Stablecoin Development Corp
For the period ended Mar 31, 2026. Filed May 15, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 15, 2026
SDEV$0.98+9.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001437749-25-033852
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001437749-26-017406
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
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Added paragraphs (50)
Current report
Stablecoin Development Corporation, formerly known as NovaBay Pharmaceuticals, Inc., is an on-chain holding company focused on long-duration participation in protocol-aligned digital asset ecosystems and providing public market access to the stablecoin economy. The Company’s initial digital asset focus is the Sky Protocol ecosystem, with SKY as its core holding. Through staking and other on-chain activities, the Company seeks to generate protocol-level economic exposure while maintaining governance, risk management, and public-company discipline. On April 2, 2026, the Company's corporate name change from NovaBay Pharmaceuticals, Inc. to Stablecoin Development Corporation became legally effective, and on April 6, 2026, the Company's common stock commenced trading on the NYSE American under the ticker symbol “SDEV.” See Note 16, “Subsequent Events,” for additional information.
Current report
Pursuant to oversight by our Board of Directors and our Digital Asset Strategy Advisory Committee established by our Board of Directors, our core business consists of the accumulation, holding, and deployment of operating digital assets for use within blockchain-based networks to support protocol-level services, including staking, governance participation, validation, and related activities. These activities may generate protocol-defined incentives, rewards, or service-based fees in accordance with network rules and governance-approved parameters. Our initial focus is on SKY, the protocol token of the decentralized Sky Protocol.
Current report
Stablecoin adoption has expanded across payments, settlement, and on-chain capital markets in recent years, and stablecoin supply has grown significantly. Regulatory frameworks in the United States and internationally continue to develop, which may provide greater clarity for stablecoin issuers and users. The Sky Protocol, through which the Company’s primary digital asset holdings are deployed, is one of the longest-operating decentralized stablecoin platforms, with USDS and DAI supply exceeding $11 billion as of March 31, 2026. The Sky Protocol generates revenue through borrowing fees, savings yields, and on-chain settlement volume. The Company’s SKY staking rewards are derived from a portion of these protocol-level revenues. The Company may evaluate additional digital asset investments that provide exposure to stablecoin infrastructure and related financial services, subject to approval by the Digital Asset Strategy Advisory Committee and the Board of Directors, and any applicable Purchaser consent rights under the Securities Purchase Agreement. See Note 8, “Financing Activities,” for additional information.
Current report
On January 16, 2026, pursuant to the January 2026 Private Placement, the Company completed a private placement of pre-funded warrants to purchase an aggregate of 167,539,227 shares of common stock for aggregate gross proceeds of approximately $134.0 million, consisting of approximately $25.0 million in cash and approximately $109.0 million in SKY tokens and stablecoins. The January 2026 Private Placement provided the initial capital base for the Company's digital asset treasury strategy and resulted in the Company's initial holdings of SKY tokens.
Current report
The Company holds digital assets as part of a long-term capital allocation strategy and does not engage in short-term speculative trading, proprietary trading strategies, margin arrangements, or derivatives transactions referencing digital assets unless expressly authorized by the Digital Asset Strategy Advisory Committee and supported by appropriate risk management, compliance, and liquidity controls. Within this framework, our approach anticipates that we may:
Current report
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.
Current report
Separately, we maintain cash, cash equivalents, and short-duration investments outside of our digital asset strategy to meet near-term operating requirements and liquidity needs.
Current report
Key Drivers of Results
Current report
The Company’s financial results are primarily driven by (i) the market price of SKY, which affects the fair value of the Company’s digital asset holdings and the magnitude of unrealized gains or losses recognized each period; (ii) staking economics, including the level of staking rewards generated by the Sky Protocol and the proportion of the Company’s holdings deployed in staking activities; (iii) the Company’s access to capital, including through its ATM Program, to fund additional SKY acquisitions; and (iv) operating expenditures required to support the Company’s digital asset holdings, including custody, compliance, legal, and accounting costs associated with maintaining public-company discipline around a digital asset-focused business model. Because the Company’s digital asset holdings constitute substantially all of its assets, changes in the market price of SKY are expected to be the most significant driver of the Company’s reported financial results in any given period.
