025, we sold the Avenova Assets~~ to ~~PRN~~enhance invalue ~~the~~through ~~Avenova~~disciplined ~~Asset~~participation Sale, which constituted the sale of substantially all of our revenue generating and operating assets. See additional discussion under the section “Recent Developments and Stock Exchange Listing” and subheading “Avenova Asset Sale” in ~~Part~~such ~~I, Item 1 above~~networks. ~~See~~We also ~~Note~~continue ~~12, “Avenova Asset Sale and Bridge Loan” in the Notes~~ to ~~Consolidated~~maintain ~~Financial~~a ~~Statements~~limited inlegacy ~~Part~~wound ~~II,~~care ~~Item 8 of this annual report~~business.

WePursuant ~~have~~to ~~also~~oversight ~~historically~~by ~~manufactured~~our ~~and~~Board ~~sold a proprietary form~~ of ~~hypochlorous~~Directors ~~acid~~and ~~for~~our ~~the~~Digital ~~wound~~Asset ~~care~~Strategy ~~market~~Advisory ~~primarily~~Committee ~~under~~established ~~the~~by ~~NeutroPhase~~our ~~and~~Board ~~PhaseOne~~of ~~brands.~~Directors, ~~Our~~our ~~wound~~core ~~care~~business ~~products~~consists ~~are~~of ~~used~~the ~~for~~accumulation, ~~cleansing~~holding, and ~~irrigation~~deployment ~~as part~~ of ~~surgical~~operating ~~procedures,~~digital asassets ~~well~~for asuse ~~treating~~within ~~wounds,~~blockchain-based ~~burns,~~networks ~~ulcers and other injuries. Subsequent~~ to ~~December~~support ~~31,~~protocol-level ~~2024~~services, onincluding ~~January~~staking, 8governance participation, ~~2025~~validation, ~~we sold our Wound Care Trademarks~~ and ~~our~~related ~~wound~~activities. ~~care~~These ~~inventory~~activities tomay ~~Phase~~generate ~~One~~protocol-defined inincentives, ~~the Wound Care Divestiture. Following the Wound Care Divestiture~~rewards, ~~our~~or ~~wound~~service-based ~~care~~fees ~~business~~in ~~has~~accordance ~~been~~with ~~significantly~~network ~~reduced~~rules ~~although~~and wegovernance-approved ~~continue to manufacture our wound care products under remaining contractual obligations to our distribution partner in China~~parameters. WeOur ~~anticipate~~initial ~~fulfilling~~focus ~~these~~is ~~obligations~~on bySKY, the ~~end~~protocol oftoken ~~the second quarter~~ of ~~2025. See~~ the ~~additional~~decentralized ~~discussion~~Sky ~~under the section “Recent Developments and Stock Exchange Listing” and subheading “Wound Care Divestiture” in Part I, Item 1 above~~Protocol. ~~See also Note 22, “Wound Care Divestiture and Held-for-Sale Assets” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.~~

~~Through~~The ~~our~~Company ~~former~~holds ~~subsidiary,~~digital ~~DERMAdoctor,~~assets weas ~~previously~~part ~~offered~~of ~~over~~a ~~30 dermatologist~~long-~~developed~~term ~~products~~capital ~~targeting~~allocation ~~common~~strategy ~~skin~~and ~~concerns,~~does ~~ranging~~not ~~from~~engage ~~aging~~in ~~and~~short-term ~~blemishes~~speculative ~~to dry skin~~trading, ~~perspiration~~proprietary ~~and~~trading ~~keratosis~~strategies, ~~pilaris.~~margin ~~On March 25~~arrangements, ~~2024,~~or wederivatives ~~announced~~transactions ~~the~~referencing ~~closing~~digital ofassets ~~the~~unless ~~sale~~expressly ofauthorized ~~DERMAdoctor~~by ~~pursuant to~~ the ~~DERMAdoctor~~Digital ~~Divestiture.~~Asset ~~See~~Strategy ~~also~~Advisory ~~Note~~Committee ~~21, “DERMAdoctor Divestiture~~ and ~~Discontinued~~supported ~~Operations”~~by inappropriate ~~the~~risk ~~Notes~~management, ~~to Consolidated Financial Statements in Part II~~compliance, ~~Item~~and 8liquidity ~~of this annual report~~controls.

Separately, we maintain cash, cash equivalents, and short-duration 25investments outside of our digital asset strategy to meet near-term operating requirements and liquidity needs.

January 2026 Private Placement

Subsequent to December 31, 2025, we completed the January 2026 Placement, consisting of the issuance of pre-funded warrants to purchase an aggregate of 167,539,227 shares of common stock in exchange for approximately $25.0 million in cash, 35,000,000 USDT and 16,000,000 USDS stablecoins (with an aggregate value of approximately $51.0 million at the time of the placement), and 943,599,690 SKY tokens (with an aggregate value of approximately $61.4 million at the time of the placement). The value of the stablecoins and SKY tokens was determined based on their respective fair values as of the closing date of the private placement. The proceeds of the private placement were received to further support the Company’s capital allocation strategy.

The Company has not established a specific target allocation for SKY or other digital assets. Decisions regarding the pace, size, and timing of any acquisitions or dispositions are driven by prevailing market conditions, liquidity considerations, risk controls established by management, and oversight by the Digital Asset Strategy Advisory Committee and the Board of Directors.

Digital Asset Holdings – SKY

As of March 16, 2026, the Company held approximately 2.1 billion SKY tokens. SKY tokens are a network-native digital asset that may be held and transferred through blockchain-based wallets and may be exchanged on trading venues that support SKY trading pairs.

The Sky Protocol is a decentralized, non-custodial software protocol built around the USDS stablecoin and governed by Sky ecosystem participants through on-chain governance processes. The protocol is implemented through open-source smart contracts deployed on the Ethereum blockchain. The Sky Protocol includes two primary native tokens: USDS, a collateral-backed stablecoin designed to maintain a soft peg to the U.S. dollar, and SKY, the protocol token used in governance and certain protocol-level economic mechanisms.

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~~With~~The ~~the~~market ~~Company~~price ~~having completed the sale~~ of ~~substantially~~SKY ~~all~~is ~~of its assets in the Avenova Asset Sale, as well as the other transactions discussed above, the Board, after evaluating the different strategic options available to the Company,~~ determined ~~that~~by ~~the~~supply ~~best opportunity available to maximize the remaining value for our Company~~ and todemand ~~our~~across ~~stockholders is to wind~~network-upbased ~~the~~markets ~~Company’s affairs~~ and ~~pursue the Dissolution pursuant to the Plan of Dissolution, which~~ may ~~result~~be ~~in distributions to our stockholders of our remaining asset value to the extent any remains~~volatile. ~~Concurrent~~Prices ~~with pursuing the Dissolution, the Company is also evaluating other strategic alternatives that~~ may befluctuate ~~available~~due to usfactors toincluding ~~the~~protocol ~~extent~~changes, ~~the~~governance ~~Dissolution~~decisions, ~~does~~market ~~not~~sentiment, ~~proceed.~~macroeconomic ~~See~~conditions, ~~the additional discussion under the section “Recent Developments~~ and ~~Stock~~broader ~~Exchange~~digital ~~Listing”~~asset ~~and~~market ~~subheading “Company Dissolution and Other Strategic Alternatives” and “Engagement of Financial Advisor—Lucid” in Part I, Item 1 above~~dynamics.

Custody and Safeguarding of Digital Assets

We safeguard our digital assets through a combination of third-party custodial services and internally controlled wallet infrastructure. A portion of our SKY is held in custody accounts with a regulated digital asset custodian that serves as custodian of record under applicable law.

We also utilize internally controlled wallet infrastructure to manage private keys and execute on-chain transactions, including staking and other protocol interactions. Digital assets held through this infrastructure are controlled by the Company rather than held in trust by a third-party custodian.

Digital assets maintained outside of custodial accounts are generally limited to amounts necessary to facilitate protocol participation and transactional activity and are subject to internal controls designed to mitigate loss.

Governmental, Regulatory, and Accounting Considerations

The regulatory framework applicable to blockchain-based networks and digital assets continues to evolve in the United States and internationally. Regulatory developments affecting trading venues, custodians, or service providers may impact access, liquidity, or pricing of digital assets held by the Company. We monitor regulatory developments and adjust our policies, counterparties, and controls as appropriate.

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 our business during 2024 and 2025, we completed the Avenova Asset Divestiture, the PhaseOne Divestiture, and the DERMAdoctor Divestiture, and decided to exit our involvement in the China NeutroPhase product line. The historical financial results of these businesses are reflected as discontinued operations in the Consolidated Financial Statements included in this annual report. See Notes 13, “Avenova Asset Divestiture and Bridge Loan,” 14 “PhaseOne Divestiture”, 15, “DERMAdoctor Divestiture” and 16, “Summary of Discontinued Operations” to the Consolidated Financial Statements in Part II, Item 8 of this annual report for additional details.

Financial Overview and Outlook

WeBased ~~have~~on ~~incurred~~funds ~~net~~available ~~losses and generated negative cash flows from operations since inception and expect to incur losses~~ as weof ~~pursue~~December ~~our~~31, ~~strategic initiatives~~2025, ~~including~~aggregate ~~the~~gross ~~Dissolution.~~cash ~~Our~~proceeds ~~net~~of ~~losses~~approximately ~~from continuing operations were~~ $725.20 million ~~and~~from ~~$6.1 million for~~ the ~~years~~January ~~ending~~2026 ~~December~~Private 31Placement, ~~2024~~net ~~and~~cash ~~2023,~~generated ~~respectively.~~from Asthe conversion of ~~December~~the ~~31,~~stablecoins ~~2024,~~received wein ~~had~~the anJanuary ~~accumulated~~2026 ~~deficit~~Private ofPlacement ~~$183~~into U.5S. ~~million~~dollars, ~~total~~and ~~current assets of~~ $113.95 million ~~and~~in ~~total~~gross ~~assets~~cash ofproceeds ~~$3.4~~from ~~million.~~issuances ~~Subsequent~~under tothe ~~December~~2026 ~~31,~~ATM ~~2024,~~Program onbetween January 1720, ~~2025,~~2026 weand ~~completed~~March ~~the~~16, ~~Avenova~~2026, ~~Asset~~management ~~Sale~~believes ~~for~~that ~~which~~the weCompany’s ~~received~~existing ~~net~~cash ~~proceeds of approximately $10.5 million~~ and oncash ~~January~~equivalents 8,will ~~2025,~~be ~~and~~sufficient weto ~~completed~~fund ~~the~~its ~~Wound~~planned ~~Care~~operating ~~Divestiture~~expenses ~~for~~at ~~which~~least wethrough ~~received~~March ~~net~~19, ~~proceeds of $0~~2027.~~5 million.~~

~~Based~~All onof ~~our funds available on December 31, 2024, as well as~~ the ~~net~~stablecoins ~~proceeds~~received ~~from~~in the ~~Avenova~~January ~~Asset~~2026 ~~Sale~~Private ~~and~~Placement ~~the~~were ~~Wound~~converted ~~Care~~into ~~Divestiture,~~U.S. ~~management~~dollars ~~believes~~to ~~that~~support ~~the~~operating ~~Company’s~~liquidity, ~~existing cash~~ and ~~cash~~a ~~equivalents~~significant ~~will~~portion bewas ~~sufficient~~deployed to ~~enable~~acquire ~~the~~additional ~~Company~~SKY ~~to meet its planned operating expenses at least through April 2, 2026~~tokens. ~~However,~~Subsequent ~~there is uncertainty with respect~~ to ~~our strategic direction, as~~ the ~~Dissolution~~January is2026 ~~subject~~Private toPlacement ~~stockholder approval~~ and wethrough ~~are~~March ~~also exploring other potential strategic alternatives that may be available to us~~16, ~~and~~2026, ~~as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause~~ the Company todeployed ~~expend~~approximately ~~cash~~$70.7 ~~significantly~~million ~~faster~~in ~~than~~cash ~~currently~~to ~~anticipated~~acquire ~~because~~approximately of1.1 ~~factors~~billion ~~beyond~~SKY ~~its control~~tokens.

Critical Accounting Estimates

Our ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements have been prepared in accordance with ~~generally~~U.S. ~~accepted accounting principles in the United States~~GAAP. The preparation of these ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements requires us 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 ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements, as well as the reported revenues and expenses during the reporting periods. In preparing these ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates.

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results ~~for~~as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, particularly taking into account the ~~periods~~significant ~~set~~changes ~~forth~~that inoccurred ~~this~~to ~~annual~~our ~~report~~business as a result of the closing of the Avenova Asset Divestiture and the PhaseOne Divestiture in January 2025.

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Impairment of Goodwill, Indefinite-Lived Intangible Assets and Long-Lived Assets

We review goodwill, indefinite-lived intangible assets and long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate. Management uses judgment in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment. This includes cash flow projections that look several years into the future and assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates. Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded such as those recorded in the fourth quarter of 2023 to fully impair these assets related to our DERMAdoctor business as further described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

Estimates of Future Product Returns

The Company records revenue in an amount that reflects the consideration which the Company expects to receive. Accordingly, revenue is reduced for estimated future product returns. The Company’s estimates for product returns have been historically updated quarterly based on historical data of actual returns. Actual future product returns experienced by us could differ significantly from historical data. As a result of having completed the Avenova Asset Sale, the impact of product returns has been significantly reduced, in particular due to PRN assuming the liability for returns of Avenova products that occur after the closing date of January 17, 2025.

Common Stock Warrant Liabilities

For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and remeasures the warrants at each balance sheet date, with changes in ~~the~~ estimated fair value recorded as a non-cash gain or loss in the ~~consolidated~~Consolidated ~~statements~~Statements of ~~operations~~Operations. ~~The fair values of these warrants are determined using the Black-Scholes option pricing model. These values are subject to a significant degree of management’s judgment.~~

-The 27fair value of warrant liabilities is determined in accordance with ASC 820 using valuation techniques that are appropriate based on the specific terms and economic characteristics of each warrant instrument. Depending on the nature of the warrants, valuation techniques may include option pricing models, such as the Black-Scholes option pricing model, or intrinsic value calculations.

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 are generally 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. Other warrant instruments may require the use of option pricing models that incorporate assumptions such as expected volatility, risk-free interest rates, expected term, and dividend yield.

The determination of the appropriate valuation technique and the related assumptions requires significant judgment. Changes in the Company’s stock price, volatility, or other valuation inputs could materially affect the recorded fair value of warrant liabilities and the related non-cash gains or losses recognized in the Consolidated Statements of Operations. See additional information in Note 9, “Common Stock Warrants and Warrant Liabilities” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

Impairment of Assets

We review long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that any such asset may be impaired, that the carrying amount of any such asset may not be fully recoverable or that the useful life of the asset, if applicable, is no longer appropriate. Management uses judgment in making critical assumptions and estimates in determining when an impairment assessment should be recorded, if more frequent than annually, or in the completion of any such assessment. This includes cash flow projections that look several years into the future and assumptions on variables such as economic conditions, probability of success, and discount rates. Changes in judgments with respect to these assumptions and estimates could impact any such impairments recorded during 2025 as further described in Notes 2, “Summary of Significant Accounting Policies;” and 6, “Commitments and Contingencies” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

Digital Assets

The Company did not hold any digital assets as of and during the years ended December 31, 2025 and 2024. Subsequent to December 31, 2025, in January 2026, the Company entered into the January 2026 Private Placement pursuant to which it received digital assets, including stablecoins and SKY tokens, and subsequently engaged in purchases and sales of such digital assets.

Digital assets acquired in connection with the January 2026 Private Placement and subsequent transactions will be accounted for in accordance with applicable U.S. GAAP and other authoritative accounting guidance in effect at the time, including Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets, which established Subtopic 350-60 within ASC 350, Intangibles—Goodwill and Other, where applicable. Depending on the nature of the digital assets held and the Company’s specific facts and circumstances—including the Company’s activities (such as staking or other yield-generating activities), the contractual terms of related arrangements, and the Company’s relationships with counterparties—the Company may apply different accounting models. Such models could include digital assets held at fair value with changes in fair value recognized in earnings under applicable crypto-asset guidance or, if such guidance is not applicable, accounting under other relevant U.S. GAAP models, including accounting for certain digital assets as indefinite-lived intangible assets measured at historical cost and evaluated for impairment. The applicable accounting framework may differ depending on the specific facts and circumstances, and the resulting classification, measurement, and presentation could materially affect the Company’s financial position and results of operations, including potential variability in reported results.

