# EDGAR Filing Document

**Accession Number:** 0001389545
**File Stem:** 0001437749-26-009090
**Filing Date:** 2026-3
**Character Count:** 707277
**Document Hash:** 46859079485b5a9423781dbbc928fc15
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-26-009090.hdr.sgml**: 20260325

**ACCESSION NUMBER**: 0001437749-26-009090

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 111

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260319

**DATE AS OF CHANGE**: 20260319

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NovaBay Pharmaceuticals, Inc.
- **CENTRAL INDEX KEY:** 0001389545
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **ORGANIZATION NAME:** 03 Life Sciences
- **EIN:** 680454536
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-33678
- **FILM NUMBER:** 26775050

**BUSINESS ADDRESS:**
- **STREET 1:** 2000 POWELL STREET, SUITE 1150
- **CITY:** EMERYVILLE
- **STATE:** CA
- **ZIP:** 94608
- **BUSINESS PHONE:** (510) 899-8800

**MAIL ADDRESS:**
- **STREET 1:** 2000 POWELL STREET, SUITE 1150
- **CITY:** EMERYVILLE
- **STATE:** CA
- **ZIP:** 94608

?xml version='1.0' encoding='ASCII'? nby20251231_10k.htm

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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, 2025

OR

☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to

Commission file number 001-33678

**NOVABAY PHARMACEUTICALS, INC.**

**(Exact name of registrant as specified in its charter)**

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| | |
|:---|:---|
| **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:**

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| | | |
|:---|:---|:---|
| **<u>Title of Each Class</u>** | **<u>Trading Symbol(s)</u>** | **<u>Name of Each Exchange On Which Registered</u>** |
| 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 ☐

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):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 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 30, 2025 on the NYSE American, was approximately $3,373,126. This figure excludes an aggregate of 1,123 shares of common stock held by the registrant's affiliates, including officers and directors, as of June 30, 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 16, 2026, there were 26,625,029 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, 2025**

**TABLE OF CONTENTS**

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| | | |
|:---|:---|:---|
|  |  | **Page** |
| [**PART I**](#part1) | [**PART I**](#part1) |  |
| ITEM 1. | [BUSINESS](#p1item1) | [4](#p1item1) |
| ITEM 1A. | [RISK FACTORS](#p1item1a) | [11](#p1item1a) |
| ITEM 1B. | [UNRESOLVED STAFF COMMENTS](#p1item1b) | [31](#p1item1b) |
| ITEM 1C. | [CYBERSECURITY](#p1item1c) | [31](#p1item1c) |
| ITEM 2. | [PROPERTIES](#p1item2) | [32](#p1item2) |
| ITEM 3. | [LEGAL PROCEEDINGS](#p1item3) | [32](#p1item3) |
| ITEM 4. | [MINE SAFETY DISCLOSURES](#p1item4) | [32](#p1item4) |
| [**PART II**](#part2) | [**PART II**](#part2) |  |
| ITEM 5. | [MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](#p2item5) | [33](#p2item5) |
| ITEM 6. | [\[RESERVED\]](#p2item6) | [33](#p2item6) |
| ITEM 7. | [MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](#p2item7) | [34](#p2item7) |
| ITEM 7A. | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#p2item7a) | [39](#p2item7a) |
| ITEM 8. | [FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](#p2item8) | [40](#p2item8) |
| ITEM 9. | [CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](#p2item9) | [80](#p2item9) |
| ITEM 9A. | [CONTROLS AND PROCEDURES](#p2item9a) | [80](#p2item9a) |
| ITEM 9B. | [OTHER INFORMATION](#p2item9b) | [80](#p2item9b) |
| ITEM 9C. | [DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](#p2item9c) | [80](#p2item9c) |
| [**PART III**](#part3) | [**PART III**](#part3) |  |
| ITEM 10. | [DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](#p3item10) | [81](#p3item10) |
| ITEM 11. | [EXECUTIVE COMPENSATION](#p3item11) | [83](#p3item11) |
| ITEM 12. | [SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](#p3item12) | [89](#p3item12) |
| ITEM 13. | [CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](#p3item13) | [91](#p3item13) |
| ITEM 14. | [PRINCIPAL ACCOUNTANT FEES AND SERVICES](#p3item14) | [92](#p3item14) |
| [**PART IV**](#part4) | [**PART IV**](#part4) |  |
| ITEM 15. | [EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](#part4item15) | [93](#part4item15) |

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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.

Subsequent to December 31, 2025, on February 20, 2026, we effected a 1-for-5 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 Divestiture (as defined below) and PhaseOne Divestiture (as defined below), pursuing other strategic alternatives, our anticipated expenses and capital requirements, the expected timing of, our ability to complete, and impact of the 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**

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| | |
|:---|:---|
| **ITEM 1.**  | **BUSINESS** |

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**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" below. As a result of these transactions, we have significantly reduced our legacy pharmaceutical business operations and have adopted a new strategic direction as a business, shifting to a capital allocation strategy that focuses on acquiring digital assets that provide exposure to economic participation within open digital financial networks.

We were historically focused on the development and sale of scientifically-created and clinically-proven eyecare, wound care, and skin care products. In the past year, we completed a comprehensive realignment of our business. We have adopted a capital allocation strategy focused on acquiring digital assets that provide exposure to economic participation within open digital financial 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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**Initial Digital Asset Holdings - SKY**

Our Digital Asset Strategy 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 held an aggregate of approximately 943.6 million SKY. SKY can be acquired, transferred, and held through digital wallets that rely on public/private key pairs, and it may be exchanged on trading venues that support SKY pairs against fiat currencies or other digital assets. The Sky network (also referred to herein as the "***Sky Protocol***") 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. There are two tokens that are native to the Sky Protocol. The first is the USDS 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.

SKY is the initial and sole digital asset approved by the Digital Asset Strategy Advisory Committee as of the date of this filing; however, the Company's strategy contemplates evaluating additional digital assets over time that meet similar economic and risk criteria. Changes to the investment strategy to acquire new assets or to pursue other growth strategies will require the completion of the following process. Our Digital Asset Strategy Advisory Committee, consisting of Michael Kazley and at least one other advisor, must first approve and the investors in the Private Placement must consent to such change. The Digital Asset Strategy Advisory Committee will then recommend to the Board of Directors the change in strategy for its approval.

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

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. 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.

**Industry Participants and Ecosystem**

The SKY ecosystem includes open-source developers, node operators, wallet providers, custodians, trading venues, market makers, data and analytics providers, payment facilitators, and software and hardware vendors. The breadth, maturity, and reliability of third-party services may affect liquidity, price discovery, and operational resilience. As adoption evolves, we expect service availability to change, including execution, clearing arrangements, and enterprise-grade 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 addition to these custodial arrangements, the Company may utilize non-custodial or third-party Web3 wallets and infrastructure, including institutional-grade transaction and security platforms, to facilitate protocol participation, staking, governance, or other interactions with decentralized applications. Assets held in such wallets are generally limited to amounts necessary for operational or transactional purposes and are subject to internal controls, segregation of duties, and risk management policies designed to mitigate loss.