Current report
Digital Asset Holdings–** SKY**
Current report
As of March 31, 2026, the Company held 2,153,141,678 SKY tokens, representing approximately 9% of the total supply of SKY. Since the closing of the January 2026 Private Placement, the Company has acquired approximately 1.2 billion additional SKY tokens on the open market at an average purchase price of approximately $0.065 per SKY token. All SKY tokens acquired outside of the January 2026 Private Placement have been purchased through open-market transactions, consistent with the Company's digital asset policies. Since commencing on-chain staking activities, the Company has earned approximately 35.3 million SKY tokens in cumulative staking rewards. The majority of the Company's SKY holdings remain deployed in staking activities within the Sky Protocol ecosystem, through which the Company participates in on-chain governance of the Sky Protocol. Staking rewards are determined by protocol governance parameters, participation levels, and other factors, and are subject to variability over time.
Current report
SKY tokens are a network-native digital asset that may be acquired, transferred, and held through digital wallets that rely on public/private key pairs, and may be exchanged on trading venues that support SKY trading pairs against fiat currencies or other digital assets.
Current report
The Sky Protocol is a decentralized finance platform that evolved from MakerDAO, one of the earliest projects in the digital asset ecosystem. The protocol is implemented through open-source smart contracts deployed on the Ethereum blockchain and enables the creation and use of USDS, a decentralized stablecoin designed to maintain a soft peg to the U.S. dollar, serving as foundational financial infrastructure for lending, savings, and on-chain capital markets. SKY is the governance token of the Sky Protocol ecosystem; holders participate in protocol governance through an open, transparent on-chain voting process. The protocol generates revenue from borrowing fees and other economic activity, which is used to fund open-market buybacks of SKY tokens that are allocated between distributions to staking participants, including the Company, and a protocol-level surplus buffer. SKY has a fixed total supply of approximately 23.5 billion tokens, based on current protocol parameters. Unlike many digital assets that rely on inflationary issuance to incentivize participation, SKY derives its economic characteristics from protocol-generated revenues associated with stablecoin issuance, collateralized lending, and other on-chain financial services.
Current report
The market price of SKY is determined by supply and demand across network-based markets, including individuals, institutions, market makers, and custodial service providers, and may be volatile. Liquidity, spreads, and volumes vary by venue and geography. Prices may fluctuate due to factors including protocol changes, governance decisions, market sentiment, macroeconomic conditions, third-party platform events, and broader digital asset market dynamics.
Current report
Industry Participants and Ecosystem
Current report
The Sky Protocol ecosystem includes open-source developers, wallet infrastructure providers, custodians, trading venues, market makers, and data and analytics providers. The breadth, maturity, and reliability of these third-party services may affect liquidity, price discovery, and the Company's operational resilience. As adoption of the Sky Protocol and related infrastructure evolves, the Company expects the availability and capabilities of these services to change over time.
Current report
Custody and Safeguarding of Digital Assets
Current report
The Company holds and safeguards its SKY tokens through a combination of qualified third-party custody and Company-controlled wallets managed through third-party key management infrastructure. Payward Financial, Inc (“Kraken”) serves as the Company’s qualified custodian pursuant to Wyoming law.
Current report
Because staking the Company’s SKY tokens requires on-chain deployment that cannot be executed from a custodial account, the substantial majority of the Company’s SKY tokens are held in self-custody using the MPC key management platform provided by Fireblocks. Fireblocks does not hold digital assets, does not act as a custodian, and does not have unilateral control over the Company’s digital assets.
Current report
The Company maintains the ability to custody digital assets with Kraken and may reallocate assets among service providers from time to time. None of the Company’s custodial or infrastructure service providers are related parties of the Company.
Current report
The principal counterparty risk associated with our SKY holdings relates to these service providers' performance under our custody and platform agreements. We hold our SKY across multiple service providers to diversify our exposure, and we continually evaluate and seek to engage additional digital asset custodians and infrastructure providers to further diversify risk. We may, in the future, discontinue or change the use of one or more third-party service providers or utilize alternative custody arrangements. Under our agreements, each of Kraken and Fireblocks may engage third-party service providers, affiliates, or subcontractors to assist in performing their respective obligations.
Current report
Governmental, Regulatory, and Accounting Considerations
Current report
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.
Current report
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.
Current report
Financial Overview
Current report
Following the establishment of the Company's digital asset treasury strategy in October 2025 and the closing of the January 2026 Private Placement, the Company has transitioned its operations to focus on the accumulation, holding, and deployment of digital assets, with an initial focus on SKY tokens. As of March 31, 2026, the Company held 2,153,141,678 SKY tokens with an aggregate fair value of $160.1 million. See also “Financial Condition, Liquidity and Capital Resources” below.