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Results of Operations

Comparison of ~~Years~~years ~~Ended~~ended December 31, ~~2024~~2025 and ~~2023~~2024 (in thousands)

	For the Years Ended December 31,						Dollar			Percent
	For the years ended December 31,						Dollar			Percent
	2024			2023			Change			Change
Statement of Operations	2025			2024			Change			Change
Statement of Operations
Operating expenses:
Sales:
General and administrative	$	7,585		$	7,379			206			3	%
Product revenue, net	$	9,747		$	10,455		$	(708	)		(7	%)
Impairment of long-lived assets		854			—			854			—
Other revenue, net		34			—			34			100	%
Total operating expenses		8,439			7,379			1,060			14	%
Total sales, net		9,781			10,455			(674	)		(6	%)
Operating loss		(8,439	)		(7,379	)		(1,060	)		14	%
Cost of goods sold		3,300			4,371			(1,071	)		(25	%)
Non-cash (loss) gain on changes in fair value of warrant liability		(24,486	)		114			(24,600	)		(21,579	%)
Gross profit		6,481			6,084			398			7	%
Accretion of interest and amortization of discounts on convertible notes		(277	)		(904	)		627			(69	%)
Research and development		42			34			8			24	%
Other expense, net		(20	)		(581	)		561			(97	%)
Sales and marketing		4,034			4,705			(671	)		(14	%)
Net loss from continuing operations		(33,222	)		(8,750	)		(24,472	)		(280	%)
General and administrative		7,379			5,447			1,932			35	%
Net income from discontinued operations, net of taxes		11,081			1,527			9,554			626	%
Loss on divestiture of subsidiary		865			—			865			—
Net loss	$	(22,141	)	$	(7,223	)	$	(14,918	)		(207	%)
Total operating expenses		12,320			10,186			2,134			21	%
Operating loss		(5,839	)		(4,102	)		1,737			42	%
Non-cash gain on changes in fair value of warrant liability		114			272			(158	)		(58	%)
Extinguishment of Secured Convertible Note		(13	)		—			(13	)		—
Non-cash gain (loss) on change in fair value of embedded derivative liability		(18	)		40			(58	)		(145	%)
Accretion of interest and amortization of discounts on convertible notes		(904	)		(1,694	)		(790	)		(47	%)
Non-cash loss on modification of common stock warrants		—			(292	)		292			(100	%)
Other expense, net		(550	)		(369	)		(181	)		49	%
Net loss from continuing operations		(7,210	)		(6,145	)		(1,065	)		17	%
Net profit from held-for-sale assets (Note 22)		111			404			(293	)		(73	%)
Net loss from discontinued operations (Note 21)		(124	)		(3,899	)		3,775			(97	%)
Net loss	$	(7,223	)	$	(9,640	)	$	2,417			(25	%)

Impact of ~~Held-for-Sale~~Divestitures ~~Assets and Discontinued Operations~~

Financial results related to divested assets from the ~~Company’s~~Avenova ~~wound~~Asset ~~care~~Divestiture ~~products~~and ~~sold~~the ~~under~~PhaseOne Divestiture and the ~~Wound~~China ~~Care~~NeutroPhase ~~Trademarks~~product ~~from~~line ~~January~~for 1,the ~~2023~~years ~~through~~ended December 31, ~~2024~~2025 ~~are~~and ~~set~~2024 ~~forth~~and infrom the ~~table~~DERMAdoctor ~~above~~Divestiture ~~and~~for asthe ~~set~~year ~~forth~~ended inDecember ~~this~~31, ~~annual~~2024 ~~report~~ have been aggregated and reported for each of these periods in the ~~caption~~line ~~entitled~~item titled “Net ~~profit~~income from ~~held-for-sale~~discontinued ~~assets~~operations, net of taxes” ~~for~~in the ~~years~~table ~~ended~~above. ~~December~~Prior-period ~~31,~~amounts ~~2024~~have ~~and~~been ~~2023.~~revised ~~The~~to ~~Wound~~correct ~~Care~~the ~~Divestiture,~~presentation ~~resulting~~of in the ~~sale~~loss ofon the ~~Wound~~DERMAdoctor ~~Care~~Divestiture ~~Trademarks,~~and ~~was~~related ~~unanimously~~divestiture ~~approved~~proceeds, bywhich ~~the~~were ~~Board~~previously onpresented ~~December~~within ~~30,~~continuing ~~2024~~operations and ~~closed~~are ~~subsequent~~now toreflected ~~December~~within 31discontinued operations. This revision did not affect total net loss, ~~2024~~total net loss per share, ontotal ~~January~~cash 8flows, ~~2025~~or the Company’s financial position. See additional ~~discussion~~information in ~~Note~~Notes 2213, “~~Wound~~Avenova ~~Care~~Asset Divestiture and ~~Held-for-Sale~~Bridge ~~Assets~~Loan;” 14, “PhaseOne Divestiture”, in15, ~~the~~“DERMAdoctor Divestiture” and 16, “Summary of Discontinued Operations” in Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual 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.

The financial results of DERMAdoctor beginning from January 1, 2023 through the closing of the DERMAdoctor Divestiture on March 25, 2024 in the table above and as set forth in this annual report have been aggregated in the caption entitled “Net loss from discontinued operations” for the years ended December 31, 2024 and 2023. See additional discussion in Note 21, “DERMAdoctor Divestiture and Discontinued Operations,” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.

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The discussions below and throughout this section apply only to results from continuing operations as of December 31, 2024, except as otherwise noted.

Total Net Sales and Cost of Goods Sold

Product revenue, net, decreased by $0.7 million, or 7%, to $9.7 million for the year ended December 31, 2024, from $10.5 million for the year ended December 31, 2023.

Revenue from eyecare products increased $0.6 million to $9.7 million for the year ended December 31, 2024, from $9.1 million for the year ended December 31, 2023. The increase was primarily due to a continued overall increase in Avenova Spray sold through online channels.

The overall increase in eyecare product revenue was offset by a $1.4 million decrease in NeutroPhase sales to Pioneer. The Company recorded $1.4 million in product revenue, net, from NeutroPhase in the year ended December 31, 2023, with no comparable revenue in the year ended December 31, 2024.

Cost of goods sold decreased $1.1 million, or 25%, to $3.3 million for the year ended December 31, 2024, from $4.4 million for the year ended December 31, 2023. The decrease was due primarily to the decrease in lower margin NeutroPhase sales, partially offset by the increase in higher-margin eyecare products sales during the comparable periods.

Sales and marketing

Sales and marketing expenses decreased $0.7 million, or 14%, to $4.0 million for the year ended December 31, 2024, from $4.7 million for the year ended December 31, 2023. The decrease was due primarily to continued digital advertising efficiencies, a decrease in the cost of marketing samples and lower marketing consulting costs incurred in the year ended December 31, 2024 as compared to the year ended December 31, 2023.

General and administrative

General and administrative expenses increased $10.92 million, or 353%, to $7.46 million for the year ended December 31, ~~2024~~2025, from $57.4 million for the year ended December 31, ~~2023~~2024. The increase was due primarily to anhigher ~~increase in~~ legal costs ~~primarily~~associated ~~related~~with to non-recurring strategic initiatives, ~~including the DERMAdoctor Divestiture, the 2024 Public Offering, the Avenova Asset Sale, the Wound Care Divestiture and the Dissolution, ongoing~~ during the year ended December 31, ~~2024~~2025.

~~Loss~~Impairment ~~on divestiture~~ of ~~subsidiary~~Long-Lived Assets

AsDuring ~~a result of~~ the ~~closing~~year ofended ~~the~~December ~~DERMAdoctor Divestiture on March 25~~31, ~~2024~~2025, wethe ~~incurred~~Company arecorded ~~loss~~an impairment of $~~0.9~~854 ~~million~~thousand ~~for~~related ~~the~~primarily ~~year~~to ~~ended~~right-of-use ~~December~~assets ~~31,~~and ~~2024~~fixed ~~with~~assets noassociated ~~comparable~~with ~~activity~~excess ~~for~~leased ~~the~~office ~~year~~capacity ~~ended~~resulting ~~December~~from ~~31,~~our ~~2023~~strategic realignment. ~~For~~This ~~additional~~impairment ~~information~~reflects ~~regarding~~actions ~~the~~taken ~~loss~~to onreduce ~~divestiture~~our ofoffice ~~this~~space ~~subsidiary,~~and ~~please~~streamline ~~see~~our ~~Note~~cost ~~21,~~structure ~~“DERMAdoctor~~following ~~Divestiture~~the ~~and~~realignment. ~~Discontinued~~No ~~Operations,”~~comparable inimpairment ~~the~~was ~~Notes~~recorded toduring ~~Consolidated~~the ~~Financial~~year ~~Statements,~~ended inDecember ~~Part II~~31, ~~Item 8 of this annual report~~2024.

Non-cash (loss) gain on changes in fair value of warrant liability

Adjustments to the fair value of warrant liabilities resulted in a ~~gain~~non-cash loss of $~~114~~24.5 ~~thousand~~million for the year ended December 31, ~~2024~~2025 and a non-cash gain of $~~272~~0.1 ~~thousand~~million for the year ended December 31, ~~2023~~2024. The warrant ~~liabilities~~liability ~~for~~recorded during the ~~December~~year ~~2023~~ended ~~Warrants~~December ~~(as defined in Note 14~~31, ~~“Common~~2025 ~~Stock~~related ~~Warrants~~to ~~and Warrant Liabilities”) and~~ the ~~March~~October ~~2024~~Pre-Funded ~~Warrant (as defined in Note 14, “Common Stock~~ Warrants. ~~and~~The ~~Warrant~~warrant ~~Liabilities”)~~liability ~~were~~recorded ~~reclassified to equity~~ during the year ended December 31, 2024, ~~and~~related ~~will~~to nothe ~~longer~~December ~~require~~2023 ~~fair~~Warrants ~~value~~and ~~adjustments~~the ~~which~~March ~~will~~2024 ~~impact our results of operations~~Warrants. For additional information regarding warrant liabilities and their valuation, please see Note 149, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

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Non-cash gain (loss) on changes in fair value of embedded derivative liability

Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the year ended December 31, 2024 and gain of $40 thousand for the year ended December 31, 2023. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

Accretion of interest and amortization of discounts on convertible notes

Accretion of interest and amortization of discounts on convertible notes was $0.93 million for the year ended December 31, ~~2024~~2025, ~~and~~compared to $10.79 million for the year ended December 31, ~~2023~~2024. The decrease reflects the elimination of the Secured Convertible Notes, which were outstanding during 2024 and carried higher interest and discount amortization, with only the Unsecured Convertible Notes outstanding during 2025. See additional discussion in Note 138, “Convertible Notes,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

Non-cash loss on modification of common stock warrants

During the year ended December 31, 2023, the Company recorded a $0.3 million non-cash loss on the modification of common stock warrants, which resulted from the 2023 Private Placement and 2023 Warrant Reprice Transaction. For additional information, see Notes 11, “Financing Activities” and 14, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

Other expense, net

Other expense, net was $~~0.6~~20 ~~million~~thousand for the year ended December 31, ~~2024~~2025, ~~and~~compared to $0.46 million for the year ended December 31, ~~2023~~2024. ~~Expenses~~The ~~were~~amounts ~~related~~recorded in each period primarily relate to separate and unrelated financing ~~events~~activities. ~~recorded~~The ~~during~~higher ~~the~~expense ~~respective~~in ~~periods~~2024 reflects non-recurring financing-related costs incurred during that period.

~~Financial~~- ~~Condition,~~37 ~~Liquidity and Capital Resources~~-

We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses as we pursue our strategic initiatives, including the Dissolution. Our net losses from continuing operations were $7.2 million and $6.1 million for the years ending December 31, 2024 and 2023, respectively. As of December 31, 2024, our cash and cash equivalents were $430 thousand, compared to $2.9 million as of December 31, 2023. Our cash and cash equivalents as of December 31, 2024 included cash received from the Bridge Loan. As of December 31, 2024, our Bridge Loan had a balance of approximately $0.5 million, which was subsequently repaid upon the closing of the Avenova Asset Sale on January 17, 2025, at which time the collateral securing the Bridge Loan was also released. See additional discussion in Note 12, “Avenova Asset Sale and Bridge Loan” in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

On March 25, 2024, the Company issued unsecured convertible notes (the “Unsecured Convertible Notes”) to four (4) secured parties that have an aggregate principal amount of $525,000 or will be convertible into an aggregate of 107,146 shares. The principal amount of the Unsecured Convertible Notes does not accrue interest and is payable to the secured parties upon maturity in March 2026, unless earlier converted into common stock. For additional information regarding the 2023 Private Placement and the Unsecured Convertible Notes, see Note 11 “Financing Activities,” Note 13 “Convertible Notes,” and Note 15 “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this annual report.

Subsequent to December 31, 2024, on January 17, 2025, we completed the Avenova Asset Sale for which we received net proceeds of approximately $10.5 million and we completed the Wound Care divestiture on January 8, 2025 where we received net proceeds of $0.5 million.

Based on our funds available on December 31, 2024, together with the net proceeds subsequently received from the Avenova Asset Sale, management believes that the Company’s existing cash and cash equivalents will be sufficient to enable the Company to meet its planned operating expenses at least through April 2, 2026. However, there is uncertainty with respect to our strategic direction, as the Dissolution is subject to stockholder approval and we are also exploring other potential strategic alternatives that may be available to us, and, as a result, when we do pursue our strategic direction, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the Company to expend cash significantly faster than currently anticipated because of factors beyond its control.

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~~Cash~~Financial ~~Used~~Condition, inLiquidity ~~Operating~~and ~~Activities~~Capital Resources

~~Net~~We ~~cash~~have ~~used~~incurred innet ~~operating~~losses ~~activities~~and ~~from~~generated ~~continuing~~negative ~~operations~~cash ~~was~~flows ~~$5.2~~from ~~million~~operations ~~for~~since ~~the~~inception ~~year~~and ~~ended~~expect ~~December~~to ~~31,~~incur ~~2024,~~losses ~~which~~as ~~consisted~~we ~~primarily~~pursue ofour astrategic initiatives. Our net ~~loss~~losses from continuing operations ofwere $733.2 million, ~~adjusted by depreciation~~ and ~~amortization expenses of~~ $~~40 thousand, stock-based compensation expenses related to employee and director stock awards of $0~~8.18 million, ~~non-cash~~for ~~loss~~the onyears ~~divestiture~~ending ofDecember ~~subsidiary of $0.9 million~~31, ~~non-cash~~2025 ~~expense~~and ~~incurred to obtain consent of Secured Convertible Note (as defined in Note 13~~2024, ~~“Convertible~~respectively. ~~Notes”)~~The ~~holders~~net toloss ~~release~~from ~~collateral~~continuing operations for the ~~DERMAdoctor~~year ~~Divestiture~~ended ofDecember ~~$0.4 million~~31, ~~non-cash~~2025 ~~loss~~included ona ~~modifications of warrants of $69 thousand,~~ non-cash ~~gain~~loss ~~on changes in fair value~~ of ~~warrant liabilities of~~ $024.15 million, ~~non-cash~~for ~~loss~~an onincrease ~~changes~~ in ~~fair~~warrant ~~value~~liability ofrecorded ~~embedded~~in ~~derivative~~conjunction ~~liability~~with ofthe ~~$18~~October ~~thousand, non~~Pre-~~cash~~Funded ~~right-of-use~~Warrants. ~~amortization~~As of ~~$0.3~~December ~~million~~31, ~~accretion~~2025, ofour ~~interest~~cash and ~~amortization~~cash ofequivalents ~~debt~~were ~~discounts on convertible notes of~~ $08.90 million, ~~and~~compared ato ~~net decrease of~~ $0.64 million inas ~~our net operating assets and liabilities~~ of ~~continuing~~December ~~operations~~31, 2024.