*Custodian Selection, Security Practices and Liability Limitations*

We carefully select our service providers through a due diligence process designed to assess their operational capabilities, security

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

● Segregation of our assets on-chain or in omnibus arrangements with books-and-records sub-accounting;

● Secure private key management, including vault-based custody, multi-party computation ("MPC") or proprietary cryptography and hardware-based storage, multi-factor authorization, and role-based access controls;

● Contractual liability provisions for failure to safeguard assets, subject to negotiated limitations;

● 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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We also utilize affiliated or vetted third-party execution providers for SKY acquisitions and dispositions, leveraging custodian connectivity and settlement rails. Notwithstanding these controls, risks of loss due to cyber incidents, operational failures, insolvency, or legal uncertainty remain. See "Risk Factors—Risks Related to Our Blockchain-Based Strategy" below.

**Considerations of Holding SKY**

We believe that long-term ownership of digital assets, including SKY, can provide exposure to blockchain-based financial infrastructure that enables peer-to-peer settlement and programmability without reliance on a central operator. We also believe that such exposure can offer participation in protocol-level economics if adoption of the Sky Protocol, tooling, and ecosystem services expands. However, this strategy also contains risk, and we will continue to monitor and adjust our strategy for the impact of volatility, technology, operational, and governance risks inherent to open-source networks, market structure risks, and evolving and overlapping regulatory frameworks across jurisdictions that may affect trading venues, custodians, and enterprise access to services. We weigh these factors against our liquidity needs, risk appetite, and regulatory obligations in determining the scope and cadence of any future acquisitions or dispositions.

***2025 Financing Transactions***

*2025 Preferred Stock Purchase Agreement*

On August 19, 2025, the Company entered into a preferred stock purchase agreement (the "***2025 Preferred Stock Purchase Agreement***") with David E. 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.

Simultaneous to entering into the 2025 Preferred Stock Purchase Agreement on August 19, 2025, Mr. Lazar completed the Initial Series D Preferred Purchase. The 2025 Preferred Stock Purchase Agreement provided for the ability of Mr. Lazar to assign, transfer and/or sell his shares of Series D Preferred Stock, Series E Preferred Stock, the shares of Common Stock underlying the Transferred Stock and/or his right to acquire such securities. On October 9, 2025, Mr. Lazar tendered his resignation as Chief Executive Officer and a director of NovaBay and entered into a securities purchase agreement with R01 Fund LP ("***R01***") and Framework Ventures IV L.P. ("***Framework***" and, together with R01, the "***Lazar Purchasers***") to effect such transfer. Pursuant to the agreement, Mr. Lazar agreed to assign to the Lazar Purchasers all of Mr. Lazar's right, title and interest in (i) 441,326 outstanding shares of Series D Preferred Stock and (ii) the rights and obligations to purchase the Transferred Stock and the transactions contemplated by the Lazar sale, each of which were purchased from the Company by Mr. Lazar pursuant to the 2025 Preferred Stock Purchase 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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*2025 Warrant Exchange and Issuance of Series F Preferred Stock*

On August 19, 2025, simultaneous with the signing of the 2025 Preferred Stock Purchase Agreement, the Company entered into warrant exchange agreements (the "***Series F Agreements***") with each of Anson Investments Master Fund LP, Hudson Bay Capital Management LP and Armistice Capital, LLC (collectively, the "***Series F Holders***"). The Series F Agreements provide for the irrevocable surrender and cancellation of all warrants beneficially owned by the Series F Holders, in exchange for the Company issuing (i) an aggregate of 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 Series F Holders if, after the effective date of the Series F Agreements, another holder of the Company's Common Stock purchase warrants receives a higher amount per underlying warrant; except that this provision shall not apply to (i) settlements with retail investor warrant holders that (1) individually is less than or equal to six and thirty hundredths percent (6.30%) of a Series F Holder's total warrants outstanding or (2) in the aggregate is less than or equal to twelve and seventy hundredths percent (12.70%) of a Series F Holder's total warrants outstanding or (ii) prior warrant settlements by the Company.

Because the 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.

*October 2025 Pre-Funded Warrant Transactions*

On October 16, 2025, the Company issued and sold pre-funded warrants (the "***October 2025 Pre-Funded Warrants***") to purchase an aggregate of 1,081,082 shares of Common Stock, to R01 and Framework in two transactions for aggregate net proceeds of approximately $5.9 million. The purchase price was $5.50 per October 2025 Pre-Funded Warrant, representing 110% of the closing price of the Common Stock on the day before the issuance, less the $0.05 exercise price for each such October 2025 Pre-Funded Warrant. The October 2025 Pre-Funded Warrants are freely exercisable for shares of Common Stock upon the receipt of stockholder approval at the March 12, 2026 special meeting of stockholders.

**Recent 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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The Company is not obligated to make any sales of Common Stock under the Sales Agreement. The Sales Agreement may be terminated by either party under specified circumstances, including material adverse changes affecting the Company or the financial markets, suspension of trading, or by notice from either party.

See also Notes 7, "Financing Activities;" 9, "Common Stock Warrants and Warrant Liabilities," 10, "Stockholders' Deficit," and 17, "Subsequent Events" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

**Legacy Wound Care and Eyecare Business**

Prior to adopting our digital asset treasury strategy, the Company operated as a pharmaceutical company focused on eyecare and wound care products.

*Avenova Asset Divestiture*

On January 17, 2025, we completed the sale of our eyecare products sold under the Avenova brand and related assets (the "***Avenova Assets***") to PRN Physician Recommended Nutriceuticals, LLC ("***PRN***"), which constituted the sale of substantially all of our then revenue-generating and operating assets (the "***Avenova Asset Divestiture***"). The Avenova Asset Divestiture was consummated pursuant to the Asset Purchase Agreement, dated September 19, 2024, as amended. The final purchase price received by the Company was approximately $10.6 million, net of adjustments. For additional information regarding the Avenova Asset Divestiture, please see Note 13, "Avenova Asset Divestiture and Bridge Loan" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

*PhaseOne Divestiture*

On January 8, 2025, we completed the sale of our wound care product trademarks, including NeutroPhase, PhaseOne and OmniPhase, and related inventory to Phase One Health LLC (the "***PhaseOne Divestiture***"). Following the PhaseOne Divestiture, our legacy wound care business has been significantly reduced.

*Exit of the China NeutroPhase Product Line*

Following the 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.

The Company is incorporated under the laws of the State of Delaware.

*Discontinued Operations*

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 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.

*Customers, Manufacturing and Suppliers*

In connection with the Avenova Asset Divestiture, the PhaseOne Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations. Information for customers, manufacturing and suppliers associated with the Company's former businesses can be found in our prior filings with the SEC.

*Intellectual Property*

In connection with the Avenova Asset Divestiture, the PhaseOne 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 Divestiture, the PhaseOne 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.

*Seasonality*

In connection with the Avenova Asset Divestiture, the PhaseOne Divestiture and the DERMAdoctor Divestiture, the Company disposed of its primary commercial operations.Additional information about these and our former Avenova Asset, PhaseOne and DERMAdoctor customers, product manufacturing and suppliers can be found in our prior filings with the SEC.