Current report
The Company has access to its ATM Program, under which it may sell shares of common stock from time to time at prevailing market prices. During the three months ended March 31, 2026, the Company used net proceeds from the ATM Program, together with other available capital, to acquire SKY tokens on the open market. The pace and magnitude of any future ATM sales and SKY purchases will depend on a number of factors, including prevailing market conditions, SKY pricing, the Company’s liquidity position, and the availability of shares under the ATM Program. The Company may also pursue additional financing transactions, subject to market conditions and Board approval. There can be no assurance that the Company will be able to sell shares under the ATM Program or that any future financing transactions will be completed on favorable terms, or at all.
Current report
The January 2026 Pre-Funded Warrants, which have a nominal exercise price, were measured at intrinsic value, calculated as the quoted market price of the Company's common stock less the per-share exercise price, multiplied by the number of shares of common stock issuable upon exercise. The Company's determination that intrinsic value approximates fair value for these warrants is based on their nominal exercise price and economic similarity to common stock. Given the substantial number of shares of common stock issuable upon exercise of these warrants, relatively small changes in the Company's common stock price had a significant effect on the measured fair value of the warrant liabilities and on the related non-cash gains and losses recognized in the Unaudited Condensed Consolidated Statements of Operations. The fair value of the January 2026 Pre-Funded Warrants at issuance was determined using the closing price of the Company's common stock on January 20, 2026 (the first trading day following the announcement of the January 2026 Private Placement, which was made after market close on January 16, 2026), as management concluded that this price was the most appropriate reference price reflecting the market's absorption of the dilutive impact of the announcement.
Current report
The intrinsic value of the January 2026 Pre-Funded Warrants at issuance exceeded the cash and other consideration received in the January 2026 Private Placement by approximately $5.3 billion, resulting in the recognition of a non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance. Changes in the Company's common stock price during the three months ended March 31, 2026 resulted in a non-cash gain on changes in fair value of warrant liabilities of approximately $5.8 billion. Following stockholder approval obtained on March 12, 2026, the warrant liability recorded for the January 2026 Pre-Funded Warrants was reclassified to stockholders' equity at fair value on that date, and no further fair value adjustments will be recorded with respect to those warrants in future periods. The October 2025 Pre-Funded Warrants remain classified as a liability as of March 31, 2026 because they are not considered indexed to the Company's own stock under ASC 815, as a result of certain anti-dilution provisions, and will continue to be remeasured at fair value at each reporting date. As of March 31, 2026, the fair value of the October 2025 Pre-Funded Warrants was $33.7 million. See Note 10, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report.
Current report
Staking Revenue
Current report
Staking revenue was $2.5 million for the three months ended March 31, 2026, compared to no staking revenue for the three months ended March 31, 2025. Staking revenue is attributable to staking rewards earned on the Company's SKY token holdings during the period, with no comparable result for the three months ended March 31, 2025, as the Company did not hold digital assets or conduct staking activities during the prior year period. The Company received 35,386,649 SKY tokens for staking rewards during the three months ended March 31, 2026.
Current report
Unrealized gain on digital assets
Current report
The Company recognized an unrealized gain on digital assets of $22.7 million for the three months ended March 31, 2026, with no comparable result for the three months ended March 31, 2025, as the Company did not hold digital assets during the prior year period. Because the Company held no digital assets at the beginning of the period, the unrealized gain represents the excess of the fair value of the Company's SKY token holdings at March 31, 2026 over the aggregate cost basis at which those holdings were initially recognized during the period. SKY tokens are measured at fair value at each reporting date, with changes in fair value recognized in earnings. The fair value of digital assets may be subject to significant volatility, and the Company expects that changes in the fair value of its SKY token holdings will continue to result in unrealized gains or losses in future periods, which may have a material impact on the Company's results of operations. For additional information, see Note 5, “Digital Assets,” in the Notes to Unaudited Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Current report
General and administrative expenses were $2.8 million for the three months ended March 31, 2026, compared to $2.7 million for the three months ended March 31, 2025, an increase of approximately $0.1 million or 5%. While total expenses were comparable period over period, the underlying composition shifted significantly. Expenses for the three months ended March 31, 2026 consisted primarily of costs incurred in connection with the Company's continued transformation into a digital asset treasury company and the initiation of its digital asset treasury activities, as well as public company costs, including legal and professional services, the March 2026 special meeting of stockholders, and director and officer liability insurance. By comparison, expenses for the three months ended March 31, 2025 consisted primarily of outside services costs related to non-recurring strategic initiatives, including the Avenova Asset Divestiture and the pursuit of a potential dissolution as a strategic option for the Company, as well as one-time severance costs relating to the departure of employees in connection with completing the Avenova Asset Divestiture.