~~Net~~Based ~~cash~~on ~~used~~funds inavailable ~~operating~~as ~~activities~~of ~~from continuing operations was $4.3 million for the year ended~~ December 31, ~~2023~~2025, ~~which~~aggregate ~~consisted~~gross ~~primarily~~cash ofproceeds ~~a net loss from continuing operations~~ of approximately $925.60 million, ~~adjusted~~from bythe ~~depreciation~~January ~~and~~2026 ~~amortization~~Private ~~expenses of $51 thousand~~Placement, ~~stock-based~~net ~~compensation expenses of $0.3 million, non-~~cash ~~loss~~generated onfrom ~~modifications~~the ofconversion ~~warrants~~ of ~~$0.3~~all ~~million,~~stablecoins ~~non-cash~~received ~~gain~~in onthe ~~changes~~January in2026 ~~fair~~Private ~~value~~Placement ofinto ~~warrant~~U.S. ~~liabilities~~dollars, ofand $013.35 million, ~~non-cash gain on changes~~ in ~~fair~~gross ~~value~~cash ofproceeds ~~embedded~~from ~~derivative~~issuances ~~liability~~under ofthe ~~$40~~2026 ~~thousand,~~ATM ~~non-cash~~Program ~~right-of-use~~between ~~amortization~~January ~~of $0.3 million~~20, ~~accretion~~2026 ~~of interest~~ and ~~amortization~~March of16, ~~debt~~2026, ~~discounts~~management onbelieves ~~convertible~~that ~~notes~~the ofCompany’s ~~$1.7~~existing ~~million,~~cash and acash ~~net~~equivalents ~~decrease~~will ofbe ~~$0.4~~sufficient ~~million~~to infund ~~our~~its ~~net~~planned operating ~~assets~~expenses ~~and~~at ~~liabilities~~least ofthrough ~~continuing~~March ~~operations~~19, 2027.

~~Cash~~All ~~Provided~~of bythe ~~(Used~~stablecoins received in) ~~Investing~~the ~~Activities~~January 2026 Private Placement were converted into U.S. dollars to support operating liquidity, and a significant portion was deployed to acquire additional SKY tokens. Subsequent to the January 2026 Private Placement and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens.

~~Net~~Cash ~~cash~~Used provided by investing activities from continuing operations was $1.1 million for the year ended December 31, 2024, which included the DERMAdoctor Divestiture proceeds of $1.1 million and purchase of property and equipment in aOperating ~~nominal amount. Net cash used in investing activities for the purchase of property and equipment from continuing operations was $19 thousand for the year ended December 31~~Activities, ~~2023.~~Continuing Operations

~~Cash~~Net ~~Provided~~cash used in operating activities from continuing operations was $8.4 million for the year ended December 31, 2025, which consisted primarily of a net loss from continuing operations of $33.2 million, adjusted by ~~Financing~~stock-based ~~Activities~~compensation expenses related to employee and director stock awards of $29 thousand, non-cash loss on changes in fair value of warrant liabilities of $24.5 million, non-cash right-of-use amortization of $0.1 million, right-of-use impairment of $0.9 million, accretion of interest and amortization of debt discounts on convertible notes of $0.2 million, and a net increase of $1.0 million in our net operating assets and liabilities of continuing operations.

Net cash ~~provided~~used byin ~~financing~~operating activities from continuing operations was $17.5 million for the year ended December 31, 2024, which ~~included~~consisted ~~repayment~~primarily of a net loss from continuing operations of $28.08 million, ~~for~~adjusted ~~the~~by ~~Secured~~stock-based ~~Convertible~~compensation ~~Notes,~~expenses ~~net~~related ~~proceeds~~to employee and director stock awards of $20.91 million, ~~from~~non-cash ~~the~~loss ~~2024~~on ~~Public~~extinguishment ~~Offering~~of Secured Convertible Note of $13 thousand, non-cash expense incurred to obtain consent of Secured Convertible Note (as defined in Note 118, “~~Financing~~Convertible ~~Activities~~Notes”) holders to release collateral for the DERMAdoctor Divestiture of $0.4 million, ~~net~~non-cash ~~proceeds~~loss on modifications of warrants of $69 thousand, non-cash gain on changes in fair value of warrant liabilities of $0.21 million, ~~from~~non-cash ~~the~~loss ~~2024~~on ~~Warrant~~changes ~~Reprice~~in ~~transaction~~fair value of embedded derivative liability of $18 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and ~~the~~amortization ~~Bridge~~of ~~Loan~~debt discounts on convertible notes of $0.9 million, and a net increase of $0.5 million in our net operating assets and liabilities of continuing operations.

~~Net~~Cash ~~cash~~Used ~~provided~~in byInvesting ~~financing activities was $1.9 million for the year ended December 31~~Activities, ~~2023,~~Continuing including $0.6 million of net proceeds from the 2023 Warrant Reprice Transaction and $3.0 million of net proceeds from the 2023 Private Placement. The proceeds were partially offset by repayments of $1.5 million on the Secured Convertible Notes issued in the 2023 Private Placement.Operations

~~Additional~~The ~~information~~Company onreported ~~Financing~~no ~~Activities~~cash ~~can~~used ~~be found~~ in ~~Notes~~or 11provided toby 15investing inactivities for the ~~Notes~~years toended ~~Consolidated~~December ~~Financial Statements~~31, in2025 ~~Part~~and ~~II, Item 8 of this annual report~~2024.

Cash Provided by Financing Activities, Continuing Operations

Net cash provided by financing activities from continuing operations was $4.6 million for the year ended December 31, 2025, which included net proceeds of $5.8 million from the 2025 Preferred Stock Purchase Agreement (as defined in Note 7, “Financing Activities”), net proceeds of $5.9 million from the October 2025 Pre-Funded Warrants, repurchase of warrants of $2.0 million, repayment of $0.5 million for the Bridge Loan, net proceeds of $0.9 million from exercise of warrants, payment on redemption of Series F Preferred Stock of $0.2 million and payment of a Special Dividend of $4.8 million.

Net cash provided by financing activities from continuing operations was $1.5 million for the year ended December 31, 2024, which included repayment of $2.0 million for the Secured Convertible Notes, net proceeds of $2.9 million from the 2024 Public Offering (as defined in Note 7, “Financing Activities”), net proceeds of $0.2 million from the 2024 Warrant Reprice transaction, and the Bridge Loan of $0.5 million.

Additional information on Financing Activities can be found in Notes 7 to 10 in the Notes to Consolidated Financial Statements, in Part II, Item 8 of this annual report.

Net Operating Losses and Tax Credit Carryforwards

AsWe ofbelieve ~~December~~that 31we experienced an ownership change during 2025 and, ~~2024~~as a result, weour ~~had~~pre-change net operating loss (“NOL”) carryforwards ~~for~~became ~~federal~~subject ~~and~~to ~~state~~significant ~~income~~limitations ~~tax~~under ~~purposes~~Section 382 of ~~$153.7~~the ~~million~~Internal ~~and~~Revenue ~~$128~~Code.6 ~~million~~As of December 31, ~~respectively.~~2025, ~~The~~we had federal ~~net~~and ~~operating~~state ~~loss~~NOL carryforwards ~~consist~~ of approximately $942.9 million ~~generated~~and ~~before~~$348 ~~January 1~~thousand, ~~2018~~respectively, ~~which~~primarily ~~will~~generated ~~begin~~subsequent to ~~expire~~the in 2025 ~~and~~ownership ~~$59~~change.6 ~~million~~Our ~~generated~~federal ~~after~~NOLs ~~December~~may ~~31,~~be ~~2017,~~carried ~~that will carry~~ forward indefinitely but are ~~subject~~generally limited to anoffsetting 80% ~~limitation~~of ~~for~~taxable ~~years~~income ~~following~~in ~~December~~any ~~31,~~given ~~2021~~year. The state ~~net~~NOL ~~operating loss~~ carryforwards ~~will~~ begin to expire in ~~2028~~2045. As of December 31, ~~2023~~2025, we ~~also~~ had ~~tax~~no ~~credit carryforwards of $0.5 million for~~ federal ~~income~~or ~~tax purposes and $0.1 million for~~ state tax ~~purposes.~~credit ~~If not utilized, the federal tax credits will begin expiring in 2031~~carryforwards. ~~The state tax credits have an indefinite carryover period.~~

~~Current~~- ~~federal~~38 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.-

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Future changes in our stock ownership, including transactions completed subsequent to year end such as the January 2026 Private Placement, could result in an additional ownership change under Section 382, which could further limit our ability to utilize our remaining tax attributes. Any such limitation could result in the expiration of carryforwards before they are utilized.

Inflation

Our costs and operating expenses are subject to fluctuations, particularly ~~historically~~ due to changes in the cost of labor and service providers. AsUnder aour ~~result~~digital ofasset strategy, our ~~recent~~exposure ~~changes~~ to ~~our~~inflationary ~~business~~pressures ~~and~~is reduced ~~operations,~~relative to our ~~future~~prior ~~business~~pharmaceutical ~~results~~operations; ~~will depend~~however, ininflation ~~part,~~may onaffect ~~our~~general ~~continued~~and ~~ability~~administrative tocosts, ~~manage~~third-party ~~these~~service ~~fluctuations~~fees, ~~through~~and ~~cost~~the ~~savings~~broader ~~projects~~economic ~~and~~environment ~~sourcing~~in ~~decisions~~which digital asset markets operate. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.

Known Trends and Uncertainties

Our shift to a digital asset strategy introduces exposure to certain known trends and uncertainties that may materially affect our financial condition and results of operations in future periods. These include: (i) volatility in the market price of SKY and other digital assets, which could result in significant fluctuations in the reported fair value of our digital asset holdings; (ii) evolving regulatory frameworks applicable to digital assets, stablecoins, and related activities, which could impose new compliance obligations or restrict certain activities; (iii) uncertainty regarding the accounting treatment of digital assets as well as staking rewards and protocol participation income; and (iv) liquidity risk associated with converting digital asset holdings to cash or cash equivalents. We continue to monitor these trends and uncertainties and may adjust our strategy, capital allocation, or operations as circumstances warrant. See “Risk Factors” in Part I, Item 1A for additional discussion of these and other risks.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements at December 31, ~~2024~~2025 or December 31, ~~2023~~2024 as defined in Item 303(ab)~~(4)(ii)~~ of SEC Regulation S-K.

Seasonality

In connection with the Avenova Asset Sale, the Wound Care Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations. Limited information for seasonality associated with the Avenova Assets and our wound care products, which were reported as continuing operations for the years ended December 31, 2024 and 2023 is provided below. Additional information about these and our former DERMAdoctor customers, manufacturing and suppliers can be found in our prior filings with the SEC.

Consistent with our peers in the United States pharmaceutical industry, prescriptions for Avenova Spray experienced seasonality with the first quarter of each year typically being the lowest revenue quarter. This annual phenomenon is due to consumers facing the need to satisfy health insurance deductibles and changes to copays as each new insurance year begins. Sales of Avenova Spray through non-prescription channels, along with the other Avenova branded products, experienced less seasonality and more consistent sales throughout the year.

Contractual Obligations

In the normal course of business, we have historically entered into contracts and commitments that obligate us to make payments in the future and we expect to enter into contracts and commitments on behalf of the Company in connection with pursuing ~~the Dissolution or~~ other strategic alternatives. Information regarding our obligations under lease and convertible note arrangements are provided in Notes 10 and 13, respectively, in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Our~~At December 31, 2025, our market risk ~~consists~~consisted principally of interest rate risk on our cash and cash equivalents. Our exposure to market risk is limited primarily to interest income sensitivity, which is affected by changes in interest rates, particularly because our current liquid assets at December 31, ~~2024~~2025 were held in cash and cash equivalents.

Our investment policy restricts our investments to high-quality investments and limits the amounts invested with any one issuer, industry, or geographic area. The goals of our investment policy are as follows: preservation of capital, assurance of liquidity needs, best available return on invested capital, and minimization of capital taxation. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with an interest rate fixed at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk, in accordance with our investment policy, we maintain our cash and cash equivalents in short-term marketable securities, including money market mutual funds, Treasury bills, Treasury notes, certificates of deposit, commercial paper, and corporate and municipal bonds. The risk associated with fluctuating interest rates is limited to our investment portfolio. Due to the short-term nature of our investment portfolio, we believe we have minimal interest rate risk arising from our investments. As of December 31, ~~2024 and 2023~~2025, a 10% change in interest rates would have had an immaterial effect on the value of our investment portfolio. We do not use derivative financial instruments in our investment portfolio. We do not hold any instruments for trading purposes.

With most of our ~~historical~~ focus on the domestic U.S. market, we have not had any material exposure to foreign currency rate fluctuations.

While the Company did not hold digital assets as of December 31, 2025, the Company’s market risk profile is expected to evolve as it implements its digital asset strategy, including exposure to market price volatility associated with such assets. In January 2026 the Company entered into the January 2026 Private Placement pursuant to which it received digital assets, including stablecoins and SKY tokens, and subsequently engaged in purchases and sales of such digital assets. Digital assets acquired in connection with the January 2026 Private Placement and subsequent transactions will be accounted for in accordance with applicable U.S. GAAP and other authoritative accounting guidance in effect at the time, including Accounting Standards Update No. 2023-08, 32Accounting for and Disclosure of Crypto Assets, which established Subtopic 350-60 within ASC 350, Intangibles—Goodwill and Other, where applicable. Depending on the nature of the digital assets held and the Company’s specific facts and circumstances—including the Company’s activities (such as staking or other yield-generating activities), the contractual terms of related arrangements, and the Company’s relationships with counterparties—the Company may apply different accounting models. Such models could include digital assets held at fair value with changes in fair value recognized in earnings under applicable crypto-asset guidance or, if such guidance is not applicable, accounting under other relevant U.S. GAAP models, including accounting for certain digital assets as indefinite-lived intangible assets measured at historical cost and evaluated for impairment. The applicable accounting framework may differ depending on the specific facts and circumstances, and the resulting classification, measurement, and presentation could materially affect the Company’s financial position and results of operations, including potential variability in reported results.

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this Item 8 are set forth below. Our financial information is set forth in Item 7 of this annual report and is hereby incorporated into this Item 8 by reference.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
	Page
Report of Independent Registered Public Accounting Firm	34
Report of Independent Registered Public Accounting Firm (PCAOB ID: 199)	41
Consolidated Balance Sheets as of December 31, 2024 and 2023	36
Report of Independent Registered Public Accounting Firm (PCAOB ID: 100)	42
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023	37
Consolidated Balance Sheets as of December 31, 2025 and 2024	44
Consolidated Statements of Stockholders’(Deficit) Equity for the Years Ended December 31, 2024 and 2023	38
Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024	45
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023	39
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2025 and 2024	46
Notes to Consolidated Financial Statements	41
Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024	47
Notes to Consolidated Financial Statements	49

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

NovaBay Pharmaceuticals, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of NovaBay Pharmaceuticals, Inc. (the “Company”) as of December 31, 2025, the related statements of operations, stockholders’ deficit and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America

We also have audited the adjustments to the 2024 financial statements to retrospectively apply the discontinued operations reclassifications related to the dispositions of Avenova and PhaseOne, as described in Notes 13 and 14, and the retrospective adjustments to share and per share data as a result of the reverse stock split, as described in Note 1. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2024 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2024 financial statements taken as a whole

We also have audited the adjustments described in Note 15 that were applied to revise the 2024 financial statements to correct an error. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2024 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2024 financial statements taken as a whole.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ CBIZ CPAs P.C.

CBIZ CPAs P.C.

We have served as the Company’s auditor since 2026.

Philadelphia, PA

March 19, 2026

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

NovaBay Pharmaceuticals, Inc.