**Our Capital Requirements** 

To help address our needs for liquidity and capital to fund our operations in 2025, we completed a series of financing transactions in 2025, as described above in "*2025 Financing Transactions*," which resulted in our Company raising approximately $12.0 million in gross proceeds. Subsequently, the Company completed an additional financing transaction in January 2026, in which it raised approximately $137.4 million and which is described in the section entitled "*Recent Developments*" above.

As a result of the completion of the Avenova Asset Divestiture, the PhaseOne Divestiture and the DERMAdoctor Divestiture, our business and operating expenses have significantly changed. Accordingly, based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of all of the stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 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 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.

**Governmental, Regulatory, and Accounting Considerations**

The legal 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.

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.

The completion of the Avenova Asset Divestiture, the PhaseOne Divestiture and the DERMAdoctor Divestiture and our decision to exit our involvement in the China NeutroPhase product line have had and will continue to 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 to fulfill a contractual obligation that has since been completed, as well as limited manufacturing on an as-needed basis for a short period for 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, 2025, on a consolidated basis, we had a total of 4 employees, 2 of whom were full-time employees and 2 who were part-time employees. None of our employees are represented by labor unions or covered by collective bargaining agreements. We 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 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, we are currently exploring 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 <u>http://www.sec.gov</u>.

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| **ITEM 1A.**  | **RISK FACTORS** |

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*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 February 10, 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 our recently adopted blockchain-based strategy under the heading* "*Risks related to Our Blockchain-Based Strategy,*" *as well as the completed Avenova Asset Divestiture and the PhaseOne Divestiture under the heading* "*Risks Relating to Our Business.*" *Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our blockchain-based strategy, our business, 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.*"

***Risk Factor Summary***

The principal risks that could materially and adversely affect us include, among others, the following:

**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.

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

● 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.

● SKY's status as an asset that may potentially be deemed to be 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.

● 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.

● 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.

● 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.

***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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***SKY***'***s status as an asset that may potentially be deemed to be 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 Company is unable to properly characterize such products or services, the Company may be subject to regulatory scrutiny, inquiries, investigations, fines and other penalties, which may adversely affect our business, operating results and financial condition.***

The SEC and its staff in the past have taken the position that a range of digital assets, as well as products and services related to digital assets, may fall within the definition of an investment contract that is offered or sold as a "security" under the U.S. federal securities laws. In connection with our business strategy, we expect to hold SKY and may engage in Sky-related activities, including participating in staking or delegation arrangements and receiving staking or protocol rewards. Each of these activities involves the use of SKY in ways that have not been the subject of definitive regulatory guidance.

The legal test for determining whether any given digital asset, product or service that is offered and sold is an investment contract was set forth in the 1946 U.S. Supreme Court case *SEC v. W.J. Howey Co.* and requires a highly complex, fact-driven analysis. Accordingly, whether SKY, or any SKY-related product or service that we may engage in, would ultimately be deemed to be offered or sold as a security is uncertain and difficult to predict, notwithstanding any conclusions we may draw based on our internal, risk-based assessments. Further, even if SKY is not determined to be a security, certain SKY-related activities, such as staking, delegation, lending, reward or yield-generating programs, or the provision of services that facilitate such activities, could be deemed to constitute securities offerings or derivatives or to involve regulated intermediaries under applicable securities laws.

***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.***

Blockchain-based assets, such 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 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***"), such legislation has not yet been enacted and remains subject to change. As a result, the regulatory treatment of blockchain-based assets continues to be uncertain.

Regulators in the United States or in foreign jurisdictions may interpret or enforce existing laws and regulations in ways that adversely affect the classification, transferability, or value of blockchain-based assets, or may adopt new laws or pursue enforcement or judicial actions that materially impact network-based markets. While it is our intention to acquire and deploy blockchain-based assets that are not securities and that would not expose us to regulatory scrutiny, the legal uncertainty in this area may cause us to miscalculate. If any blockchain-based assets we hold or acquire are later determined to constitute "securities" under applicable law, we could become subject to additional regulatory obligations or restrictions, including under the federal securities laws and the 1940 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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Further, state regulators may conclude that the blockchain-based assets we hold are securities under state 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.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SKY or the ability of individuals or institutions such as us to own or transfer SKY and utilize blockchain-based applications on networks such as SKY. For example, the U.S. executive branch, the SEC, the European Union's Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the United Kingdom, the Financial Services and Markets Act 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, CFTC, or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of blockchain-based asset markets to function or the willingness of financial and other institutions to continue to provide services to the blockchain-based assets industry, nor how any new regulations or changes to existing regulations might impact the value of blockchain-based assets generally and SKY specifically. The consequences of increased regulation of blockchain-based assets and blockchain-based asset activities could adversely affect the market price of SKY and in turn adversely affect the market price of our common stock.

In addition, the evolving regulatory environment surrounding blockchain-based assets has introduced complications related to insurance coverage and market perception. For example, our engagement in blockchain-based asset activities may result in increased costs for director and officer liability 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.

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

We use third-party trading platforms, which we believe are reputable, as well as reputable over-the-counter brokers to purchase SKY and other tokens that we may use in the future. As part of our process in determining transactions with third-party exchanges, we search for reputable exchanges that have industry standard policies and procedures in place regarding data security and customer diligence related to anti-money laundering, Office of Foreign Assets Control sanctions compliance, and know-your-customer rules and regulations. If any of these third-party exchanges no longer meet our standards or if there is a decrease in reputable third-party exchanges, we may need to find additional counterparties and enter into additional agreements that could be on less favorable terms, which could have a material adverse effect on our business, financial condition or the results of our operations.

In addition, there has been increasing focus on the extent to which blockchain-based assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine and sanctions programs administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), including those relating to countries such as Iran, North Korea and Syria. If we are found to have purchased any of our SKY from bad actors that have used SKY to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in SKY by us may be restricted or prohibited.

***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.***

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

SKY and other blockchain-based assets and the entities that provide services to participants in blockchain ecosystems have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading blockchain-based asset exchange and reportedly stole over $400.0 million in blockchain-based assets from customers. A successful security breach or cyberattack could result in:

● a partial or total loss of our blockchain-based assets in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our blockchain-based assets;

● harm to our reputation and brand;

● improper disclosure of data and violations of applicable data privacy and other laws; or

● significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure,

Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with blockchain-based assets or companies that operate blockchain-based asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader SKY ecosystem or in the use of the SKY network to conduct financial transactions, which could negatively impact 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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***Decentralized finance arrangements may expose us to risks of smart contract risk, operational failures and cybersecurity threats.***

From time to time, we may 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 mitigate risks of engaging in DeFi applications may not prevent the Company from engaging in DeFi pools that are also used by bad actors or sanctioned persons.

As part of our token management strategy, we may engage in staking, re-staking, or other activities that may involve the use of "smart contracts" or decentralized applications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an "admin key" or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, potentially leading to a loss of our tokens. Like all software code, smart contracts are exposed to the risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application. Smart contracts and decentralized applications may contain bugs, security vulnerabilities, technical vulnerabilities, exploits, liquidation risks, governance risks, or poorly designed permission structures that could result in the irreversible loss of our blockchain-based assets. In addition, certain smart contracts are upgradable or subject to certain governance controls which could result in unforeseen code errors, asset or account freezing, or the loss of blockchain-based assets. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences, such as the loss of or inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial condition.