Current report
As the Company’s digital asset operations mature, management expects the composition of general and administrative expenses to continue shifting toward costs associated with digital asset custody and infrastructure, cybersecurity, regulatory compliance, and specialized legal and accounting services. The Company expects these categories to represent an increasing proportion of its operating cost base relative to legacy transformation-related expenditures, which are substantially complete.
Current report
Impairments of long-lived assets
Current report
Non-cash loss on fair value of warrant liabilities in excess of proceeds at issuance
Current report
During the three months ended March 31, 2026, the Company recognized a non-cash loss of $5.3 billion with no comparable results for the three months ended March 31, 2025. The issuance-date fair value of the January 2026 Pre-Funded Warrants exceeded the proceeds received, resulting in a non-cash loss on warrant issuance. For additional information, please see Note 10, “Common Stock Warrants and Warrant Liabilities,” in the Notes to Unaudited Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Current report
Other expense, net was $1.4 million for the three months ended March 31, 2026 and $40 thousand for the three months ended March 31, 2025. The 2026 result was due primarily to costs incurred in connection with the January 2026 Private Placement. There was no comparable expense related to financing activities in the 2025 period. See Note 8, “Financing Activities” in the Notes to the Unaudited Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Current report
Net Income from Continuing Operations
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Removed paragraphs (39)
Previous report
We were previously focused on the development and sale of eyecare, wound care, and skin care products. The Company may continue to manufacture wound care products domestically in the United States and export finished goods to China.
Previous report
Previous Plan of Dissolution and Strategic Direction of the Company
Previous report
The Company’s Board unanimously approved each of the divestitures above and subsequently evaluated additional strategic options available to the Company. During this time, the Board pursued the Dissolution pursuant to Plan of Dissolution which was approved at the 2025 Special Meeting (see Note 1, “Organization” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report). Although stockholder approval of the Dissolution was received, the Board was authorized to subsequently determine, in its discretion, whether or not to proceed with the Dissolution. The Board ultimately determined not to pursue the Dissolution and simultaneously entered into the 2025 Preferred Stock Purchase Agreement (see Note 8, “Financing Activities” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report), Series E Preferred Stock Closing (see Note 19, “Subsequent Events” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report) and October 2025 Pre-Funded Warrants (see Note 19, “Subsequent Events” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report). As part of its broader capital allocation review, the Company has begun evaluating opportunities within emerging financial infrastructure and network-based markets. These opportunities may include select blockchain-based assets that the Company believes could enhance capital efficiency and long-term stockholder value.
Previous report
NYSE American Notices
Previous report
On April 18, 2024, 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)(i), 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (requiring stockholders’ equity of (i) $2.0 million or more if the Company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years; (ii) $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 (iii) $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.
Previous report
On October 20, 2025, the Company was notified by NYSE American that the Company had regained compliance with the minimum stockholders’ equity requirements of Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the Company Guide.
Previous report
Financial Overview and Outlook
Previous report
Impairment of Assets
Previous report
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 judgement 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 such as those recorded in the first and third quarter of 2025 as further described in Notes 2, “Summary of Significant Accounting Policies;” 5, “Property and Equipment;” and 7, “Commitments and Contingencies” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Previous report
Common Stock Warrant Liabilities
Previous report
Total Net Sales and Cost of Goods Sold
Previous report
Product revenue, net, increased $0.5 million, or 100%, to $0.5 million for the three months ended September 30, 2025.
Previous report
Revenue and cost of goods sold recorded during the three months ended September 30, 2025 was from the Company’s wound care business sold to our Chinese distributor with no comparable order in the three months ended September 30, 2024.
Previous report
General and administrative expenses decreased $0.5 million, or 29%, to $1.2 million for the three months ended September 30, 2025, from $1.7 million for the three months ended September 30, 2024, due primarily to a decrease in outside services costs related to non-recurring strategic initiatives, including the Avenova Asset Divestiture, the PhaseOne Divestiture, and evaluating and pursuing various strategic options for our Company.