Opinion on the Consolidated Financial Statements

We have audited, before the effects of the adjustments to retrospectively apply the discontinued operations reclassifications related to the dispositions of Avenova and PhaseOne described in Notes 13 and 14, the retrospective adjustments to share and per share data as a result of the reverse stock split as described in Note 1, as well as the correction of the error described in Note 15, the accompanying consolidated balance ~~sheets~~sheet of NovaBay Pharmaceuticals, Inc. and subsidiaries (the “Company”) as of December 31, 2024 ~~and 2023~~, and the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for ~~each of~~ the ~~two~~year ~~years in the period~~ ended December 31, 2024, ~~and the related notes~~ (collectively referred to as the “consolidated financial statements”) (the consolidated financial statements before the effects of the adjustments discussed in Notes 1, 13, 14, and 15 are not presented herein). In our opinion, except for the error described in Note 15, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the discontinued operations reclassifications related to the dispositions of Avenova and PhaseOne described in Notes 13 and 14 and the retrospective adjustments to share and per share data as a result of the reverse stock split as described in Note 1, present fairly, in all material respects, the financial position of the Company as of December 31, 2024 ~~and 2023~~, and the results of its operations and its cash flows for ~~each of~~ the ~~two~~year ~~years in the period~~ ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the discontinued operations reclassifications related to the dispositions of Avenova and PhaseOne described in Notes 13 and 14 or the retrospective adjustments to share and per share data as a result of the reverse stock split as described in Note 1 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by CBIZ CPAs P.C.

We were not engaged to audit, review, or apply any procedures to the adjustments for the correction of the error described in Note 15 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by CBIZ CPAs P.C.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2024, the Company is seeking approval from its stockholders to dissolve and distribute all remaining assets to stockholders. Management has determined that it is in the best interest of the Company and its stockholders to continue pursuing the voluntary Dissolution pursuant to the Plan of Dissolution and management’s plans regarding these matters are also described in Note 1 to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2024. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our ~~audits~~audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audits~~audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our ~~audits~~audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our ~~audits~~audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our ~~audits~~audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our ~~audits~~audit ~~provide~~provides a reasonable basis for our opinion.

~~Critical~~- ~~Audit~~42 ~~Matter~~-

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

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Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements; and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowances for Product Returns

Description of the Matter

As described in Note 2 of the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2024, when recognizing revenue from product sales, the Company makes an estimate of the amount of consideration the Company expects to be entitled to receive. Upon recognition of these product sales, the Company records ~~estimates~~an estimate for variable consideration consisting of service fees, discounts, rebates, and product returns, resulting in a reduction in product revenue. The variable consideration provisions are recorded within accrued liabilities in the same period that the related revenue is recognized. Liabilities related to the allowance for product returns involve the use of significant assumptions and judgments in their calculation. These significant assumptions and judgments include historical sales and return rates and inventory levels in the distribution channel, as well as existing return policies with customers.

The Company’s estimated allowance for product returns requires a high degree of judgment and is subject to change based on various quantitative and qualitative factors. Accordingly, extensive audit effort and a high degree of auditor judgment were needed to evaluate management’s estimates and assumptions used in the determination of the allowance for product returns. Therefore, we identified the Company’s allowance for product returns as a critical audit matter.

How We Addressed the Matter in Our Audit

We obtained an understanding of and evaluated the design of controls relating to the Company’s processes for estimating the allowance for product returns. We evaluated the significant accounting policies relating to product returns, as well as management’s application of the policies, for appropriateness and reasonableness.

We obtained the Company’s allowance for product returns analysis and performed testing procedures on the underlying data that was used in management’s development of the product returns estimate. We compared the significant assumptions used by management to customer contract information, tested the historical returns data used in the analysis, and reviewed subsequent product return activity. In addition, we performed sensitivity analyses of significant assumptions used in the analysis to determine what changes in assumptions are particularly sensitive when calculating the amount of the allowance for product returns. Additionally, we tested the mathematical accuracy of management’s calculation of revenue, net of product sales allowances, and the associated timing of revenue recognition, in the consolidated financial statements.

/s/ WithumSmith+Brown, PC

We ~~have~~ served as the Company’s auditor ~~since~~from 2010 through January 2026.

New York, New York

April 2, 2025

PCAOB ID Number 100

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NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value amounts)

	December 31,			December 31,
	As of December 31,
	2024			2023
	2025			2024
ASSETS
Current assets:
Cash and cash equivalents	$	~~430~~7,958		$	~~2,924~~430
Accounts receivable, net of allowance for credit losses ($3 at December 31, 2024 and 2023)		389			680
Prepaid expenses and other current assets		717			272
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($30 and $218 at December 31, 2024 and 2023, respectively)		765			501
Current assets, discontinued operations		—			1,233
Prepaid expenses and other current assets		303			256
Total current assets		8,675			1,935
Current assets, held-for-sale		48			63
Operating lease right-of-use assets		—			955
Current assets, discontinued operations		—			2,730
Other assets		360			524
Total current assets		1,935			7,154
Other assets, discontinued operations		—			9
Operating lease right-of-use assets		955			1,296
TOTAL ASSETS	$	9,035		$	3,423
Property and equipment, net		53			87
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Other assets		480			478
Other assets, discontinued operations		—			19
TOTAL ASSETS	$	3,423		$	9,034
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	~~623~~257		$	~~906~~109
Accrued liabilities		~~1,257~~396			~~1,169~~581
Bridge Loan		~~500~~—			—500
Unsecured Convertible Notes, net of discounts		6567			—65
Secured Convertible Notes, net of discounts		—			1,137
Operating lease liabilities		422			398
Operating lease liabilities		398			368
Current liabilities, discontinued operations		—			1,190
Current liabilities, discontinued operations		—			698
Total current liabilities		1,142			2,843
Total current liabilities		2,843			4,278
Warrant liabilities, at fair value		30,432			—
Warrant liability		—			334
Operating lease liabilities-non-current		287			709
Operating lease liabilities-non-current		709			1,108
Total liabilities		31,861			3,552
Total liabilities		3,552			5,720
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 10)
Mezzanine (temporary) equity:
Stockholders’ (deficit) equity:
Preferred stock, $0.01 par value; 5,000 shares authorized;
Series B Preferred Stock; 1 and 6 shares issued and outstanding at December 31, 2024 and 2023, respectively		6			275
Series F Preferred Stock; 1,347 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively		350			—
Series C Preferred Stock; 0 and 1 shares issued and outstanding at December 31, 2024 and 2023, respectively		—			1,675
Stockholders’ deficit:
Common stock, $0.01 par value; 150,000 shares authorized, 4,885 and 321 shares issued and outstanding at December 31, 2024 and 2023, respectively		49			3
Preferred stock, $0.01 par value; 5,000 shares authorized;
Additional paid-in capital		183,273			176,210
Series B Preferred Stock; 1 and 1 shares issued and outstanding at December 31, 2025 and 2024, respectively		6			6
Accumulated deficit		(183,457	)		(174,849	)
Common stock, $0.01 par value; 1,500,000 shares authorized, 25,216 and 977 shares issued and outstanding at December 31, 2025 and 2024, respectively*		252			10
Total stockholders’ (deficit) equity		(129	)		3,314
Additional paid-in capital*		186,981			183,312
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	3,423		$	9,034
Accumulated deficit		(210,415	)		(183,457	)
Total stockholders’ deficit		(23,176	)		(129	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	9,035		$	3,423

~~The~~* ~~accompanying~~After ~~notes~~giving ~~are~~retroactive aneffect ~~integral~~to ~~part~~a of1-for-5 ~~these~~reverse ~~consolidated~~stock ~~financial~~split ~~statements~~that became effective February 20, 2026.

-The 36accompanying -notes are an integral part of these Consolidated Financial Statements.

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NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the Years Ended December 31,
	For the years ended December 31,
	2024			2023
	2025			2024 (As Revised)
Sales:
Product revenue, net	$	9,747		$	10,455
Other revenue, net		34			—
Total sales, net		9,781			10,455
Cost of goods sold		3,300			4,371
Gross profit		6,481			6,084
Operating expenses
Research and development		42			34
General and administrative	$	7,585		$	7,379
Sales and marketing		4,034			4,705
Impairment of long-lived assets		854			—
General and administrative		7,379			5,447
Total operating expenses		8,439			7,379
Loss on divestiture of subsidiary		865			—
Operating loss		(8,439	)		(7,379	)
Total operating expenses		12,320			10,186
Non-cash (loss) gain on changes in fair value of warrant liability		(24,486	)		114
Operating loss		(5,839	)		(4,102	)
Accretion of interest and amortization of discounts on convertible notes		(277	)		(904	)
Non-cash gain on changes in fair value of warrant liability		114			272
Other expense, net		(20	)		(581	)
Extinguishment of Secured Convertible Note		(13	)		—
Net loss from continuing operations	$	(33,222	)	$	(8,750	)
Non-cash (loss) gain on changes in fair value of embedded derivative liability		(18	)		40
Net income from discontinued operations, net of taxes		11,081			1,527
Accretion of interest and amortization of discounts on convertible notes		(904	)		(1,694	)
Net loss	$	(22,141	)	$	(7,223	)
Non-cash loss on modification of common stock warrants		—			(292	)
Less: Increase to accumulated deficit due to adjustment to common stock warrants exercise price		—			(1,005	)
Other expense, net		(550	)		(369	)
Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion prices		—			(380	)
Net loss from continuing operations	$	(7,210	)	$	(6,145	)
Net loss attributable to common stockholders	$	(22,141	)	$	(8,608	)
Net income from held-for-sale assets (Note 22)		111			404
Weighted average shares outstanding:
Net loss from discontinued operations (Note 21)		(124	)		(3,899	)
Basic (and diluted for net loss)*		5,820			679
Net loss	$	(7,223	)	$	(9,640	)
Diluted (loss) earnings per share attributable to common stockholders
Less: Increase to accumulated deficit due to adjustment to common stock warrants exercise price		(1,005	)		—
Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion prices		(380	)		(7,057	)
Net loss attributable to common stockholders	$	(8,608	)	$	(16,967	)
Basic and diluted net loss per share
Loss per share from continuing operations	$	(2.53	)	$	(110.02	)
Basic loss per share from continuing operations*	$	(5.70	)	$	(14.93	)
Loss per share from held-for-sale assets and discontinued operations		(0.00	)		(29.12	)
Basic earnings per share from discontinued operations*		1.90			2.25
Net loss per share attributable to common stockholders (basic and diluted)	$	(2.53	)	$	(139.14	)
Basic (loss) earnings per share attributable to common stockholders*	$	(3.80	)	$	(12.68	)
Weighted-average shares of common stock used in computing net loss per share attributable to common stockholders (basic and diluted)		3,396			120

-The 37accompanying -notes are an integral part of these Consolidated Financial Statements.

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NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(in thousands)

																			~~Total~~						Total
	Preferred Stock						Common Stock						Additional Paid-in			Accumulated			Stockholders’ (Deficit)
	Redeemable																		Additional						Stockholders’
	Shares			Amount			Shares			Amount			Capital			Deficit			Equity
	Preferred Stock						Preferred Stock						Common Stock						Paid-In			Accumulated			Equity
Balance at December 31, 2022		14		$	2,973			58		$	1		$	165,732		$	(158,152	)	$	10,554
	Shares			Amount			Shares			Amount			Shares*			Amount*			Capital*			Deficit			(Deficit)
Net loss		—			—			—			—			—			(9,640	)		(9,640	)
Balance at December 31, 2023		7		$	1,950			7		$	1,950			64		$	1		$	176,212		$	(174,849	)	$	3,314
Conversion of Series B Preferred Stock to common stock		(6	)		(295	)		183			2			293			—			—
Net loss		—			—			—			—			—			—			—			(7,223	)		(7,223	)
Conversion of Series C Preferred Stock to common stock		(1	)		(728	)		8			—			728			—			—
Conversion of Series B Preferred Stock to common stock		(5	)		(268	)		(5	)		(268	)		125			1			267			—			—
Adjustment of Series B Preferred Stock conversion price		—			—			—			—			6,385			(6,385	)		—
Conversion of Series C Preferred Stock to common stock		(1	)		(1,676	)		(1	)		(1,676	)		41			—			1,676			—			—
Adjustment of Series C Preferred Stock conversion price		—			—			—			—			~~672~~—			~~(672~~—	)		—380			(380	)		—
Modification of common stock warrants		—			—			—			—			479			—			479
Modification of common stock warrants in connection with 2024 Warrant Reprice Transaction		—			—			—			—			—			—			69			—			69
Reclassification of May 2023 Warrants		—			—			—			—			1,360			—			1,360
Issuance of common stock in connection with 2024 Warrant Reprice Transaction, net of offering costs		—			—			—			—			18			—			130			—			130
Reclassification of embedded derivative liability		—			—			—			—			169			—			169
Reclassification of December 2023 Warrants from liability		—			—			—			—			—			—			212			—			212
Issuance of common stock in connection with 2023 Warrant Reprice Transaction, net of offering costs		—			—			72			—			101			—			101
Reclassification of March 2024 Warrant from liability		—			—			—			—			—			—			100			—			100
Stock-based compensation expense related to employee and director stock awards		—			—			—			—			291			—			291
Reclassification of embedded derivative liability		—			—			—			—			—			—			242			—			242
Balance at December 31, 2023		7		$	1,950			321		$	3		$	176,210		$	(174,849	)	$	3,314
Shares issued for 35:1 reverse stock split due to rounding feature		—			—			—			—			21			—			—			—			—
Net loss		—			—			—			—			—			(7,223	)		(7,223	)
Issuance of common stock and pre-funded warrants in the 2024 Public Offering, net of issuance cost		—			—			—			—			299			3			2,855			—			2,858
Conversion of Series B Preferred Stock to common stock		(5	)		(268	)		625			6			262			—			—
Exercise of pre-funded warrants		—			—			—			—			409			5			16			—			21
Conversion of Series C Preferred Stock to common stock		(1	)		(1,676	)		205			2			1,674			—			—
Adjustment to common stock warrant exercise price		—			—			—			—			—			—			1,005			(1,005	)		—
Adjustment of Series C Preferred Stock conversion price		—			—			—			—			380			(380	)		—
Stock-based compensation expense related to employee and director stock awards		—			—			—			—			—			—			148			—			148
Modification of common stock warrants in connection with 2024 Warrant Reprice Transaction		—			—			—			—			69			—			69
Balance at December 31, 2024		—		$	—			1		$	6			977		$	10		$	183,312		$	(183,457	)	$	(129	)
Issuance of common stock in connection with 2024 Warrant Reprice Transaction, net of offering costs		—			—			90			1			129			—			130
Net loss		—			—			—			—			—			—			—			(22,141	)		(22,141	)
Reclassification of December 2023 Warrants from liability		—			—			—			—			212			—			212
Issuance of Series D Preferred Stock, net of offering costs		—			—			481			3,786			—			—			—			—			3,786
Reclassification of March 2024 Warrant from liability		—			—			—			—			100			—			100
Conversion of Series D Preferred Stock to common stock		—			—			(481	)		(3,786	)		15,400			154			3,632			—			—
Reclassification of embedded derivative liability		—			—			—			—			242			—			242
Issuance of Series E Preferred Stock, net of offering costs		—			—			269			2,049			—			—			—			—			2,049
Shares issued for 35:1 reverse stock split due to rounding feature		—			—			107			1			(1	)		—			—
Conversion of Series E Preferred Stock to common stock		—			—			(269	)		(2,049	)		8,600			86			1,963			—			—
Issuance of common stock and pre-funded warrants in the 2024 Public Offering, net of issuance cost		—			—			1,495			15			2,843			—			2,858
Issuance of Series F Preferred Stock and Cancellation of Warrants in conjunction with Series F Agreements		1,987			525			—			—			—			—			(1,484	)		—			(1,484	)
Exercise of pre-funded warrants		—			—			2,042			21			—			—			21
Deemed Capital Contribution pursuant to Series F Agreements		—			—			—			—			—			—			434			—			434
Adjustment to common stock warrant exercise price		—			—			—			—			1,005			(1,005	)		—
Redemption of Series F Preferred Stock		(640	)		(175	)		—			—			—			—			—			—			—
Stock-based compensation expense related to employee and director stock awards		—			—			—			—			148			—			148
Conversion of Unsecured Convertible Notes to common stock		—			—			—			—			14			—			246			—			246
Balance at December 31, 2024		1		$	6			4,885		$	49		$	183,273		$	(183,457	)	$	(129	)
Exercise of warrants		—			—			—			—			224			2			850			—			852
Repurchase of Warrants		—			—			—			—			—			—			(2,001	)		—			(2,001	)
Stock-based compensation expense related to employee and director stock awards		—			—			—			—			—			—			29			—			29
Vesting of director RSU awards		—			—			—			—			1			—			—			—			—
Dividend Paid ($4.00 per share of common stock)		—			—			—			—			—			—			—			(4,817	)		(4,817	)
Balance at December 31, 2025		1,347		$	350			1		$	6			25,216		$	252		$	186,981		$	(210,415	)	$	(23,176	)

-The 38accompanying -notes are an integral part of these Consolidated Financial Statements.