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

Our SKY strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty's financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of SKY, a loss of the opportunity to generate funds, or other losses.

Our primary counterparty risk with respect to our SKY is custodian performance obligations under the custody 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 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 a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., 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 resulted in any loss or misappropriation of our SKY, nor have such events adversely impacted our access to our SKY, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings 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. Additional bankruptcies, 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.

While our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held SKY will not become part of the custodian's insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our SKY holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodians with which we custody substantially all of our SKY, could have a material adverse effect on our business, prospects, financial condition, and operating results.

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***Our ability to generate income from our blockchain-based asset holdings is subject to significant uncertainty, and revenue opportunities may not develop or may fail to perform as expected.***

As part of our strategy, we intend to evaluate or participate in reward-generating activities associated with SKY. SKY presents distinct risks that may limit our ability to earn returns, or result in losses. SKY supports staking, and we intend to stake SKY, for which efforts we may receive rewards. However, staking reward rates are unpredictable. Staking reward rates are variable and are determined by the current issuance parameter of rewards (how many rewards are distributed, as determined by Sky Ecosystem Governance) and the 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.

Security risks are also present, including the risk of hacking. Hacking risk refers to the potential for malicious actors to exploit or gain unauthorized access to the Sky.money front-end user interface, or even certain parts of the Sky Protocol. This could lead to theft of assets, manipulation of data, or disruption of services. There also exists the potential for attackers to take advantage of weaknesses or flaws in the Sky.money front-end user interface, smart contracts, or associated protocols, which could result in financial losses, data breaches, or system malfunctions. The potential for phishing and impersonation also exists, wherein malicious actors may create fake websites, social media accounts, or other online presences that closely mimic the Sky.money front-end user interface, which could lead to users inadvertently providing sensitive information, such as private keys or seed phrases, or interacting with fraudulent interfaces that result in the signing of malicious transactions, thereby compromising our assets or data.

Because SKY tokens have no physical existence beyond the record of transactions on the SKY network, a variety of technical factors related to the SKY network could also impact the price of SKY. The liquidity of SKY may also be reduced and damage to the public perception of SKY may occur, if financial institutions were to deny or limit banking services to businesses that hold SKY, provide SKY-related services or accept SKY as payment, which could also decrease the price of SKY. In addition, any failure to properly monitor and upgrade the SKY network could adversely affect the SKY network and negatively affect the price of SKY.

The community-driven governance model that SKY operates under may also create risks. This governance model allows holders of the protocol's governance token to influence changes to the protocol. While this decentralized approach aims to ensure that the protocol evolves in the best interest of its users, it may introduce certain risks. For instance, there is a possibility that the community might advocate for changes that negatively impact some users or introduce instability to the system. Additionally, the decentralized policymaking process could potentially be delayed in reacting to urgent issues, potentially leaving the protocol vulnerable during critical periods. This process could also be attacked or manipulated by malicious actors. This could occur where, for example, an attacker attempts to accumulate a large number of governance tokens to push through harmful proposals. A successful attack could be severe, potentially leading to changes in protocol parameters that benefit the attacker at the expense of other users, thereby negatively impacting their positions or the overall stability of the system. Furthermore, there exists the potential for a concentration of decision-making power within a small group of participants in the Sky Protocol's system. This concentration could lead to decisions that primarily benefit these major stakeholders, potentially at the expense of smaller participants. This could lead to changes in protocol parameters, fee structures, or risk management strategies that may not align with the needs of all users. Furthermore, a concentration of governance power might be more susceptible to external pressures, potentially impacting the protocol's long-term stability and decentralization ethos.

Further, hacks and other security breaches targeting the core infrastructure of blockchain networks or major participants, such as exchanges and custodians, could severely impact the reputation and market confidence in these networks. Exploits of protocol-level vulnerabilities could also compromise the integrity of the cryptocurrency blockchains, resulting in a substantial loss of value.

The success and growth of cryptocurrency assets depend significantly on their continued security, stability and scalability. Any technical failures, consensus breakdowns, governance disputes or regulatory interventions that diminish confidence in the networks or impair their functionality could lead to a material decline in their market prices, which could materially and adversely impact our business, financial condition and results of operations. A sustained or significant decrease in the price or liquidity of cryptocurrencies, whether due to 51% attacks, forks, hacks, network disruptions or other adverse events, could negatively impact our business, financial condition, and results of operations. Furthermore, even the perception that any of these events could occur may lead to significant market volatility and price declines, adversely affecting our business, financial condition and results of operations and the price of our common stock.

The liquidity of SKY may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for SKY and other blockchain-based assets.

In light of these risks, there can be no assurance that we will be able to generate meaningful or sustainable revenue from SKY. Any failure to do so could adversely affect our operating results, liquidity, and ability to execute our business strategy.

***Political or economic crises may motivate large-scale sales of blockchain-based assets, which would result in a reduction in values and materially and adversely affect us.***

Cryptocurrencies, as an alternative to fiat currencies that are backed by central governments, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. For example, political or economic crises could motivate large-scale acquisitions or sales of blockchain-based assets either globally, regionally or locally. Large-scale sales of certain blockchain-based assets would result in a reduction in their value and could materially and adversely affect our investment and trading strategies, the value of our assets, our business, financial condition and results of operations, and the price of our common stock.

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***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.***

Certain blockchain-based assets, such as Bitcoin, use a "proof-of-work" consensus algorithm. The genesis block on the Bitcoin blockchain was mined 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 a proof-of-stake model in 2022, use a newer consensus algorithm known as "proof-of-stake." SKY is an ERC-20 token deployed on the Ethereum blockchain, 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 period of time or subject to as widespread use or adoption as, for example, Bitcoin's proof-of-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 of which could cause these blockchains not to function as intended, lead to outright failure to function entirely causing a total outage or disruption 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 health of the Sky Protocol depend on the Ethereum Proof-of-Stake consensus mechanism for transaction finality and smart contract execution. If Ethereum's consensus layer were compromised, including as a result of validator attacks, slashing cascades, or network forks, such compromises would directly and negatively impact the functionality and transferability of SKY and Sky Protocol operations, including staking, governance, and USDS issuance. Arising from SKY's dependence on the Ethereum consensus mechanism, the cost and timeliness of interacting with Sky Protocol contracts, including staking and governance participation 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 adoption or perform successfully; any failure to do so could negatively impact our business, financial condition and results of operations and the price of our common stock. If Ethereum's proof-of-stake consensus mechanism were compromised, SKY functionality and value could be materially adversely affected.

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

Blockchain-based 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 exhibit comparatively greater 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 SKY and 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 depend, for instance, on public 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 the blockchain-based assets industry, consumer demand for SKY as a means of payment, and the availability and popularity of alternatives to SKY. 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.

These risks include the potential for monetary loss arising as a result of market volatility, smart contract vulnerabilities, and other unforeseen risks that may have a material adverse effect on SKY. There is also market risk, or the potential for loss due to the overall performance of the cryptocurrency markets. The value of SKY can be affected by broader market trends, potentially impacting the value of SKY holdings.

SKY has historically 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.