Previous report
Extinguishment of Secured Convertible Notes
Previous report
Extinguishment of Secured Convertible Notes was $13 thousand for the three months ended September 30, 2024, with no comparable activity for the three months ended September 30, 2025.
Previous report
Accretion of interest and amortization of discounts on convertible notes
Previous report
Accretion of interest and amortization of discounts on convertible notes was $0.1 million for the three months ended September 30,
Previous report
2024, with no comparable activity for the three months ended September 20, 2025.
Previous report
Other expense, net was $77 thousand for the three months ended September 30, 2025, with no comparable activity for the three months ended September 30, 2024.
Previous report
Impact of Divestitures
Previous report
Total Net Sales and Cost of Goods Sold
Previous report
Product revenue, net, increased $0.5 million, or 100%, to $0.5 million for the nine months ended September 30, 2025.
Previous report
Revenue and cost of goods sold recorded during the nine months ended September 30, 2025 was from the Company’s wound care business sold to our Chinese distributor with no comparable order in the nine months ended September 30, 2024.
Previous report
General and administrative
Previous report
General and administrative expenses increased $0.2 million, or 3%, to $5.8 million for the nine months ended September 30, 2025, from $5.6 million for the nine months ended September 30, 2024, due primarily to an increase in outside services costs related to non-recurring strategic initiatives, including evaluating and pursuing various strategic options for our Company.
Previous report
Non-cash gain on changes in fair value of warrant liability
Previous report
Non-cash loss on changes in fair value of embedded derivative liability
Previous report
Adjustments to the fair value of embedded derivative liability resulted in a loss of $18 thousand for the nine months ended September 30, 2024 with no comparable adjustment for the nine months ended September 30, 2025. For additional information regarding the embedded derivative liability and its valuation, please see Note 3, “Fair Value Measurements” and Note 9, “Convertible Notes” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Previous report
Accretion of interest and amortization of discounts on convertible notes
Previous report
Accretion of interest and amortization of discounts on convertible notes was $0.9 million for the nine months ended September 30, 2024 with no comparable result for the nine months ended September 30, 2025. The 2024 result was primarily from the amortization of discount and issuance cost related to the Secured Convertible Notes issued in May 2023 which were fully repaid in the third quarter of 2024. See Note 3, “Fair Value Measurements” and Note 9, “Convertible Notes” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Previous report
Other expense, net
Previous report
Other expense, net was $190 thousand for the nine months ended September 30, 2025 and $0.5 million for the nine months ended September 30, 2024. The higher result in the 2024 period was due to issuance costs incurred for the March 2024 Warrant and the Unsecured Convertible Notes issued in March 2024. See Note 9, “Convertible Notes” and Note 10, “Common Stock Warrants” in the Notes to the Condensed Consolidated Financial Statements (unaudited), in Part I, Item 1 of this report.
Previous report
We have largely incurred net losses and generated negative cash flows from operations since inception and may incur losses as we pursue our new strategic direction. As of September 30, 2025, our cash and cash equivalents were $2.3 million, compared to $430 thousand as of December 31, 2024. Based on our funds available on September 30, 2025, together with net proceeds from the issuance of the Series E Preferred Stock and October 2025 Pre-Funded Warrants (see Note 19, “Subsequent Events” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report), 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 November 7, 2026; however, as referenced above, the Company is considering adjustments to its strategic direction. As a result of any changes in the Company’s strategic direction, there may be circumstances that cause the Company to adjust its anticipated spending in the near term.
Previous report
Net cash used in operating activities from continuing operations was $5.8 million for the nine months ended September 30, 2024, which consisted primarily of a net loss from continuing operations of $6.0 million, adjusted by depreciation and amortization expenses of $24 thousand, stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash expense incurred to obtain consent of Secured Convertible Note holders in connection with the DERMAdoctor Divestiture of $0.4 million, non-cash gain on changes in fair value of warrant liability of $0.1 million, non-cash loss on changes in fair value of embedded derivative liability of $18 thousand, non-cash loss on modification of warrants of $69 thousand, non-cash right-of-use asset amortization of $254 thousand, accretion of interest and amortization of debt discounts on convertibles notes of $0.9 million, and a net increase of $0.6 million in our net operating assets and liabilities of continuing operations.