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NOVABAY PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	For the years ended December 31,
	2024			2023
	2025			2024 (As Revised)
Operating activities:
Net loss	$	(722,~~223~~141	)	$	(97,~~640~~223	)
Net income from held-for-sale assets		(111	)		(404	)
Net income from discontinued operations, net of taxes		(11,081	)		(1,527	)
Net loss from discontinued operations		124			3,899
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment		40			51
Stock-based compensation expense related to employee and director stock awards		29			148
Stock-based compensation expense related to employee and director stock awards		148			291
Non-cash loss on extinguishment of Secured Convertible Note		—			13
Non-cash loss on divestiture of subsidiary		865			—
Non-cash expense incurred to obtain consent of Secured Convertible Note holders		—			368
Non-cash loss on extinguishment of Secured Convertible Note		13			—
Non-cash loss (gain) on changes in fair value of warrant liability		24,486			(114	)
Non-cash expense incurred to obtain consent of Secured Convertible Note holders		368			—
Non-cash loss on changes in fair value of embedded derivative liability		—			18
Modification of common stock warrants, included in Other expense		69			292
Non-cash loss on modifications of warrants		—			69
Non-cash gain on changes in fair value of warrant liability		(114	)		(272	)
Non-cash right-of-use amortization		140			341
Non-cash loss (gain) on changes in fair value of embedded derivative liability		18			(40	)
Non- cash impairment of long-lived assets		854			—
Non-cash right-of-use amortization		341			305
Amortization of debt discounts on convertible notes		248			873
Accretion of interest and amortization of debt discounts on convertible notes		874			1,690
Changes in operating assets and liabilities:
Accounts receivable		291			846
Prepaid expenses and other current assets		(445	)		(65	)
Inventory		(272	)		162
Other assets		(85	)		28
Prepaid expenses and other current assets		(48	)		11
Accounts payable and accrued liabilities		(37	)		(57	)
Other assets		(2	)		(6	)
Operating lease liabilities		(398	)		(369	)
Accounts payable and accrued liabilities		(195	)		(1,127	)
Net cash used in operating activities, continuing operations		(8,430	)		(7,497	)
Operating lease liabilities		(369	)		(319	)
Net cash used in operating activities, continuing operations		(5,183	)		(4,261	)
Investing activities:
Proceeds from divestiture of subsidiary		1,070			—
Purchases of property and equipment		(6	)		(19	)
Net cash provided by (used in) investing activities, continuing operations		1,064			(19	)
Financing activities:
Proceeds from Warrants Exercise		247			565
Net proceeds from issuance of Series D Preferred Stock		3,786			—
Proceeds from issuance of common stock and pre-funded warrants the 2024 Public Offering, net of issuance costs		2,858			—
Net proceeds from issuance of Series E Preferred Stock		2,049			—
Proceeds from Bridge Loan		500			—
Cash payment pursuant to warrant exchange		(525	)		—
Proceeds from issuance of Secured Convertible Notes and May 2023 Warrants, net of discounts		—			3,000
Proceeds from Warrants Exercise		852			247
Payments on Secured Convertible Notes		(1,990	)		(1,474	)
Proceeds from issuance of October 2025 pre-funded warrants		5,946			—
Cash debt issuance cost		(115	)		(181	)
Proceeds from issuance of common stock and pre-funded warrants the 2024 Public Offering, net of issuance costs		—			2,858
Net cash provided by financing activities, continuing operations		1,500			1,910
Proceeds from Bridge Loan		—			500
Net decrease in cash, cash equivalents, and restricted cash, continuing operations		(2,619	)		(2,370	)
Payment on Bridge Loan		(500	)		—
Net increase in cash and cash equivalents, held-for-sale assets		126			503
Payments on Secured Convertible Notes		—			(1,991	)
Net decrease in cash and cash equivalents, discontinued operations		(206	)		(373	)
Payments on warrants purchase		(2,001	)		—
Net decrease in cash, cash equivalents and restricted cash, consolidated		(2,699	)		(2,240	)
Payment on redemption of Series F Preferred Stock		(175	)		—
Cash, cash equivalents and restricted cash, beginning of year		3,606			5,846
Dividend paid		(4,817	)		—
Less: Cash and cash equivalents of discontinued operations, end of year		—			(206	)
Cash debt issuance cost		—			(115	)
Cash, cash equivalents and restricted cash of continuing operations, end of year	$	907		$	3,400
Net cash provided by financing activities, continuing operations		4,615			1,499
Net decrease in cash, cash equivalents, and restricted cash, continuing operations		(3,815	)		(5,998	)
Net increase in cash and cash equivalents, discontinued operations		11,133			3,299
Net decrease in cash, cash equivalents and restricted cash, consolidated		7,318			(2,699	)
Cash, cash equivalents and restricted cash, beginning of year		907			3,606
Cash, cash equivalents and restricted cash of continuing operations, end of year	$	8,225		$	907

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	For the Years Ended December 31,
	For the years ended December 31,
	2024		2023
	2025		2024
Supplemental disclosure of cash flow information:
Interest paid in continuing operations	$	~~147~~8	$	~~174~~130
Interest paid in discontinued operations		—		15

	For the Years Ended December 31,
	For the years ended December 31,
	2024		2023
	2025		2024
Supplemental disclosure of non-cash information:
Conversions of preferred stock to common stock	$	15,~~944~~835	$	1,~~023~~944
Down round feature adjustments related to preferred stock		380		7,057
Cancellation of Common Stock Warrants pursuant to Series F Agreements		1,484		—
Down round feature adjustments related to common stock warrants		1,005		—
Deemed Capital Contribution pursuant to Series F Agreements		434		—
Issuance of derivative liability in conjunction with Unsecured Convertible Notes		224		—
Conversion of Unsecured Convertible Notes to common stock		246		—
Warrant liabilities transferred to equity		312		1,360
Down round feature adjustments related to common stock warrants		—		1,005
Embedded derivative liability transferred to equity		242		169
Down round feature adjustments related to preferred stock		—		380
Warrant liabilities transferred to equity		—		312
Derivative liability related to Unsecured Convertible Notes transferred to equity		—		242
Issuance of derivative liability in conjunction with Unsecured Convertible Notes		—		224

The accompanying notes are an integral part of these ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

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NOVABAY PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, ~~2024~~2025

NOTE 1. ORGANIZATION

NovaBay Pharmaceuticals, Inc. (the “Company” or “our,” “we,” or “us”) ~~has~~was ~~historically~~previously ~~been~~ focused on the development and sale of ~~scientifically-created and clinically-proven~~ eyecare, wound care, and skin care products. We have undergone significant changes to our business and operations as a result of a series of completed transactions summarized below. Following the closing of each of these transactions, we have significantly reduced our business operations and currently have limited sources of future revenue.

As● aThe ~~result~~Avenova ofAsset ~~completing~~Divestiture ~~each~~closed ofon ~~the~~January ~~transaction~~17, ~~discussed~~2025 ~~below,~~in which we ~~have~~sold ~~significantly~~our ~~reduced~~primary ~~our~~eyecare business ~~operations~~(see ~~and~~Note ~~currently~~13, ~~have~~“Avenova ~~limited~~Asset ~~sources~~Divestiture ofand ~~future~~Bridge ~~revenue~~Loan”); ~~generation.~~● ~~Our~~The ~~Company~~PhaseOne ~~was~~Divestiture ~~historically~~closed ~~focused~~ on ~~the~~January ~~development and sale of scientifically-created and clinically-proven eyecare~~8, ~~wound~~2025 ~~care,~~in ~~and~~which ~~skin~~we ~~care~~sold ~~products. The Avenova Assets were~~ our ~~leading~~PhaseOne ~~products~~trademark ~~formulated~~(see ~~with~~Note ~~our proprietary~~14, ~~stable~~“PhaseOne ~~and~~Divestiture”); ~~pure form of hypochlorous acid~~ and ~~were~~● ~~cleared~~The byDERMAdoctor ~~the~~Divestiture ~~FDA~~closed ~~for~~on ~~sale~~March ~~in the United States. As described in additional detail below~~12, ~~subsequent to December 31,~~ 2024, onin ~~January~~which ~~17, 2025,~~ we ~~completed~~sold ~~the~~our ~~Avenova~~primary ~~Asset~~skin ~~Sale.~~care ~~See~~business ~~additional~~(see ~~discussion~~Note ~~under~~15, ~~the section~~ “~~Recent~~DERMAdoctor ~~Developments and Stock Exchange Listing~~Divestiture” ~~and subheading “Avenova Asset Sale” below~~).

~~Our~~During ~~primary~~2025, ~~continuing~~the ~~operations~~Company ~~were~~completed ~~focused~~a oncomprehensive ~~our~~realignment ~~eyecare products during each~~ of ~~the~~its ~~years~~business ~~ended December 31, 2024~~ and ~~2023.~~adopted ~~However,~~a ascapital ~~described~~allocation ~~further~~approach ~~below,~~focused on ~~September~~acquiring ~~19,~~and ~~2024,~~holding ~~the~~digital ~~Company~~assets ~~entered~~that ~~into~~enable ~~the~~participation ~~Purchase~~in ~~Agreement~~decentralized ~~with~~financial ~~PRN~~networks, ~~pursuant~~subject to ~~which~~applicable ~~PRN~~risk, ~~agreed~~liquidity, ~~to acquire the Avenova Assets~~governance, ~~which~~and ~~transaction~~regulatory ~~constituted~~considerations. ~~the~~As ~~sale~~part of ~~substantially~~this ~~all~~strategy, ofthe ~~our~~Company ~~revenue~~intends ~~generating~~to accumulate and ~~operating~~hold digital assets. ~~Subsequent~~for toparticipation ~~December~~in ~~31,~~blockchain-based ~~2024~~networks, wewhich ~~completed~~may ~~the~~involve ~~Avenova~~staking, ~~Asset~~governance ~~Sale~~participation, onor ~~January~~other ~~17,~~protocol-level ~~2025~~activities. ~~See~~Such ~~additional~~activities, ~~information~~when ~~about the Avenova Asset Sale in Note 12~~undertaken, ~~“Avenova~~may ~~Asset~~generate ~~Sale~~protocol-defined ~~and~~incentives ~~Bridge~~or ~~Note”~~rewards ~~and~~in ~~Note~~accordance ~~23,~~with ~~“Subsequent~~network ~~Events~~rules.”

The Company was incorporated under the laws of the State of California on January 19, 2000, as NovaCal Pharmaceuticals, Inc. It had no operations until July 1, 2002, on which date it acquired all of the operating assets of NovaCal Pharmaceuticals, LLC, a California limited liability company. In February 2007, the Company changed its name from NovaCal Pharmaceuticals, Inc. to NovaBay Pharmaceuticals, Inc. In June 2010, the Company changed the state in which it was incorporated pursuant to the Reincorporation and is ~~now~~ incorporated under the laws of the State of Delaware. ~~All~~The ~~references to “the~~ Company” ~~herein~~has ~~refer~~one tooperating ~~the California corporation prior to the date of the Reincorporation~~ and toreportable ~~the~~segment ~~Delaware~~encompassing ~~corporation~~its onconsolidated ~~and~~operations ~~after~~as ~~the date~~ of ~~the~~December ~~Reincorporation. The Company is managed as one reportable segment~~31, ~~eyecare and wound care~~2025.

OnSubsequent ~~May~~to 30December 31, ~~2024~~2025, ~~the~~on ~~Company~~February 20, 2026, we effected ~~the~~a 1-for-5 Reverse Stock Split. Except as otherwise specifically noted, all share numbers, share prices, exercise/conversion prices and per share amounts in this annual report have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split.

Held-for-Sale Assets

We historically manufactured and sold a proprietary form of hypochlorous acid for the wound care market under the NeutroPhase and PhaseOne brands. Our wound care products were used for cleansing and irrigation as part of surgical procedures, as well as treating wounds, burns, ulcers and other injuries. Subsequent to December 31, 2024, on January 8, 2025, we completed the Wound Care Divestiture to Phase One. Following the Wound Care Divestiture, we are continuing to manufacture our wound care products under remaining contractual obligations to our distribution partner in China. We anticipate fulfilling these obligations by the end of the second quarter of 2025. See additional information about the Wound Care Trademarks and the Wound Care Divestiture in Note 22, “Wound Care Divestiture and Held-for-Sale Assets.”

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Discontinued Operations

~~Through~~Historical ~~our~~financial ~~former~~results ~~subsidiary~~related ~~DERMAdoctor,~~to each of the ~~Company~~businesses ~~also~~and ~~offered~~assets ~~over~~divested 30above ~~dermatologist-developed~~are ~~products~~now ~~targeting~~presented ~~common~~as ~~skin~~discontinued ~~concerns,~~operations ~~ranging~~in ~~from~~our ~~aging~~Consolidated ~~and~~Financial ~~blemishes~~Statements to(see ~~dry~~Note ~~skin~~13, ~~perspiration~~“Avenova ~~and~~Asset ~~keratosis~~Divestiture ~~pilaris.~~and OnBridge ~~March~~Loan”; ~~25,~~Note ~~2024~~14, we“PhaseOne ~~announced~~Divestiture”; ~~that~~Note we15, ~~had completed the~~ “DERMAdoctor Divestiture.” ~~See additional information about DERMAdoctor~~ and ~~the DERMAdoctor Divestiture in~~ Note 2116, “~~DERMAdoctor~~Summary ~~Divestiture~~of ~~and~~ Discontinued Operations.”).

Plan of Dissolution

The Board unanimously approved the Avenova Asset Sale as described above and further determined at the same time that, if the Avenova Asset Sale was completed, that the best opportunity available to maximize the remaining value for our Company and to our stockholders was to wind-up the Company’s affairs and pursue the Dissolution pursuant to the Plan of Dissolution that may result in distributions to our stockholders of our remaining asset value, if any remains. The Avenova Asset Sale and the Dissolution were presented to stockholders at the 2024 Special Meeting that was originally convened on November 22, 2024 and was subsequently adjourned and finally reconvened on January 30, 2025. At the 2024 Special Meeting reconvened on January 16, 2025, we received stockholder approval for the Avenova Asset Sale; however, we did not receive the requisite vote of stockholders representing a majority of the outstanding shares of our common stock to approve the Dissolution. The Avenova Asset Sale was completed subsequent to December 31, 2024 on January 17, 2025. With the Company having completed the sale of substantially all of its assets in the Avenova Asset Sale and sold all of its wound care inventory to Phase One in the Wound Care Divestiture, the Board, upon further analysis of the best opportunity to maximize the remaining value for the Company and its stockholders, among the other alternatives currently available, determined that it is in the best interest of the Company and its stockholders for the Company to continue pursuing the voluntary Dissolution pursuant to the Plan of Dissolution.

The ability of the Company to proceed with the Dissolution under Delaware law is subject to the Company first receiving stockholder approval. Accordingly, the Company intends to hold the New Special Meeting of stockholders where the Company’s stockholders will be asked to, among other items, consider and approve the Dissolution pursuant to the Plan of Dissolution. If the Company’s stockholders approve the Dissolution on April 16, 2025, and the Board determines to proceed with the Dissolution, then the Company would consider liquidation to be imminent and apply the liquidation basis of accounting pursuant to the accounting principles generally accepted in the United States (“U.S. GAAP”). See additional discussion in Note 23, “Subsequent Events.”