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In addition, social media posts and other statements and actions by prominent individuals have resulted in outsized movements in the market price of certain blockchain-based assets. It is possible that future statements by individuals concerning certain blockchain-based assets will have disproportionate impacts on the market price of certain blockchain-based assets.

Our financial results and the market price of our listed securities would be adversely affected, and our business and financial condition would be negatively impacted, if the price of SKY decreased substantially, including as a result of:

● decreased user and investor confidence in SKY, including due to the various factors described herein;

● negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, SKY or the broader blockchain-based assets industry, for example, additional filings for bankruptcy protection or bankruptcy proceedings of major blockchain-based asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates;

● competition from other blockchain-based assets that exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;

● a decrease in the price of other blockchain-based assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for SKY purchase and sale transactions, to the extent the decrease in the price of such other blockchain-based assets or the unavailability of such stablecoins may cause a decrease in the price of SKY or adversely affect investor confidence in blockchain-based assets generally;

● developments relating to the Sky Protocol, including (i) changes to the Sky Protocol that impact its security, speed, scalability, usability, or value, such as changes to the cryptographic security protocol underpinning the Sky network, changes to the maximum number of Sky outstanding, changes to the mutability of transactions, changes relating to the size of Sky blocks, and similar changes, (ii) failures to make upgrades to the Sky Protocol to adapt to security, technological, legal or other challenges, and (iii) changes to the Sky Protocol that introduce software bugs, security risks or other elements that adversely affect 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:

● <u>Potential Premium Collapse</u>: 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.

● <u>Liquidity and Macro Sensitivity</u>: Blockchain-based asset treasury company equities are typically high-beta assets.

● <u>Dilution Fatigue</u>: 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.

***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.***

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.

***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.***

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.

***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.***

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.

***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 that could have a material adverse effect on our financial condition.***

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.***

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.***

We may issue additional shares of our common stock, other series or classes of 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, 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.

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***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 post-change taxable income is subject to annual limitations. Since our formation, we have raised capital through the issuance of capital stock on numerous occasions which, together with subsequent transfers of our stock by stockholders, have resulted in ownership shifts within the meaning of Section 382. We believe that we experienced an ownership change during 2025 and, accordingly, our pre-change NOLs and other tax attributes are expected to be subject to significant limitations under Section 382. We have not yet completed a formal study to determine the precise amount of the applicable limitation. As a result, our ability to utilize pre-change NOLs and other tax attributes in future periods may be materially restricted. In addition, future changes in our stock ownership, some of which are outside of our control, could result in an additional ownership change under Section 382, which could further limit the availability of our tax attributes.

***Our stockholders 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** |

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Not Applicable.

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| **ITEM 1C.** | **CYBERSECURITY** |

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**Risk Management and Strategy**

Many aspects of our business depend on the availability, integrity, and security of our information systems and digital infrastructure, including systems used to record, process, and report financial information and to support our operations within open digital financial networks. Following our business realignment during and subsequent to 2025, our operations increasingly involve the accumulation and deployment of operating digital assets within blockchain networks to provide protocol-level services, including staking, governance participation, validation, and related activities. As a result, our cybersecurity risk profile includes risks associated with blockchain-based networks, digital asset custody, private-key management, smart contracts, and reliance on third-party service providers that support digital asset operations. Our cybersecurity risk management program is informed by established security frameworks, such as the NIST Cybersecurity Framework, and includes an annual enterprise risk assessment that addresses cybersecurity risks. The program encompasses documented policies, procedures, and standards governing information security, digital asset management, and incident response. We do not maintain in-house information technology or cybersecurity personnel and instead rely on established third-party providers for enterprise software, cloud-based services, and digital 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**

Oversight of cybersecurity risk is provided by Company management, including our Chief Executive Officer and Chief Financial Officer. Our Board of Directors oversees cybersecurity risk as part of its broader oversight of enterprise risk, including risks related to technology infrastructure and digital asset operations. In connection with our business realignment, the Board has established a Digital Asset Strategy Advisory Committee, which provides additional oversight with respect to risks associated with the Company's participation in blockchain networks and deployment of operating digital assets.

The Board receives updates from management regarding cybersecurity risks and related matters as appropriate. Escalation procedures are in place to ensure that cybersecurity incidents are reported to the Board or any relevant subcommittees, depending on the nature and severity of the incident. Given the Company's size and operating model, cybersecurity oversight is integrated into the Board's general risk oversight responsibilities rather than managed through a dedicated cybersecurity committee.

Management considers cybersecurity risks as part of its overall risk management process and elevates matters to the Board when appropriate.

**Cybersecurity Risks**

Our cybersecurity risks include risks arising from unauthorized access to information systems, data breaches, malware or ransomware attacks (including those leveraging artificial intelligence), phishing or social-engineering attempts (including AI-generated content such as deepfakes), supply chain attacks, and failures or security incidents involving third-party service providers. In addition, our operations within blockchain networks expose us to risks specific to digital assets, including the loss, theft, or compromise of private keys; vulnerabilities in smart contracts or protocol-level code; outages or disruptions affecting blockchain networks or validators; and cybersecurity incidents at custodians or other digital asset infrastructure providers. We also recognize that cybersecurity insurance coverage may have limitations and may not fully cover all losses arising from such incidents.

A cybersecurity incident or digital-asset-related security 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** |

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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.

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| **ITEM 3.**  | **LEGAL PROCEEDINGS** |

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From time to time, the Company may be involved in various legal proceedings arising in the ordinary course of business. As of December 31, 2025, 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. As of the date of this filing, there were no matters, except as set forth below, 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.

*Legal Proceedings and Threatened Legal Proceedings Related to the January 2026 Private 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.

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| **ITEM 4.**  | **MINE SAFETY DISCLOSURES** |

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Not Applicable.

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**PART II**

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| **ITEM 5.** | **MARKET FOR REGISTRANT**'**S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES** |

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**Market Information** 

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

**Holders**

As of March 16, 2026, there were approximately 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 and do not currently expect to do so in the near future. In 2025, following a comprehensive realignment of our 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.

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| **ITEM 6.**  | **[RESERVED]** |

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| **ITEM 7.** | **MANAGEMENT**'**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |

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*The following discussion of our financial condition and results of operations should be read together with our Consolidated Financial 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 Divestiture, the PhaseOne 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**

During 2025, we completed a comprehensive realignment of our business. As part of this realignment, we adopted a capital allocation approach focused on acquiring and holding economically productive digital assets that enable participation in open, decentralized financial networks, subject to applicable risk, liquidity, governance, and regulatory considerations. Our primary objective is to preserve stockholder value and, over time, seek opportunities to enhance value through disciplined participation in such networks. We also continue to maintain a limited legacy wound care business.

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.

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.

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.

*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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The market price of SKY is determined by supply and demand across network-based markets and may be volatile. Prices may fluctuate due to factors including protocol changes, governance decisions, market sentiment, macroeconomic conditions, and broader digital asset market 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**

Based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of the stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 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 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.

**Critical Accounting Estimates** 

Our Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The preparation of these 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 Consolidated Financial Statements, as well as the reported revenues and expenses during the reporting periods. In preparing these 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.

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 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.