Previous report
which included repayment of $2.0 million for the Secured Convertible Notes through September 30, 2024, net proceeds of $2.9 million from the 2024 Public Offering transaction, and the net proceeds of $0.2 million from the 2024 Warrant Repice transaction.
Previous report
As of December 31, 2024, we had net operating loss carryforwards for federal and state income tax purposes of $153.7 million and $128.6 million, respectively. The federal net operating loss carryforwards consist of $94.9 million generated before January 1, 2018, which will begin to expire in 2025 and $59.6 million generated after December 31, 2017, that will carry forward indefinitely but are subject to an 80% limitation for years following December 31, 2021. The state net operating loss carryforwards will begin to expire in 2028. As of December 31, 2024, we also had tax credit carryforwards of $0.5 million for federal income tax purposes and $0.1 million for state tax purposes. If not utilized, the federal tax credits will begin expiring in 2031. The state tax credits have an indefinite carryover period.
Previous report
Our costs and operating expenses are subject to fluctuations, particularly historically due to changes in the cost of labor and service providers. As a result of our recent changes to our business and reduced operations, our future business results will depend, in part, on our continued ability to manage these fluctuations through cost savings projects and sourcing decisions. Failure to manage these fluctuations could adversely impact our results of operations or cash flows.
Previous report
Our NeutroPhase branded product is sold through our distribution partner in China; therefore, we receive periodic large orders that result in large chunks of revenue that are received in irregular intervals.
Reworded paragraphs (15)
Previous wording
This discussion contains forward-looking statements that involve risks and uncertainties. The following discussion of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report, and with our consolidated financial statements and related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2024 Annual Report. Words such as“expects,”* “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” “determines,” variations of these* words, and similar expressions are intended to identify these forward-looking statements. As a result of the significant changes that have occurred to us and our business as a result of completing the Avenova Asset Divestiture and the PhaseOne Divestiture, the 2025 Preferred Stock Issuance and the sale of the October 2025 Pre-Funded Warrants, the expected additional changes that will occur when we determine and proceed with the future strategic direction of our Company, as well as other factors, including those set forth under the section titled“Risk Factors”* in Part I, Item 1A. of this Quarterly Report and the section titled*“Risk Factors”* in Part I, Item 1A. of our 2024 Annual Report, as well as in other sections in our SEC filings, 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 revise or update publicly any forward-looking statements after the date of this report, even if new information becomes available in the future.
Current wording
The following discussion of our financial condition and results of operations should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1 of this report and with our Consolidated Financial Statements and related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2025 Annual Report on Form 10-K, as amended. This discussion contains forward-looking statements that involve risks and uncertainties. Words such as “expects,” “anticipated,” “will,” “may,” “goals,” “plans,” “believes,” “estimates,” “concludes,” “determines,” variations of these words, and similar expressions are intended to identify these forward-looking statements. As a result of the significant changes that have occurred to us and our business, including the establishment of our digital asset treasury strategy, as well as other factors, including those set forth under the section entitled “Risk Factors” in Part I, Item 1A. of our 2025 Annual Report on Form 10-K, as amended, and elsewhere in our SEC filings, our actual results may differ materially from those anticipated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions based upon assumptions made that we believe to be reasonable at the time and are subject to risks and uncertainties. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to publicly revise or update any forward-looking statements after the date of this report, even if new information becomes available in the future.
Previous wording
Historical financial results related to each of the businesses that we divested above in the Avenova Asset Divestiture, the PhaseOne Divestiture and the DERMAdoctor Divestiture are presented as discontinued operations in the unaudited condensed consolidated financial statements included in this report. See Notes 14, “Avenova Asset Divestiture and Bridge Loan,” 15 “PhaseOne Divestiture” and 16, “DERMAdoctor Divestiture” to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details.
Current wording
As part of the comprehensive realignment of the Company's business during 2025, the Company completed the Avenova Asset Divestiture and the PhaseOne Divestiture and decided to exit its involvement in the China NeutroPhase product line. The historical financial results of these businesses are reflected as discontinued operations in the Unaudited Condensed Consolidated Financial Statements included in this report. See Note 13, “DivestituresDivestitures,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report for additional details.
Previous wording
Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial 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 unaudited condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. In preparing these unaudited condensed consolidated financial 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.