Liquidity

Based on ~~our~~ funds available onas of December 31, ~~2024~~2025, asaggregate ~~well~~gross ascash ~~net~~ proceeds of approximately $1025.50 million from the ~~Avenova~~January ~~Asset~~2026 ~~Sale~~Private ~~that~~Placement, ~~was~~net ~~completed~~cash ongenerated ~~January~~from ~~17,~~the ~~2025,~~conversion ~~management~~of ~~believes~~all ~~that~~of the ~~Company’s~~stablecoins ~~existing~~received ~~cash~~in ~~and~~the ~~cash~~January ~~equivalents~~2026 ~~will~~Private bePlacement ~~sufficient~~into toU.S. ~~enable~~dollars, ~~the~~and ~~Company~~$13.5 tomillion ~~meet~~in ~~its~~gross ~~planned~~cash ~~operating~~proceeds ~~expenses~~from atissuances ~~least~~under ~~through~~the ~~April 2,~~ 2026. ~~However,~~ATM ~~there~~Program isbetween ~~uncertainty~~January ~~with~~20, ~~respect~~2026 toand ~~our~~March ~~strategic~~16, ~~direction~~2026, asmanagement ~~the~~believes ~~Dissolution~~that isthe ~~subject~~Company’s toexisting ~~stockholder~~cash ~~approval~~ and wecash ~~are~~equivalents ~~also~~will ~~exploring other potential strategic alternatives that may~~ be ~~available~~sufficient to ~~us,~~fund ~~and,~~its asplanned aoperating ~~result,~~expenses ~~when~~at weleast dothrough ~~pursue~~March ~~our~~19, ~~strategic~~2027. ~~direction~~However, there may be unknown or potential future claims and liabilities that may arise or changing circumstances that may cause the Company to expend cash significantly faster than currently anticipated because of factors beyond its control.

All of the stablecoins received in the January 2026 Private Placement were converted into U.S. dollars to support operating liquidity, and a significant portion was deployed to acquire additional SKY tokens. Subsequent to the January 2026 Private Placement and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements have been prepared in accordance with U.S. GAAP and are expressed in U.S. dollars.

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Principles of Consolidation

The accompanying ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements include the accounts of the Company and its former wholly- owned subsidiary, DERMAdoctor, which was fully divested on March 12, 2024, as of and for ~~years~~the year ended December 31, 2024 ~~and 2023~~. All significant intercompany balances and transactions have been eliminated in consolidation. See also Note 15, “DERMAdoctor Divestiture.” The accompanying Consolidated Financial Statements include only the accounts of the Company as of and for the year ended December 31, 2025.

~~See~~Assets ~~also Note 21, “DERMAdoctor Divestiture and Discontinued Operations” and Note 22, “Wound Care Divestiture and~~ Held- for~~-Sale~~ ~~Assets.”~~Sale

The Company classifies long-lived assets or disposal groups as held for sale when management commits to a plan to sell and all criteria in ASC 360 are met, including availability for immediate sale, active marketing, and probable sale within one year. If shareholder approval is required, the held-for-sale criteria are not considered met until such approval is obtained. Assets and liabilities classified as held for sale are presented separately in the consolidated balance sheets. Prior periods are reclassified to conform to current presentation.

Discontinued Operations

A component of the Company is reported as a discontinued operation when it has been disposed of or classified as held for sale and the disposal represents a strategic shift that has, or will have, a major effect on the Company’s operations and financial results in accordance with ASC 205-20. Results of discontinued operations, including any gain or loss on disposal, are presented separately from continuing operations in the consolidated statements of operations for all periods presented. Prior periods are reclassified to conform to current presentation.

Financial Statement Reclassification

Certain account balances from ~~the~~ prior ~~year~~periods have been reclassified in these ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements to conform to current ~~year~~period classifications. The prior year amounts have been modified in these consolidated financial statements to properly report amounts under current operations and discontinued operations (see Note 21, “DERMAdoctor Divestiture and Discontinued Operations” and Note 22, “Wound Care Divestiture and Held-for-Sale Assets”).

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements and accompanying notes. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, ~~contract liabilities related to product sales such as product returns,~~ assumptions for valuing warrants, assumptions for valuing derivative liabilities, ~~the~~long-lived ~~fair~~asset ~~value of contingent consideration~~impairments, ~~intangible assets, goodwill,~~ 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.

Segment Information

The Company has one operating and reportable segment ~~that~~encompassing ~~encompasses~~its ~~the Company’s~~ consolidated ~~ongoing~~ operations, ~~reflecting the integrated nature of its business that involves the commercialization of its eyecare and wound care products~~ as of December 31, 2025 and 2024. The Company’s chief operating decision maker (“CODM”) is its chief executive officer. The measurement of segment profit ~~and~~or loss is the ~~segment loss, which is equivalent to the “~~net loss from continuing operations”, as reported onin the ~~Company's~~consolidated ~~statement~~statements of operations. The measurement of segment assets is total consolidated assets, as reported on the ~~Company’s~~consolidated balance sheet ~~as “total assets”~~. The CODM allocates resources and assesses performance on a consolidated basis, ~~focused on the Company’s cash resources~~ and ~~an assessment of the probability of success of its ongoing commercial activities. The CODM~~ is not regularly provided with disaggregated actual expense information, ~~other~~beyond ~~than~~that ~~the actual expense information~~ included in the consolidated ~~statements~~financial ~~of operations, as the Company’s integrated operating model emphasizes shared resources and centralized decision-making~~statements.

The Company’s revenue is predominantly generated in the United States and all of the Company’s assets are held in the United States.

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Cash, Cash Equivalents, and Highly Liquid 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 December 31, ~~2024~~2025 and ~~2023~~2024, the Company’s cash and cash equivalents were held in a major financial ~~institution~~institutions in the United States.

~~The~~- ~~following~~50 ~~table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the consolidated balance sheets (in thousands):~~-

	December 31,		December 31,
	2024		2023
Cash and cash equivalents	$	430	$	3,130
Restricted cash included in other assets		477		476
Cash and cash equivalents, discontinued operations		-		(206	)
Total cash, cash equivalents, and restricted cash in the consolidated statements of cash flows	$	907	$	3,400

The restricted cash amount included in other assets on the consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.

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 a major financial institution in the United States.

The Company has a significant amount of its cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

During the years ended December 31, 2024 and 2023, revenues from significant product categories were as follows (in thousands):

	For the Years Ended December 31,
	2024		2023
Avenova Spray	$	8,673	$	7,805
NeutroPhase		-		1,377
Other products		1,074		1,273
Total product revenue, net		9,747		10,455
Other revenue, net		34		-
Total sales, net	$	9,781	$	10,455

During the years ended December 31, 2024 and 2023, revenues were derived primarily from sales of Avenova branded products, directly to consumers through Amazon.com and Avenova.com. Sales of Avenova Spray via Amazon comprised 73% and 67% of total Avenova Spray net revenue during the years ended December 31, 2024 and 2023, respectively.

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AsThe offollowing ~~December~~table ~~31,~~provides ~~2024~~a ~~and~~reconciliation ~~2023,~~of ~~accounts~~the ~~receivable~~cash, ~~from~~cash ~~our~~equivalents, ~~major distribution partners~~ and ~~major~~restricted ~~retailers~~cash ~~greater~~reported ~~than~~in ~~10%~~the ~~were~~Consolidated asBalance ~~follows~~Sheets (in thousands):

	December 31,		December 31,
	As of December 31,
Major distribution partner	2024		2023
	2025		2024
Major U.S. Retailer A	$	194	$	148
Cash and cash equivalents	$	7,958	$	430
Avenova Spray Pharmacy Distributor A		46		*
Restricted cash included in other assets		267		477
Avenova Spray Pharmacy Distributor B		39		93
Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows	$	8,225	$	907
Avenova Spray Pharmacy Distributor C		39		*
Chongqing Pioneer Pharma Holdings Limited		*		243

*The ~~Less~~restricted ~~than~~cash ~~10%~~amount included in other assets on the Consolidated Balance Sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord.

~~The~~Concentrations ~~Company~~of ~~relies~~Credit onRisk ~~one contract manufacturer to produce its products. The Company does not have any manufacturing facilities~~ and ~~intends~~Major to continue to rely on third parties for the supply of finished goods. Our contract manufacturer may or may not be able to meet the Company’s needs with respect to timing, quantity or quality. In particular, it is possible that the Company may suffer from unexpected delays in light of the global supply chain issues.Partners

The Company has a significant amount of its cash balances at a major financial institution which exceed the federally insured limit of $250,000. Any loss incurred or a 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 did not hold any digital assets as of December 31, 2025. Subsequent to year end, in connection with the January 2026 Private Placement and related transactions, the Company acquired and accumulated a significant position in SKY tokens. The concentration of the Company’s assets in SKY tokens increases the Company’s exposure to price volatility and other risks associated with the SKY token. See Note 19, “Subsequent Events,” for additional information regarding these transactions and related activities.

Fair Value of Financial Assets and Liabilities

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts ~~receivable, accounts~~ payable, accrued liabilities, ~~warrant liabilities,~~ and ~~contingent~~warrant ~~consideration~~liabilities. The Company’s cash and cash equivalents, restricted cash, accounts ~~receivable, 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 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.”

~~Allowance~~Digital ~~for Credit Losses~~Assets

The Company ~~has~~did ~~maintained~~not anhold ~~allowance~~any ~~for~~digital ~~estimated~~assets ~~losses~~as ~~resulting from the inability~~ of ~~its~~and ~~customers~~during ~~to meet their financial obligations to~~ the ~~Company.~~years ~~The~~ended ~~Company~~December ~~has recognized an allowance for credit losses based on factors such as historical experience~~31, ~~contract~~2025 ~~terms~~ and ~~general and market business conditions~~2024. ~~The~~Subsequent ~~Company’s future collection experience can differ significantly from historical collection trends due~~ to ~~such~~December ~~factors~~31, as2025, ~~changing~~in ~~customer~~January ~~circumstances~~2026, ~~and~~the ~~uncertain~~Company ~~economic~~entered ~~and~~into ~~industry~~the ~~trends.~~January ~~The~~2026 ~~allowance~~Private ~~has~~Placement ~~been~~pursuant ~~re-evaluated~~to bywhich usit onreceived adigital ~~regular basis and adjusted as needed~~assets, ~~however,~~including asstablecoins ~~a result of recent changes to our business~~ and ~~operations~~SKY ~~this practice is being reevaluated going forward. Once a receivable is deemed to be uncollectible~~tokens, ~~such~~and ~~balance~~subsequently isengaged ~~then~~in ~~charged~~purchases ~~against~~and ~~the~~sales ~~allowance. Management recorded a reserve for allowance for credit losses~~ of $3such ~~thousand~~digital ~~as of December 31, 2024 and 2023~~assets.

Digital assets acquired in connection with the January 2026 Private Placement and subsequent transactions will be accounted for in accordance with applicable U.S. GAAP and other authoritative accounting guidance in effect at the time, including Accounting Standards Update No. 2023-08, 45Accounting for and Disclosure of Crypto Assets, which established Subtopic 350-60 within ASC 350, Intangibles—Goodwill and Other, where applicable. Depending on the nature of the digital assets held and the Company’s specific facts and circumstances—including the Company’s activities (such as staking or other yield-generating activities), the contractual terms of related arrangements, and the Company’s relationships with counterparties—the Company may apply different accounting models. Such models could include digital assets held at fair value with changes in fair value recognized in earnings under applicable crypto-asset guidance or, if such guidance is not applicable, accounting under other relevant U.S. GAAP models, including accounting for certain digital assets as indefinite-lived intangible assets measured at historical cost and evaluated for impairment. The applicable accounting framework may differ depending on the specific facts and circumstances, and the resulting classification, measurement, and presentation could materially affect the Company’s financial position and results of operations, including potential variability in reported results.

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~~Inventory~~Impairment of Long-Lived Assets

~~Inventory~~The isCompany’s ~~comprised~~long-lived ofassets ~~(1)~~are ~~raw~~reviewed ~~materials~~for ~~and~~impairment ~~supplies,~~in ~~such~~accordance aswith ~~bottles,~~ASC ~~packaging materials~~360, ~~labels~~Property, ~~boxes~~Plant and ~~pumps;~~Equipment, ~~(2)~~which ~~goods~~requires that companies consider whether events or changes in ~~progress~~facts and circumstances, ~~which~~both ~~are~~internally ~~normally~~and ~~filled~~externally, ~~but~~may ~~unlabeled~~indicate ~~bottles;~~that ~~and~~an ~~(3)~~impairment ~~finished~~of ~~goods~~long-lived assets held for use are present. The ~~price~~Company ~~paid~~reviews tolong-lived ~~contract~~assets ~~manufacturers~~for toimpairment ~~produce~~at ~~our~~least ~~products~~annually isor ~~included~~whenever events or changes in ~~inventory~~business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. ~~Inventory~~Determination of recoverability is ~~stated~~based aton an estimate of undiscounted future cash flows resulting from the ~~lower~~use of ~~cost~~the orasset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated ~~net~~fair ~~realizable~~values ~~value~~and ~~determined~~the byloss is recognized in the ~~first-~~Consolidated Statements of Operations. The Company recorded $854 thousand and $0 thousand in, ~~first~~long-~~out~~lived ~~method.~~assets Atimpairment losses for the years ended December 31, ~~2024~~2025 and ~~2023~~2024, ~~management~~respectively. ~~had~~This ~~recorded~~included an$39 ~~allowance~~thousand for ~~excess~~fixed ~~and~~assets ~~obsolete~~including ~~inventory~~leasehold improvements and ~~lower~~$815 thousand for operating lease right-of-use ~~cost~~assets orfor ~~estimated~~the ~~net~~year ~~realizable~~ended ~~value~~December ~~adjustments~~31, 2025. There was no impairment of ~~$30~~long-lived ~~thousand~~assets ~~and~~for ~~$218~~the ~~thousand~~year ended December 31, ~~respectively~~2024.

Property and Equipment, Net

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets of five to seven years for office and laboratory equipment, three to five years for computer equipment and software, and five to seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term.

The costs of normal maintenance, repairs, and minor replacements are expensed as incurred.

Business Combinations, Goodwill and Indefinite-Lived Intangible Assets

We account for business combinations using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The acquisition method requires that identifiable assets acquired and liabilities assumed are recognized and measured at fair value on the acquisition date, which is the date that the acquirer obtains control of the acquired business. Intangible assets are measured at their respective fair values as of the acquisition date. Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

Goodwill and indefinite-lived intangible assets are tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may more likely than not be less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, management can elect to forgo the qualitative assessment and perform the quantitative test. If the qualitative assessment indicates that the quantitative analysis should be performed, or if management elects to bypass a qualitative assessment, the Company then evaluates goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. The quantitative assessment for goodwill requires management to estimate the fair value of the Company’s reporting units using either an income or market approach or a combination thereof.

Management makes critical assumptions and estimates in completing impairment assessments of goodwill and indefinite-lived intangible assets. The Company’s cash flow projections look several years into the future and include assumptions on variables such as future sales and operating margin growth rates, economic conditions, probability of success, market competition, inflation and discount rates.

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During the fourth quarter of 2023, the Company performed its annual goodwill impairment analysis following the steps laid out in ASC 350-20-35-3C. The Company’s annual impairment analysis included a qualitative assessment to determine if it is necessary to perform the quantitative impairment test. In performing the qualitative assessment, the Company reviewed events and circumstances that could affect the significant inputs used to determine if the fair value is less than the carrying value of goodwill. The Company performed a Step 0 goodwill impairment analysis and determined that the fair value of the reporting unit may more likely than not be less than carrying amount, which necessitated the Company performing the quantitative impairment test. After performing the quantitative impairment test in accordance with ASC 350-20-35-3C, the Company determined that goodwill related to its DERMAdoctor reporting unit was fully impaired as of December 31, 2023 which resulted in goodwill impairment charges of $0.3 million during the year ended December 31, 2023, which is reflected in the net loss from discontinued operations caption in the Company’s consolidated statements of operations. The Company did not perform its annual goodwill impairment analysis in the fourth quarter of 2024 because the DERMAdoctor business had been fully impaired as of December 31, 2023 and was subsequently disposed of pursuant to the DERMAdoctor Divestiture.