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***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 estimated fair value recorded as a non-cash gain or loss in the Consolidated Statements of Operations.

The fair 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 ended December 31, 2025 and 2024 (in thousands)***

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|  | For the years ended<br> December 31, | For the years ended<br> December 31, | Dollar | Percent |
| **Statement of Operations** | 2025 | 2024 | Change | Change |
| Operating expenses: |  |  |  |  |
| General and administrative | $7585 | $7379 | 206 | 3% |
| Impairment of long-lived assets | 854 |  | 854 |  |
| Total operating expenses | 8439 | 7379 | 1060 | 14% |
| Operating loss | (8439) | (7379) | (1060) | 14% |
| Non-cash (loss) gain on changes in fair value of warrant liability | (24486) | 114 | (24600) | (21579%) |
| Accretion of interest and amortization of discounts on convertible notes | (277) | (904) | 627 | (69%) |
| Other expense, net | (20) | (581) | 561 | (97%) |
| Net loss from continuing operations | (33222) | (8750) | (24472) | (280%) |
| Net income from discontinued operations, net of taxes | 11081 | 1527 | 9554 | 626% |
| Net loss | $(22141) | $(7223) | $(14918) | (207%) |

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***Impact of Divestitures***

Financial results related to divested assets from the Avenova Asset Divestiture and the PhaseOne Divestiture and the China NeutroPhase product line for the years ended December 31, 2025 and 2024 and from the DERMAdoctor Divestiture for the year ended December 31, 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. Prior-period amounts have been revised to correct the presentation of the loss on the DERMAdoctor Divestiture and related divestiture proceeds, which were previously presented within continuing operations and are now reflected within discontinued operations. This revision did not affect total net loss, total net loss per share, total cash flows, or the Company's financial position. See additional information in Notes 13, "Avenova Asset Divestiture and Bridge Loan;" 14, "PhaseOne Divestiture", 15, "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.

***General and administrative***

General and administrative expenses increased $0.2 million, or 3%, to $7.6 million for the year ended December 31, 2025, from $7.4 million for the year ended December 31, 2024. The increase was due primarily to higher legal costs associated with non-recurring strategic initiatives during the year ended December 31, 2025.

***Impairment of Long-Lived Assets***

During the year ended December 31, 2025, the Company recorded an impairment of $854 thousand related primarily to right-of-use assets and fixed assets associated with excess leased office capacity resulting from our strategic realignment. This impairment reflects actions taken to reduce our office space and streamline our cost structure following the realignment. No comparable impairment was recorded during the year ended December 31, 2024.

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

Adjustments to the fair value of warrant liabilities resulted in a non-cash loss of $24.5 million for the year ended December 31, 2025 and a non-cash gain of $0.1 million for the year ended December 31, 2024. The warrant liability recorded during the year ended December 31, 2025 related to the October Pre-Funded Warrants. The warrant liability recorded during the year ended December 31, 2024 related to the December 2023 Warrants and the March 2024 Warrants. For additional information regarding warrant liabilities and their valuation, please see Note 9, "Common Stock Warrants and Warrant Liabilities," 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 $0.3 million for the year ended December 31, 2025, compared to $0.9 million for the year ended December 31, 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 8, "Convertible Notes," in the Notes to Consolidated Financial Statements in Part II, Item 8 of this annual report.

***Other expense, net***

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

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**Financial Condition, 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. Our net losses from continuing operations were $33.2 million and $8.8 million for the years ending December 31, 2025 and 2024, respectively. The net loss from continuing operations for the year ended December 31, 2025 included a non-cash loss of $24.5 million for an increase in warrant liability recorded in conjunction with the October Pre-Funded Warrants. As of December 31, 2025, our cash and cash equivalents were $8.0 million, compared to $0.4 million as of December 31, 2024.

Based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of all stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 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 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.

***Cash Used in Operating Activities, Continuing Operations***

Net 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 stock-based 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 used in operating activities from continuing operations was $7.5 million for the year ended December 31, 2024, which consisted primarily of a net loss from continuing operations of $8.8 million, adjusted by stock-based compensation expenses related to employee and director stock awards of $0.1 million, non-cash loss on extinguishment of Secured Convertible Note of $13 thousand, non-cash expense incurred to obtain consent of Secured Convertible Note (as defined in Note 8, "Convertible Notes") holders to release collateral for the DERMAdoctor Divestiture of $0.4 million, non-cash loss on modifications of warrants of $69 thousand, non-cash gain on changes in fair value of warrant liabilities of $0.1 million, non-cash loss on changes in fair value of embedded derivative liability of $18 thousand, non-cash right-of-use amortization of $0.3 million, accretion of interest and amortization of 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.

***Cash Used in Investing Activities, Continuing Operations***

The Company reported no cash used in or provided by investing activities for the years ended December 31, 2025 and 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***

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

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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 due to changes in the cost of labor and service providers. Under our digital asset strategy, our exposure to inflationary pressures is reduced relative to our prior pharmaceutical operations; however, inflation may affect general and administrative costs, third-party service fees, and the broader economic environment in 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, 2025 or December 31, 2024 as defined in Item 303(b) of SEC Regulation S-K.

***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 other strategic alternatives.

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| | |
|:---|:---|
| **ITEM 7A.**  | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |

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At December 31, 2025, our market risk 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, 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, 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 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, 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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| | |
|:---|:---|
| **ITEM 8.**  | **FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA** |

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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.

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| | |
|:---|:---|
| **INDEX TO CONSOLIDATED FINANCIAL STATEMENTS** | **INDEX TO CONSOLIDATED FINANCIAL STATEMENTS** |
|  | Page |
| [Report of Independent Registered Public Accounting Firm (PCAOB ID: 199)](#report_irpaf) | [41](#report_irpaf) |
| [<u>Report of Independent Registered Public Accounting Firm</u> (PCAOB ID: 100)](#reportpredauditor) | [42](#reportpredauditor) |
| [Consolidated Balance Sheets as of December 31, 2025 and 2024](#balsheet) | [44](#balsheet) |
| [Consolidated Statements of Operations for the Years Ended December 31, 2025 and 2024](#income) | [45](#income) |
| [Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 2025 and 2024](#equity) | [46](#equity) |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, 2025 and 2024](#cashflows) | [47](#cashflows) |
| [Notes to Consolidated Financial Statements](#notes) | [49](#notes) |

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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 sheet of NovaBay Pharmaceuticals, Inc. and subsidiaries (the "Company") as of December 31, 2024, and the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows for the year ended December 31, 2024 (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 the results of its operations and its cash flows for the year 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 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 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 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 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 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 audit provides a reasonable basis for our opinion.