Current wording
The Company's Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The preparation of these Unaudited Condensed Consolidated Financial Statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Unaudited Condensed Consolidated Financial Statements, as well as the reported revenues and expenses during the reporting periods. In preparing these Unaudited Condensed Consolidated Financial Statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. On an ongoing basis, the Company evaluates its estimates and judgments. The Company bases its estimates on historical experience and on various other factors that the Company believes are reasonable under the circumstances. Actual results may differ from these estimates.
Previous wording
While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report, we believe that the following accounting estimates are most critical to fully understanding and evaluating our reported financial results as discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, particularly taking into account the significant changes that occurred to our business as a result of the closing of the Avenova Asset Divestiture and the PhaseOne Divestiture in January 2025.
Current wording
While the Company's significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report, the Company believes that the accounting estimates of the fair value of the January 2026 Pre-Funded Warrants issued in conjunction with the 2026 Private Placement are the most critical to fully understanding and evaluating its reported financial results as discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations.
Previous wording
Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture for the three months ended September 30, 2025 and 2024 have been aggregated and reported for each of these periods in the line item titled “Net income from discontinued operations, net of taxes” in the table above. See additional information in Notes 14, “Avenova Asset Divestiture and Bridge Loan;” and 15, “PhaseOne Divestiture;” in Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.
Current wording
Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture for the three months ended March 31, 2025 have been aggregated and reported for each of these periods in the line item titled “Net income (loss) from discontinued operations, net of taxes” in the table above. See additional information in Note 13, “Divestitures,” in the Notes to the Unaudited Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.
Previous wording
During the three months ended September 30, 2025, the Company recorded an impairment for right-of-use assets associated with leases of $84 thousand and $3 thousand for fixed assets including leasehold improvements.
Current wording
There were no impairments of long-lived assets recorded during the three months ended March 31, 2026. During the quarter ended March 31, 2025, the Company recorded one-time impairments for right-of-use assets associated with leases of $559 thousand and $30 thousand for fixed assets including leasehold improvements due to the uncertainty at the time associated with our future operations and our strategic direction as we were exploring a dissolution of the Company and other potential strategic alternatives that were available to us.
Previous wording
For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the unaudited condensed consolidated statements of 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.
Current wording
Non-cash gain on changes in fair value of warrant liabilities
Previous wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $0.1 million for the nine months ended September 30, 2024 with no comparable adjustment for the nine months ended September 30, 2025. For additional information regarding warrant liabilities and their valuation, please see Note 3, “Fair Value Measurements” and Note 10, “Common Stock Warrants” in the Notes to Unaudited Condensed Consolidated Financial Statements, (unaudited) in Part I, Item 1 of this report.
Current wording
Adjustments to the fair value of warrant liabilities resulted in a gain of $5.8 billion for the three months ended March 31, 2026 with no comparable adjustment for the three months ended March 31, 2025. This gain related to the October 2025 Pre-Funded Warrants and the January 2026 Pre-Funded Warrants, which were initially classified as liabilities and recorded at fair value at each reporting date. Following stockholder approval obtained on March 12, 2026, the warrant liability recorded for the January 2026 Pre-Funded Warrants was reclassified to stockholders' equity at their fair value on that date, and no further fair value adjustments will be recorded with respect to those warrants in future periods. The October 2025 Pre-Funded Warrants remain classified as a liability as of March 31, 2026, with a fair value of $33.7 million, and will continue to be remeasured at fair value at each reporting date with changes in fair value recognized in earnings. For additional information regarding warrant liabilities and their valuation, please see Note 3, “Fair Value Measurements” and Note 10, “Common Stock Warrants and Warrant Liabilities” in the Notes to Unaudited Condensed Consolidated Financial Statements, (unaudited) in Part I, Item 1 of this report.
Previous wording
Based on our funds available on September 30, 2025, together with net proceeds from the issuance of the Series E Preferred Stock and October 2025 Pre-Funded Warrants (see Note 19, “Subsequent Events” in the Notes to Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report), 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 November 7, 2026; however, as referenced above, the Company is considering adjustments to its strategic direction. As a result of any changes in the Company’s strategic direction, there may be circumstances that cause the Company to adjust its anticipated spending in the near term.
Current wording
Based on our funds available on March 31, 2026, 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 May 15, 2027. Beyond twelve months, our ability to fund growth and meet obligations will depend on market conditions and access to capital on acceptable terms.