During the fourth quarter of 2023 the Company also performed its indefinite-lived intangible asset impairment assessment. The Company evaluated, on the basis of the weight of the evidence, the significance of all identified events and circumstances that could affect the significant inputs used to determine the fair value of the Company’s indefinite-lived intangible assets, to determine whether it is more likely than not that the Company’s indefinite-lived intangible assets were impaired. After assessing the totality of events and circumstances, and their potential effect on significant inputs to the fair value calculation, the Company determined that it is more likely than not that its indefinite-lived intangible assets related to its DERMAdoctor reporting unit were impaired. As such, the Company performed a quantitative impairment test on its indefinite-lived intangible assets. Based on the quantitative impairment test, the Company determined that its indefinite-lived trade name intangible asset should be fully impaired as of December 31, 2023, which resulted in a $1.1 million impairment charge being recorded during the year ended December 31, 2023, which is reflected in the net loss from discontinued operations caption in the Company’s consolidated statements of operations. The Company did not perform its annual indefinite-lived intangible asset impairment analysis in the fourth quarter of 2024 because the DERMAdoctor business had been fully impaired as of December 31, 2023 and was subsequently disposed of pursuant to the DERMAdoctor Divestiture.

Valuation of Contingent Consideration Resulting from a Business Combination

As part of the Company’s acquisition of the DERMAdoctor business in 2021, the Company was subject to paying consideration that was contingent upon the achievement of specified milestone events. The Company recorded this contingent consideration at its fair value on the acquisition date. Each quarter thereafter, the Company revalued the contingent consideration and recorded changes in fair value within the consolidated statements of operations. Contingent consideration was dependent upon financial targets for calendar years 2022 and 2023 which were not met. As a result, the liability recorded for potential earn out payments in the Company’s consolidated balance sheets was zero as of December 31, 2023.

Long-Lived Assets

The Company’s intangible assets that do not have indefinite lives (primarily trade secrets / product formulations) are amortized over their estimated useful lives. All of the Company’s intangible assets subject to amortization and other long-lived assets, are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment, which requires that companies consider whether events or changes in facts and circumstances, both internally and externally, may indicate that an impairment of long-lived assets held for use are present. The Company reviews long-lived assets for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the asset, the assets are written down to their estimated fair values and the loss is recognized in the consolidated statements of operations.

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In connection with the above-mentioned DERMAdoctor reporting unit impairments, discussed in the goodwill and indefinite-lived intangible assets caption above, the Company determined that all of the DERMAdoctor business definite long-lived intangible assets and property and equipment were also impaired. As such, the Company recorded an impairment charge in the year ended December 31, 2023 of $1.0 million, for the impairment of long-lived intangible assets which is reflected in the caption net loss from discontinued operations in the Company’s consolidated statements of operations; $0.1 million for the impairment of a right-of-use asset which is reflected in the caption net loss from discontinued operations in the Company’s consolidated statements of operations in the year ended December 31, 2023; and of $2 thousand, net in the year ended December 31, 2023, for property and equipment which is reflected in the net loss from discontinued operations caption in the Company’s consolidated statements of operations. The Company did not perform an analysis for impairment of long-lived intangible assets in the fourth quarter of 2024 because the DERMAdoctor business had been fully impaired as of December 31, 2023 and was subsequently disposed of pursuant to the DERMAdoctor Divestiture.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received. Additionally, the Company determined that a right-of-use asset related to the DERMAdoctor business had been fully impaired as of December 31, 2023. Accordingly, the Company recorded an impairment charge of $0.1 million which is reflected in the caption net loss from discontinued operations in the Company’s consolidated statements of operations in the year ended December 31, 2023.

The Company has elected to combine lease and non-lease components as a single component. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use assets and lease liability for leases being greater than if the policy election was not applied. Leases include variable components (e.g., common area maintenance) that are paid separately from the monthly base payment based on actual costs incurred and therefore were not included in the right-of-use assets and lease liability but are reflected as an expense in the ~~year~~period incurred.

The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized in the ~~consolidated~~Consolidated ~~balance~~Balance ~~sheet~~Sheets as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current.

The Company recorded $815 thousand in impairment losses for the year ended December 31, 2025, related to operating lease right-of-use assets. There was no impairment losses related to leases for the year ended December 31, 2024.

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 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.

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 ~~consolidated~~Consolidated ~~statements~~Statements of ~~operations~~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 are generally 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 ~~these~~other warrants are determined using the Black-Scholes option pricing model. ~~These~~and ~~values are~~ subject to a significant degree of management’s judgment. See Note 3, “Fair Value Measurements,” subheading “Black Scholes Valuation Models and Assumptions” and Note 149, “Common Stock Warrants and Warrant Liabilities,” subheading “Summary of Common Stock Warrant Liabilities.”

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Amendments to warrant terms are recorded as a non-cash gain or loss on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black-Scholes option pricing model. See Note 3, “Fair Value Measurements,” subheading “Black Scholes Valuation Models and Assumptions.”

Preferred Stock

~~Terms of the Company’s outstanding~~ Preferred ~~Stock~~stock ~~historically~~that ~~included~~is aredeemable ~~Ratchet~~at ~~whereby~~ the ~~applicable~~option ~~conversion price could be adjusted (as defined and described in Note 15, “Stockholders’ Equity”). The applicable Ratchet provisions~~ of the ~~Company’s~~holder ~~outstanding~~or ~~Preferred~~upon ~~Stock~~events ~~terminated~~not ~~during~~solely within the ~~quarter~~control ~~ended~~of ~~March 31, 2024. When a conversion price was adjusted under~~ the ~~Ratchet, the~~ Company ~~recorded~~is aclassified ~~deemed dividend~~ as amezzanine ~~reduction~~(temporary) toequity ~~income~~in ~~available to common stockholders. In~~ accordance with ASC ~~820,~~480-10-S99-3A. ~~Fair~~Such ~~Value~~instruments ~~Measurements~~are ~~and~~initially ~~Disclosures~~recorded ~~(“ASC~~at ~~820”), the deemed dividend was measured as the difference between (1) the~~ fair value, net of ~~the~~issuance ~~Preferred~~costs, ~~Stock immediately prior to the conversion price adjustment (but without the anti-dilution protection feature)~~ and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). These fair values were determined using the Black Scholes option pricing model. These values are ~~subject~~not accreted to aredemption ~~significant~~value ~~degree~~unless ofredemption ~~management’s~~becomes ~~judgment~~probable. ~~See also Note 3, “Fair Value Measurements,” subheading “Black Scholes Valuation Models and Assumptions.”~~

~~Revenue~~Terms ~~Recognition~~of the Company’s Preferred Stock have historically included a ratchet whereby the applicable conversion price could be adjusted (as defined and described in Note 10, “Stockholders’ Deficit”). The applicable ratchet provisions of the Company’s outstanding Series B Preferred Stock terminated during the year ended December 31, 2024. When a conversion price for outstanding Preferred Stock is adjusted under the ratchet, the Company records a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), the deemed dividend was measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the ratchet anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the ratchet anti-dilution protection feature). These fair values were determined using the Black Scholes option pricing model. These values are subject to a significant degree of management’s judgment. See also Note 3, “Fair Value Measurements,” subheading “Black Scholes Valuation Models and Assumptions.”

~~The~~- ~~Company’s~~52 ~~product revenue recognition policies are established in accordance with ASC 606, Revenue from Contracts with Customers, in accordance with the following five steps:~~-

i. identify the contract(s) with a customer; ii. identify the performance obligations in the contract; iii. determine the transaction price; iv. allocate the transaction price to the performance obligations in the contract; and v. recognize revenue when (or as) the entity satisfies performance obligations.

Revenue is recognized in accordance with the amount of consideration which the Company expects to receive.

Revenue generated from end consumers through third-party online retailers, such as Amazon, as well as the Company’s web store (Avenova.com) is recognized on a “sell-through” basis when control of the goods is transferred to the consumer, which generally occurred upon delivery of the products to the party fulfilling the consumer’s order. Revenue is recorded net of any discounts and estimates for refunds and product returns. Fees paid to third-party online retailers and fulfillment parties are recorded as incurred in the Company’s consolidated statements of operations. Fulfillment and shipping and handling fees are recorded as product cost of goods sold. Selling commissions and advertising and promotion fees are recorded as sales and marketing expenses.

Revenue generated through major pharmacy distributors is recognized on a “sell-in” basis when control of the goods is transferred to the distributor, which generally occurs upon delivery of the products to the distributor. Revenue is recorded net of consideration for contract liabilities for distributor services, discounts, rebates, and product returns. The Company estimates returns and other contract liabilities based on historical data which is updated quarterly. Payment for products sold is typically due 60 days after delivery to the distributor.

Revenue generated from end consumers through the Company’s partner pharmacies is recognized on a “sell-through” basis when control of the goods is transferred to the consumer.

Revenue generated from other retailers is recognized on a “sell-through” basis, net of estimated future product returns, when control of the goods is transferred to the retailer, which generally occurs upon delivery of the products to a third-party carrier who is delivering the products to the retailer.

The Company defers recognition for pre-payments until the Company’s performance obligations are satisfied.

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Cost of Goods Sold

Cost of goods sold includes third-party manufacturing costs, shipping and handling costs, third-party fulfillment fees, and other costs associated with products sold. Cost of goods sold also includes any necessary allowances for excess and obsolete inventory as well as lower of cost and estimated net realizable value.

Research and Development Costs

The Company charges research and development costs to expense as incurred. These costs include all costs associated with research, development and regulatory activities.

Patent Costs

Patent costs are expensed in the period in which they are incurred. Patent expenses are included in general and administrative expenses in the consolidated statements of operations.

Advertising Costs

Advertising costs are expensed in the period in which the costs are incurred. Advertising costs are included in sales and marketing expenses in the consolidated statements of operations. Advertising expenses were $0.7 million and $1.1 million, respectively, for the years ended December 31, 2024 and 2023.

Stock-Based Compensation

The Company’s stock-based compensation includes grants of stock options and restricted stock units (“RSUs”) to employees, consultants and non-employee directors. The expense associated with these grants is recognized in the Company’s ~~consolidated~~Consolidated ~~statements~~Statements of ~~operations~~Operations based on their fair values as they are earned under the applicable vesting terms. For stock options granted, the fair value of the stock options is estimated using a Black-Scholes option pricing model. The Company accounts for RSUs issued to employees and non-employees (directors, consultants and advisory board members) based on the fair market value of the Company’s common stock on the date of issuance. See Note 1611, “~~Equity~~Stock-Based Compensation” for further information regarding stock-based compensation expense and the assumptions used in estimating the expense.

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.

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 consolidated balance sheets.

Income Tax Payments

Income taxes paid are presented as operating cash flows in the consolidated statements of cash flows. Refunds received are also presented within operating activities.

Net Loss per Share

The Company computes net loss per share by presenting both basic and diluted loss per share (“EPS”) as shown in the Company’s ~~consolidated~~Consolidated ~~statements~~Statements of ~~operations~~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. 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 50following -table provides a reconciliation of the numerator used for basic and diluted (loss) earnings per share (in thousands):

	For the years ended December 31,
	2025			2024
Numerator for basic and diluted income (loss) per share:
Net loss from continuing operations	$	(33,222	)	$	(8,750	)
Less: Increase to accumulated deficit due to adjustment to common stock warrants exercise price		—			1,005
Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion price		—			380
Net loss from continuing operations attributable to common stockholders	$	(33,222	)	$	(10,135	)
Net income from discontinued operations, net of taxes		11,081			1,527
Net loss	$	(22,141	)	$	(8,608	)

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~~For~~The ~~the~~following ~~years~~outstanding ~~ended~~Unsecured ~~December~~Convertible 31Notes, ~~2024~~Preferred ~~and 2023~~Stock, ~~the~~stock ~~Series~~options ~~B Preferred Stock~~ and ~~Series~~stock Cwarrants ~~Preferred Stock~~ were excluded from the ~~computation of~~ diluted ~~net~~EPS ~~loss~~computation ~~per share~~ as their ~~inclusion~~effect ~~on an “if converted” basis~~ would have been anti-dilutive~~. The Series B Preferred Stock and Series C Preferred Stock were considered anti-dilutive because such securities did not have a contractual obligation to participate in losses of the Company.~~:

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:

	As of December 31,
	2025*		2024*
Shares issuable upon conversion of Unsecured Convertible Notes		7,143		21,429
Common stock equivalent of Series B Non-Voting Convertible Preferred Stock (the “*Series B Preferred Stock*”)		3,013		3,013
Stock options and RSUs		18,201		1,372
Stock warrants		1,098,248		2,167,279
		1,126,605		2,193,093

	As of December 31,
	2024		2023
Common stock equivalent of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred Stock”)		15,065		640,800
Common stock equivalent of Series C Non-Voting Convertible Preferred Stock (the “Series C Preferred Stock”)		-		125,371
Stock options		6,859		3,568
Stock warrants		10,836,275		210,927
		10,858,199		980,666

* After giving retroactive effect to a 1-for-5 reverse stock split that became effective February 20, 2026.

Revenue Recognition

The Company’s product revenue recognition policies are established in accordance with ASC 606, Revenue from Contracts with Customers, in accordance with the following five steps:

identify the contract(s) with a customer;

ii.

identify the performance obligations in the contract;

iii.

determine the transaction price;

iv.

allocate the transaction price to the performance obligations in the contract; and

recognize revenue when (or as) the entity satisfies performance obligations.

Revenue is recognized in accordance with the amount of consideration which the Company expects to receive when control of the goods is transferred to the customer, which generally occurs upon delivery of the products to a third-party carrier who is delivering the products to the customer. The Company defers recognition for pre-payments until the Company’s performance obligations are satisfied.

Cost of Goods Sold

Recent Accounting Pronouncements

~~Changes~~In toDecember ~~U.S.~~2025, ~~GAAP are established by~~ the ~~Financial~~FASB issued Accounting Standards ~~Board~~Update (“~~FASB~~ASU”) inNo. ~~the~~2025-11, ~~form~~Narrow-Scope ofImprovements ~~Accounting Standard Updates~~ (“~~ASUs~~ASU 2025-11”). toASU ~~the~~2025-11 ~~FASB~~is ~~ASC~~effective for annual reporting periods beginning after December 15, 2027. WeEarly ~~consider~~adoption ~~the~~is ~~applicability~~permitted. ~~and~~While ~~impact~~the adoption of ~~all~~ASU ~~ASUs~~2025-11 ~~and~~is ~~any~~ not ~~listed~~expected ~~below~~to ~~were~~have ~~assessed~~an ~~and~~effect ~~determined~~on toour beConsolidated ~~not~~Financial ~~applicable~~Statements, orit ~~are~~is expected to ~~have~~result ain ~~minimal~~incremental ~~impact~~disclosures onwithin the notes to our ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements. The Company is currently evaluating ASU 2025-11.

In November 2024, the FASB issued ASU No. 2024-03, “Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 ~~requires~~is ~~disclosure~~intended ofto increase transparency and provide investors with more detailed information about the nature of expenses ~~included~~reported inon the ~~income~~face ~~statement~~of inthe ~~response~~statements toof ~~longstanding~~operations. ~~requests~~ASU ~~from~~2024-03 ~~investors~~does ~~for~~not ~~more~~change ~~information~~the ~~about~~requirements anfor ~~entity’s~~the ~~expenses.~~presentation ~~The~~of ~~new~~expenses ~~standard~~on ~~requires~~the ~~disclosures~~face ~~about~~of ~~specific~~the ~~types~~statements of ~~expenses~~operations. ~~included~~Under ASU 2024-03, entities are required to disaggregate, in ~~the~~tabular ~~expense~~format, ~~captions~~expenses presented on the face of the ~~income~~statements ~~statement~~of asoperations ~~well~~if asthey ~~disclosures~~include ~~about~~any ~~selling~~of the following expense categories: employee compensation, depreciation, intangible asset amortization, and depreciation or depletion. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. ASU 2024-03 ~~will~~is be effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods ~~within annual reporting periods~~ beginning after December 15, 2027. ~~The~~Early ~~Company~~adoption is ~~currently~~permitted. ~~evaluating~~While the adoption of ASU 2024-03 ~~and~~is ~~does~~ not ~~expect~~expected it to have aan ~~material~~ effect on our Consolidated Financial Statements, it is expected to result in incremental disclosures within the notes to our Consolidated Financial Statements. The Company’s ~~consolidated~~is ~~financial~~currently ~~statements~~evaluating ASU 2024-03.