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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 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 served as the Company's auditor 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)**

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| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2024** |
| **ASSETS** |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $7958 | $430 |
| Prepaid expenses and other current assets | 717 | 272 |
| Current assets, discontinued operations |  | 1233 |
| Total current assets | 8675 | 1935 |
| Operating lease right-of-use assets |  | 955 |
| Other assets | 360 | 524 |
| Other assets, discontinued operations |  | 9 |
| TOTAL ASSETS | $9035 | $3423 |
| **LIABILITIES AND STOCKHOLDERS**' **DEFICIT** |  |  |
| Liabilities: |  |  |
| Current liabilities: |  |  |
| Accounts payable | $257 | $109 |
| Accrued liabilities | 396 | 581 |
| Bridge Loan |  | 500 |
| Unsecured Convertible Notes, net of discounts | 67 | 65 |
| Operating lease liabilities | 422 | 398 |
| Current liabilities, discontinued operations |  | 1190 |
| Total current liabilities | 1142 | 2843 |
| Warrant liabilities, at fair value | 30432 |  |
| Operating lease liabilities-non-current | 287 | 709 |
| Total liabilities | 31861 | 3552 |
| Commitments and contingencies (Note 6) |  |  |
| Mezzanine (temporary) equity: |  |  |
| Preferred stock, $0.01 par value; 5,000 shares authorized; |  |  |
| Series F Preferred Stock; 1,347 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively | 350 |  |
| Stockholders' deficit: |  |  |
| Preferred stock, $0.01 par value; 5,000 shares authorized; |  |  |
| Series B Preferred Stock; 1 and 1 shares issued and outstanding at December 31, 2025 and 2024, respectively | 6 | 6 |
| 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 |
| Additional paid-in capital\* | 186981 | 183312 |
| Accumulated deficit | (210415) | (183457) |
| Total stockholders' deficit | (23176) | (129) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $9035 | $3423 |

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

The accompanying 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)**

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024**<br> **(As Revised)** |
| Operating expenses |  |  |
| General and administrative | $7585 | $7379 |
| Impairment of long-lived assets | 854 |  |
| Total operating expenses | 8439 | 7379 |
| Operating loss | (8439) | (7379) |
| Non-cash (loss) gain on changes in fair value of warrant liability | (24486) | 114 |
| Accretion of interest and amortization of discounts on convertible notes | (277) | (904) |
| Other expense, net | (20) | (581) |
| Net loss from continuing operations | $(33222) | $(8750) |
| Net income from discontinued operations, net of taxes | 11081 | 1527 |
| Net loss | $(22141) | $(7223) |
| Less: Increase to accumulated deficit due to adjustment to common stock warrants exercise price |  | (1005) |
| Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion prices |  | (380) |
| Net loss attributable to common stockholders | $(22141) | $(8608) |
| Weighted average shares outstanding: |  |  |
| Basic (and diluted for net loss)\* | 5820 | 679 |
| Diluted (loss) earnings per share attributable to common stockholders |  |  |
| Basic and diluted net loss per share |  |  |
| Basic loss per share from continuing operations\* | $(5.70) | $(14.93) |
| Basic earnings per share from discontinued operations\* | 1.90 | 2.25 |
| Basic (loss) earnings per share attributable to common stockholders\* | $(3.80) | $(12.68) |

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

The accompanying 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)**

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  |  |  |  | **Total** |
|  | **Redeemable** | **Redeemable** |  |  |  |  | **Additional** |  | **Stockholders'** |
|  | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | **Paid-In** | **Accumulated** | **Equity** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares\*** | **Amount\*** | **Capital\*** | **Deficit** | **(Deficit)** |
| **Balance at December 31, 2023** | 7 | $1950 | 7 | $1950 | 64 | $1 | $176212 | $(174849) | $3314 |
| Net loss |  |  |  |  |  |  |  | (7223) | (7223) |
| Conversion of Series B Preferred Stock to common stock | (5) | (268) | (5) | (268) | 125 | 1 | 267 |  |  |
| Conversion of Series C Preferred Stock to common stock | (1) | (1676) | (1) | (1676) | 41 |  | 1676 |  |  |
| Adjustment of Series C Preferred Stock conversion price |  |  |  |  |  |  | 380 | (380) |  |
| Modification of common stock warrants in connection with 2024 Warrant Reprice Transaction |  |  |  |  |  |  | 69 |  | 69 |
| Issuance of common stock in connection with 2024 Warrant Reprice Transaction, net of offering costs |  |  |  |  | 18 |  | 130 |  | 130 |
| Reclassification of December 2023 Warrants from liability |  |  |  |  |  |  | 212 |  | 212 |
| Reclassification of March 2024 Warrant from liability |  |  |  |  |  |  | 100 |  | 100 |
| Reclassification of embedded derivative liability |  |  |  |  |  |  | 242 |  | 242 |
| Shares issued for 35:1 reverse stock split due to rounding feature |  |  |  |  | 21 |  |  |  |  |
| Issuance of common stock and pre-funded warrants in the 2024 Public Offering, net of issuance cost |  |  |  |  | 299 | 3 | 2855 |  | 2858 |
| Exercise of pre-funded warrants |  |  |  |  | 409 | 5 | 16 |  | 21 |
| Adjustment to common stock warrant exercise price |  |  |  |  |  |  | 1005 | (1005) |  |
| Stock-based compensation expense related to employee and director stock awards |  |  |  |  |  |  | 148 |  | 148 |
| **Balance at December 31, 2024** |  | $— | 1 | $6 | 977 | $10 | $183312 | $(183457) | $(129) |
| Net loss |  |  |  |  |  |  |  | (22141) | (22141) |
| Issuance of Series D Preferred Stock, net of offering costs |  |  | 481 | 3786 |  |  |  |  | 3786 |
| Conversion of Series D Preferred Stock to common stock |  |  | (481) | (3786) | 15400 | 154 | 3632 |  |  |
| Issuance of Series E Preferred Stock, net of offering costs |  |  | 269 | 2049 |  |  |  |  | 2049 |
| Conversion of Series E Preferred Stock to common stock |  |  | (269) | (2049) | 8600 | 86 | 1963 |  |  |
| Issuance of Series F Preferred Stock and Cancellation of Warrants in conjunction with Series F Agreements | 1987 | 525 |  |  |  |  | (1484) |  | (1484) |
| Deemed Capital Contribution pursuant to Series F Agreements |  |  |  |  |  |  | 434 |  | 434 |
| Redemption of Series F Preferred Stock | (640) | (175) |  |  |  |  |  |  |  |
| Conversion of Unsecured Convertible Notes to common stock |  |  |  |  | 14 |  | 246 |  | 246 |
| Exercise of warrants |  |  |  |  | 224 | 2 | 850 |  | 852 |
| Repurchase of Warrants |  |  |  |  |  |  | (2001) |  | (2001) |
| 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) |  |  |  |  |  |  |  | (4817) | (4817) |
| **Balance at December 31, 2025** | 1347 | $350 | 1 | $6 | 25216 | $252 | $186981 | $(210415) | $(23176) |

---

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

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

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**NOVABAY PHARMACEUTICALS, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(in thousands)**