Previous wording
Net cash used in operating activities from continuing operations was $6.2 million for the nine months ended September 30, 2025, which consisted primarily of a net loss from continuing operations of $6.6 million, adjusted by depreciation and amortization expenses of $5 thousand, stock-based compensation expenses related to employee and director stock awards of $6 thousand, non-cash right-of-use asset amortization of $0.1 million, non-cash impairment of long-lived assets of $0.7 million, accretion of interest and amortization of debt discounts on convertibles notes of $84 thousand, and a net increase of $0.4 million in our net operating assets and liabilities of continuing operations.
Current wording
Net cash used in operating activities from continuing operations was $1.3 million for the three months ended March 31, 2025, which consisted primarily of a net loss of $3.3 million, adjusted for non-cash items including stock-based compensation expense of $2 thousand, non-cash right-of-use amortization of $53 thousand, non-cash impairment of long-lived assets of $0.6 million, and amortization of debt discounts on convertible notes of $26 thousand. Changes in operating assets and liabilities resulted in a net cash inflow of $1.3 million.
Previous wording
Net cash used in investing activities from continuing operations was $2 thousand for the nine months ended September 30, 2024, which consisted of purchases of property and equipment. There was no cash used in, or provided by, investing activities from continuing operations during the nine months ended September 30, 2025.
Current wording
There was no cash used in, or provided by, investing activities from continuing operations during the three months ended March 31, 2025.
Previous wording
Cash Used in Financing Activities, Continuing Operations
Current wording
Cash Provided by (Used in) Financing Activities, Continuing Operations
Previous wording
Net cash provided by financing activities from continuing operations was $1.0 million for the nine months ended September 30, 2024,
Current wording
Net cash provided by financing activities from continuing operations was $38.3 million for the three months ended March 31, 2026, consisting primarily of $25.0 million in proceeds from the issuance of pre-funded warrants in connection with the January 2026 Private Placement, $13.4 million in net proceeds from sales under the ATM Program, and $0.3 million in proceeds from warrant exercises, partially offset by $0.4 million in payments on redemption of Series F Preferred Stock.
Previous wording
Net cash used in financing activities from continuing operations was $3.2 million for the nine months ended September 30, 2025, which consisted primarily of $2.0 million in cash payments to repurchase outstanding warrants, a $0.5 million repayment of the Bridge Note, and dividend paid of $4.8 million. Offsetting these payments were $0.9 million in proceeds from warrant exercises and $3.8 million in proceeds from the Lazar Purchase Agreement.
Current wording
Net cash used in financing activities from continuing operations was $1.7 million for the three months ended March 31, 2025, which consisted primarily of $1.8 million in cash payments to repurchase outstanding warrants and a $0.5 million repayment of a bridge loan, partially offset by $0.6 million in proceeds from warrant exercises.
Previous wording
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 our evolving strategic direction. Information regarding our obligations under lease and convertible note arrangements are provided in Notes 7 and 9, respectively, in the Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report.
Current wording
In the normal course of business, the Company enters into contracts and commitments that obligate it to make payments in the future. As of March 31, 2026, the Company's contractual obligations consisted primarily of obligations under its operating lease for its corporate headquarters. Information regarding the Company's obligations under its operating lease is provided in Note 7, “Commitments and Contingencies,” in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this report. As of March 31, 2026, the Company had no convertible note obligations outstanding.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Comparison of the Nine Months Ended September 30, 2025 and 2024 (dollars in thousands)
Previous report — wording carried elsewhere
Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture for the nine months ended September 30, 2025 and from the DERMAdoctor Divestiture for the nine months ended September 30, 2024 have been aggregated and reported for each of these periods in the line item titled “Net income from discontinued operations, net of taxes” in the table above. See additional information in Notes 14, “Avenova Asset Divestiture and Bridge Loan;” 15, “PhaseOne Divestiture;” and 16, “DERMAdoctor Divestiture” in Notes to the Condensed Consolidated Financial Statements (unaudited) in Part I, Item 1 of this report for additional details regarding these financial results for the periods presented. The discussions below and throughout this section apply only to results from our continuing operations except as otherwise noted.
Previous report — wording carried elsewhere
During the nine months ended September 30, 2025, the Company recorded an impairment for right-of-use assets associated with leases of $643 thousand and $33 thousand for fixed assets including leasehold improvements.