~~In December 2023, the FASB issued ASU 2023~~-09 ~~“Income~~54 ~~Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023~~-09”). ASU 2023-09 requires disclosure of specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for the annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating ASU 2023-09 and does not expect it to have a material effect on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) which is intended to provide enhanced segment disclosures. The standard requires disclosures about significant segment expenses and other segment items and identifying the CODM and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all entities on an interim and annual basis, even if they have only a single reportable segment. The standard is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. The adoption of this standard did not have a significant impact on Company’s financial statements or related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. ASU 2016-13 is effective for the Company for annual and interim reporting periods beginning January 1, 2023. The Company adopted the new standard effective January 1, 2023, and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and disaggregation of income tax disclosures. The amendments primarily require (i) expanded income tax rate reconciliation disclosures using prescribed categories and (ii) disaggregation of income taxes paid, net of refunds, by federal, state and foreign jurisdictions, among other disclosure enhancements. The amendments do not change the recognition or measurement of income taxes under ASC 740. The Company adopted ASU 2023-09 effective January 1, 2025 on a prospective basis. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows, but resulted in expanded income tax disclosures in the accompanying notes to the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-08, Intangibles — Goodwill and Other — Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). The adoption had no impact on the Company’s financial statements for the year ended December 31, 2025, as the Company held no crypto assets during the fiscal year. As described in Note 19, “Subsequent Events”, in January 2026 the Company entered into the January 2026 Private Placement pursuant to which it received digital assets, including stablecoins and SKY tokens, and subsequently engaged in purchases and sales of digital assets. Digital assets acquired in connection with the January 2026 Private Placement and subsequent transactions will be accounted for in accordance with ASU 2023-08. Depending on the nature of the digital assets held and the Company’s specific facts and circumstances—including the Company’s activities (such as staking or other yield-generating activities), the contractual terms of related arrangements, and the Company’s relationships with counterparties—the Company may apply different accounting models. Such models could include digital assets held at fair value with changes in fair value recognized in earnings under applicable crypto-asset guidance or, if such guidance is not applicable, accounting under other relevant U.S. GAAP models, including accounting for certain digital assets as indefinite-lived intangible assets measured at historical cost and evaluated for impairment. The applicable accounting framework may differ depending on the specific facts and circumstances, and the resulting classification, measurement, and presentation could materially affect the Company’s financial position and results of operations, including potential variability in reported results.

NOTE 3. FAIR VALUE MEASUREMENTS

The following tables ~~presents~~ present the Company’s financial instruments measured at fair value on a recurring basis as of December 31, ~~2024~~2025 and ~~2023~~2024 (in thousands):

Fair Value Measurements Using

Quoted

Prices in

Active

Markets

Significant

for

Other

Significant

Balance at

Identical

Observable

Unobservable

As of

Identical

Observable

Unobservable

December

Items

Inputs

31, 2024

(Level 1)

(Level 2)

(Level 3)

31, 2025

(Level 1)

(Level 2)

(Level 3)

Assets

Restricted cash held as a certificate of deposit

~~477~~267

—

Liabilities

Warrant liability

30,432

—

30,432

—

Fair Value Measurements Using

Quoted

Prices in

Active

Markets

Significant

for

Other

Significant

Balance at

Identical

Observable

Unobservable

As of

Identical

Observable

Unobservable

December

Items

Inputs

31, 2023

(Level 1)

(Level 2)

(Level 3)

31, 2024

(Level 1)

(Level 2)

(Level 3)

Assets

Restricted cash held as a certificate of deposit

~~476~~477

—

Liabilities

Warrant liability

334

—

334

—

The Company’s ~~cash equivalents and~~ restricted cash held as ~~certificates~~a of deposit ~~are~~is classified within Level 1 of the fair value hierarchy because ~~they~~it ~~are~~is valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The ~~Secured~~warrant ~~Convertible~~liability ~~Notes~~is ~~and~~measured ~~Unsecured Convertible Notes (see Note 13, “Convertible Notes”) are carried~~ at ~~proceeds,~~fair ~~net~~value ofbased ~~discounts,~~on ~~which~~the ~~management~~intrinsic ~~believes approximates fair~~ value. ~~As a result~~ of ~~certain~~the ~~call~~warrants, ~~and~~which ~~put~~is ~~options~~determined ~~within~~using the ~~Secured~~quoted ~~Convertible~~market ~~Notes~~price ~~and~~of ~~Unsecured Convertible Notes,~~ the Company’s ~~recorded~~common anstock ~~embedded~~at ~~derivative~~the ~~liability~~measurement ondate. ~~its~~Because ~~consolidated~~the ~~balance~~warrants ~~sheets~~themselves ~~with~~are anot ~~corresponding~~actively ~~debt~~traded ~~discount~~and ~~which is netted against~~ the ~~face~~valuation ~~value~~relies ofon ~~the~~observable ~~Secured~~market ~~Convertible~~inputs ~~Notes~~other ~~and~~than ~~Unsecured~~quoted ~~Convertible~~prices ~~Notes.~~for ~~The~~identical ~~fair~~instruments, ~~value of~~ the ~~embedded~~liability ~~derivatives~~is ~~were~~classified ~~calculated~~within ~~using the Black Scholes valuation model using~~ Level 2 ~~inputs~~ of the fair value hierarchy.

~~The~~- ~~fair~~55 value of the December 2023 Warrants issued in conjunction with the 2023 Warrant Reprice Transaction as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Warrant Reprice Transaction were classified within Level 2. The fair value of the March 2024 Warrant issued in conjunction with the 2024 Subsidiary Guarantee Termination was classified within Level 2.-

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See Note 14, “Common Stock Warrants and Warrant Liabilities,” subheading “Summary of Common Stock Warrant Liabilities,” for a reconciliation of the beginning and ending balances for the warrant liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2024 and 2023.

Black Scholes Valuation Models and Assumptions

The Company utilizes a Black Scholes model for various valuations as outlined throughout this ~~annual~~ report. The following tables summarize the assumptions utilized for valuations impacting results for the ~~years~~periods ~~ended December 31, 2024 and 2023~~reported. ~~See also Note 16, “Equity-Based Compensation” for related Black Scholes valuation assumptions.~~

Warrant Liabilities

~~Various~~Certain of the Company’s warrants ~~have~~were ~~been~~ subject to stockholder approval upon issuance or amendment and prior to exercise. Warrants requiring stockholder approval are recorded as a liability at fair value upon issuance or amendment and continue to be recorded as a liability at fair value at each reporting date until stockholder approval occurs at which time they are transferred to stockholders’ equity at their fair value on the date of approval. Fair value was determined using a Black Scholes model as outlined below. See Note 14, “Common Stock Warrants and Warrant Liabilities” for additional information and the definitions of the Company’s warrants.

	May 2023 Warrants					May 2023 Warrants
Measurement event	Issuance					Stockholder Approval
Date	May 1, 2023					June 9, 2023
Total Value	$1.6 million					$1.4 million
Gain (Loss)	not applicable					$0.2 million
Assumptions:
Exercise price	$	45.50				$	45.50
Market price	$	25.20			(a)	$	23.80
Volatility		80.1			%		77.6			%
Risk-free rate		3.60	-	4.04	%		3.92	-	4.59	%
Dividend yield		0.0			%		0.0			%
Term (years)		2.1	-	5.1			2.0	-	5.0

For warrants with substantive exercise prices, fair value is determined using a Black-Scholes option pricing model as outlined below. Pre-funded warrants with a nominal exercise price are considered to be substantially intrinsic value instruments, as the exercise price is de minimis relative to the fair value of the underlying common stock. Accordingly, the fair value of such pre-funded warrants is based on the market price of the Company’s common stock less the nominal exercise price. See Note 9, “Common Stock Warrants” for additional information and the definitions of the Company’s warrants.

	December 2023 Warrants			~~December 2023 Warrants~~
Measurement event	~~Reporting~~Stockholder ~~Date~~Approval			~~Stockholder Approval~~
Date	~~December~~May 3128, ~~2023~~2024			~~May 28, 2024~~
Total Value	$0.3 million			$0.2 million
Total Value (in millions)	$	0.2
Gain (Loss)	$56 thousand			$(51 thousand)
Gain (Loss) (in thousands)	$	(51	)
Assumptions:
Exercise price	$	843.75		$	~~8.75~~
Market price	$	724.1470		$	~~4.94~~
Volatility		7983.39	%		~~83.9~~	%
Risk-free rate		34.8556	%		~~4.56~~	%
Dividend yield		0.0	%		~~0.0~~	%
Term (years)		5.51			~~5.1~~

- 53 -

	March			March
	2024			2024
	Warrant			Warrant
Measurement event	Reporting Date			Stockholder Approval
Date	March 31, 2024			May 28, 2024
Total Value (in millions)	$	0.1		$	0.1
Gain (Loss) (in thousands)	$	21		$	28

Assumptions:
Exercise price	$	24.50		$	24.50
Market price	$	18.30		$	24.70
Volatility		86.9	%		83.9	%
Risk-free rate		4.21	%		4.56	%
Dividend yield		0.0	%		0.0	%
Term (years)		5.5			5.3

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	March			March
	2024			2024
	Warrant			Warrant
Measurement event	Reporting Date			Stockholder Approval
Date	March 31, 2024			May 28, 2024
Total Value	$0.1 million			$0.1 million
Gain (Loss)	$21 thousand			$(28 thousand)
Assumptions:
Exercise price	$	4.90		$	4.90
Market price	$	3.66		$	4.94
Volatility		86.9	%		83.9	%
Risk-free rate		4.21	%		4.56	%
Dividend yield		0.0	%		0.0	%
Term (years)		5.5			5.3

(a) Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

Warrant Modifications

Amendments to warrant terms are recorded as a non-cash gain (or loss) on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black Scholes option pricing model. Fair value was determined using a Black Scholes model as outlined below.

	July 2020, November 2021, September 2022 & November 2022 Warrants
	September 2022, November 2022, and May 2023 Warrants
Measurement event	Prior to amendment					After amendment
Date	~~April~~June 2714, ~~2023~~2024					~~April~~June 2714, ~~2023~~2024
Total Value	$0.3 million					$0.5 million
Total Value (in thousands)	$66					$100
Loss	not applicable					$0.2 million
Loss (in thousands)	not applicable					$70
Assumptions:
Exercise price	$	~~220~~43.5075	-	262.50		$	5212.50
Market price	$	2512.2055			~~(a)~~	$	2512.2055			~~(a)~~
Volatility		8089.13			%		8089.13			%
Risk-free rate		34.5927	-	45.7308	%		34.5927	-	45.7308	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.10	-	54.64			1.10	-	54.64	%

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	May 2023 Warrants
Measurement event	Prior to amendment					After amendment
Date	December 21, 2023					December 21, 2023
Total Value	$56 thousand					$0.2 million
Loss	not applicable					$0.1 million
Assumptions:
Exercise price	$	45.50				$	8.75
Market price	$	8.07				$	8.07
Volatility		79.3			%		79.3			%
Risk-free rate		3.92	-	4.62	%		3.92	-	4.62	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.5	-	4.5			1.5	-	4.5

	September 2022, November 2022, and May 2023 Warrants
Measurement event	Prior to amendment					After amendment
Date	June 14, 2024					June 14, 2024
Total Value	$66 thousand					$0.1 million
Loss	not applicable					$70 thousand
Assumptions:
Exercise price	$	8.75-52.50				$	2.50
Market price	$	2.51				$	2.51
Volatility		89.3			%		89.3			%
Risk-free rate		4.27	-	5.08	%		4.27	-	5.08	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.0	-	4.4			1.0	-	4.4	%

(a) Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

Warrant Down Round Feature Adjustment

Terms of the Company’s outstanding 2024 July Warrants included a down round feature adjustment whereby the applicable exercise price was automatically adjusted (see Note 117, “Financing Activities”). When the exercise price was adjusted, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the 2024 July Warrants immediately prior to the conversion price adjustment and (2) the fair value of the 2024 July Warrants immediately after the conversion price adjustment. Fair value was determined using a Black Scholes model, as outlined below.

	Series F-1
Measurement event	Prior to adjustment			After adjustment
Date	September 27, 2024			September 27, 2024
Total value	$1.7 million			$1.9 million
Total value (in millions)	$	1.7		$	1.9
Deemed dividend	not applicable			$0.2 million
Deemed dividend (in millions)	not applicable			$	0.2
Assumptions:
Exercise price	$	15.1050		$	03.6630
Market price	$	03.7155		$	03.7155
Volatility		97.1	%		97.1	%
Risk-free rate		3.55	%		3.55	%
Dividend yield		0.0	%		0.0	%
Term (in years)		4.84			4.84

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Table of Contents

	Series F-2
Measurement event	Prior to adjustment			After adjustment
Date	September 27, 2024			September 27, 2024
Total value	$0.2 million			$0.6 million
Deemed dividend	not applicable			$0.4 million
Assumptions:
Exercise price	$	1.10		$	0.66
Market price	$	0.71		$	0.71
Volatility		97.1	%		97.1	%
Risk-free rate		4.64	%		4.64	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.34			0.34

	Series F-3
Measurement event	Prior to adjustment			After adjustment
Date	September 27, 2024			September 27, 2024
Total value	$0.6 million			$1.0 million
Deemed dividend	not applicable			$0.4 million
Assumptions:
Exercise price	$	1.10		$	0.66
Market price	$	0.71		$	0.71
Volatility		97.1	%		97.1	%
Risk-free rate		4.10	%		4.10	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.84			0.84

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Preferred Stock Conversion Price Adjustments

Terms of the Company’s outstanding Preferred Stock historically included a Ratchet whereby the applicable conversion price could be adjusted (see Note 15, “Stockholders’ Equity”). The applicable Ratchet provisions of the Company’s outstanding Preferred Stock terminated during the quarter ended March 31, 2024. When a conversion price was adjusted under the Ratchet, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.

	Series B & C Preferred Stock
Measurement event	Prior to Ratchet			After Ratchet
Date	April 27, 2023			April 27, 2023
Total value (b)	$9.6 million			$11.6 million
Deemed dividend	not applicable			$2.0 million
Assumptions:
Exercise price	$	220.50		$	45.50
Market price	$	25.20	(a)	$	25.20	(a)
Volatility		80.1	%		80.1	%
Risk-free rate		4.91	%		4.91	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.8			0.8

	Series B & C Preferred Stock
Measurement event	Prior to Ratchet			After Ratchet
Date	December 21, 2023			December 21, 2023
Total value (b)	$1.7 million			$6.8 million
Deemed dividend	not applicable			$5.1 million
Assumptions:
Exercise price	$	45.50		$	8.75
Market price	$	8.07		$	8.07
Volatility		79.3	%		79.3	%
Risk-free rate		5.43	%		5.43	%
Dividend yield		0.0	%		0.0	%
Term (years)		0.3			0.3

	Series C Preferred Stock
Measurement event	Prior to Ratchet			After Ratchet
Date	March 24, 2024			March 24, 2024
Total value (b)	$0.5 million			$0.9 million
Deemed dividend	not applicable			$0.4 million
Assumptions:
Exercise price	$	8.75		$	4.90
Market price	$	4.77		$	4.77
Volatility		79.9	%		79.9	%
Risk-free rate		5.51	%		5.51	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.1			0.1

(a) Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.

(b) Includes value of incremental shares underlying preferred stock and adjusted for probability of occurrence.

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Bifurcatable Derivatives

	Series F-2
Measurement event	Prior to adjustment			After adjustment

Date	September 27, 2024			September 27, 2024
Total value (in millions)	$	0.2		$	0.6
Deemed dividend (in millions)	not applicable			$	0.4

Assumptions:
Exercise price	$	5.50		$	3.30
Market price	$	3.55		$	3.55
Volatility		97.1	%		97.1	%
Risk-free rate		4.64	%		4.64	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.34			0.34

Upon issuance in March 2024, the Unsecured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 13, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

	Series F-3
Measurement event	Prior to adjustment			After adjustment

Date	September 27, 2024			September 27, 2024
Total value (in millions)	$	0.6		$	1.0
Deemed dividend (in millions)	not applicable				0.4

Assumptions:
Exercise price	$	5.50		$	3.30
Market price	$	3.55		$	3.55
Volatility		97.1	%		97.1	%
Risk-free rate		4.10	%		4.10	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.84			0.84

Unsecured Co

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