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024**<br> **(As Revised)** |
| **Operating activities:** |  |  |
| Net loss | $(22141) | $(7223) |
| Net income from discontinued operations, net of taxes | (11081) | (1527) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Stock-based compensation expense related to employee and director stock awards | 29 | 148 |
| Non-cash loss on extinguishment of Secured Convertible Note |  | 13 |
| Non-cash expense incurred to obtain consent of Secured Convertible Note holders |  | 368 |
| Non-cash loss (gain) on changes in fair value of warrant liability | 24486 | (114) |
| Non-cash loss on changes in fair value of embedded derivative liability |  | 18 |
| Non-cash loss on modifications of warrants |  | 69 |
| Non-cash right-of-use amortization | 140 | 341 |
| Non- cash impairment of long-lived assets | 854 |  |
| Amortization of debt discounts on convertible notes | 248 | 873 |
| Changes in operating assets and liabilities: |  |  |
| Prepaid expenses and other current assets | (445) | (65) |
| Other assets | (85) | 28 |
| Accounts payable and accrued liabilities | (37) | (57) |
| Operating lease liabilities | (398) | (369) |
| **Net cash used in operating activities, continuing operations** | (8430) | (7497) |
| **Financing activities:** |  |  |
| Net proceeds from issuance of Series D Preferred Stock | 3786 |  |
| Net proceeds from issuance of Series E Preferred Stock | 2049 |  |
| Cash payment pursuant to warrant exchange | (525) |  |
| Proceeds from Warrants Exercise | 852 | 247 |
| Proceeds from issuance of October 2025 pre-funded warrants | 5946 |  |
| Proceeds from issuance of common stock and pre-funded warrants the 2024 Public Offering, net of issuance costs |  | 2858 |
| Proceeds from Bridge Loan |  | 500 |
| Payment on Bridge Loan | (500) |  |
| Payments on Secured Convertible Notes |  | (1991) |
| Payments on warrants purchase | (2001) |  |
| Payment on redemption of Series F Preferred Stock | (175) |  |
| Dividend paid | (4817) |  |
| Cash debt issuance cost |  | (115) |
| **Net cash provided by financing activities, continuing operations** | 4615 | 1499 |
| **Net decrease in cash, cash equivalents, and restricted cash, continuing operations** | (3815) | (5998) |
| **Net increase in cash and cash equivalents, discontinued operations** | 11133 | 3299 |
| **Net decrease in cash, cash equivalents and restricted cash, consolidated** | 7318 | (2699) |
| Cash, cash equivalents and restricted cash, beginning of year | 907 | 3606 |
| **Cash, cash equivalents and restricted cash of continuing operations, end of year** | $8225 | $907 |

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024** |
| **Supplemental disclosure of cash flow information:** |  |  |
| Interest paid in continuing operations | $8 | $130 |

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,** | **For the years ended** <br> **December 31,** |
|  | **2025** | **2024** |
| **Supplemental disclosure of non-cash information:** |  |  |
| Conversions of preferred stock to common stock | $5835 | $1944 |
| Cancellation of Common Stock Warrants pursuant to Series F Agreements | 1484 |  |
| Deemed Capital Contribution pursuant to Series F Agreements | 434 |  |
| Conversion of Unsecured Convertible Notes to common stock | 246 |  |
| Down round feature adjustments related to common stock warrants |  | 1005 |
| 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 |

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

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**NOVABAY PHARMACEUTICALS, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2025**

**NOTE 1. ORGANIZATION**

NovaBay Pharmaceuticals, Inc. (the "***Company***" or "***our***," "***we***," or "***us***") was previously focused on the development and sale of eyecare, wound care, and skin care products.

● The Avenova Asset Divestiture closed on January 17, 2025 in which we sold our primary eyecare business (see Note 13, "Avenova Asset Divestiture and Bridge Loan");

● The PhaseOne Divestiture closed on January 8, 2025 in which we sold our PhaseOne trademark (see Note 14, "PhaseOne Divestiture"); and

● The DERMAdoctor Divestiture closed on March 12, 2024 in which we sold our primary skin care business (see Note 15, "DERMAdoctor Divestiture").

During 2025, the Company completed a comprehensive realignment of its business and adopted a capital allocation approach focused on acquiring and holding digital assets that enable participation in decentralized financial networks, subject to applicable risk, liquidity, governance, and regulatory considerations. As part of this strategy, the Company intends to accumulate and hold digital assets for participation in blockchain-based networks, which may involve staking, governance participation, or other protocol-level activities. Such activities, when undertaken, may generate protocol-defined incentives or rewards in accordance with network rules.

The Company is incorporated under the laws of the State of Delaware. The Company has one operating and reportable segment encompassing its consolidated operations as of December 31, 2025.

Subsequent to December 31, 2025, on February 20, 2026, we effected 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.

***Discontinued Operations***

Historical financial results related to each of the businesses and assets divested above are now presented as discontinued operations in our Consolidated Financial Statements (see Note 13, "Avenova Asset Divestiture and Bridge Loan"; Note 14, "PhaseOne Divestiture"; Note 15, "DERMAdoctor Divestiture" and Note 16, "Summary of Discontinued Operations").

***Liquidity***

Based on funds available as of December 31, 2025, aggregate gross cash proceeds of approximately $25.0 million from the January 2026 Private Placement, net cash generated from the conversion of all of the stablecoins received in the January 2026 Private Placement into U.S. dollars, and $13.5 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. 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 Financial 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 Financial 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 the year ended December 31, 2024. 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.

***Assets Held for 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 prior periods have been reclassified in these Consolidated Financial Statements to conform to current period classifications.

***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 Financial Statements and accompanying notes. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, assumptions for valuing warrants, assumptions for valuing derivative liabilities, long-lived asset impairments, 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 encompassing its consolidated operations 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 or loss is the net loss from continuing operations, as reported in the consolidated statements of operations. The measurement of segment assets is total consolidated assets, as reported on the consolidated balance sheet. The CODM allocates resources and assesses performance on a consolidated basis and is not regularly provided with disaggregated actual expense information beyond that included in the consolidated financial statements.

***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, 2025 and 2024, the Company's cash and cash equivalents were held in major financial institutions in the United States.

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The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the Consolidated Balance Sheets (in thousands):

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| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2024** |
| Cash and cash equivalents | $7958 | $430 |
| Restricted cash included in other assets | 267 | 477 |
| Total cash, cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows | $8225 | $907 |

---

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 major financial institutions in the United States.

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 payable, accrued liabilities and warrant liabilities. The Company's cash and cash equivalents, restricted cash, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The Company follows Accounting Standards Codification ("***ASC***") 820, *Fair Value Measurements and Disclosures*, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities;

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and

Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

See additional information in Note 3, "Fair Value Measurements."

***Digital Assets***

The Company 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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***Impairment of Long-Lived Assets***

The Company's 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. The Company recorded $854 thousand and $0 thousand in long-lived assets impairment losses for the years ended December 31, 2025 and 2024, respectively. This included $39 thousand for fixed assets including leasehold improvements and $815 thousand for operating lease right-of-use assets for the year ended December 31, 2025. There was no impairment of long-lived assets for the year ended December 31, 2024.

***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.

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 period incurred.

The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized in the Consolidated Balance 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 Statements of Operations. Warrants that contain nominal exercise prices are economically similar to common stock, and do not require assumptions related to volatility, expected term, or other option-pricing inputs 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 other warrants are determined using the Black-Scholes option pricing model and subject to a significant degree of management's judgment. See Note 3, "Fair Value Measurements," subheading "Black Scholes Valuation Models and Assumptions" and Note 9, "Common Stock Warrants and Warrant Liabilities," subheading "Summary of Common Stock Warrant Liabilities."

***Preferred Stock***

Preferred stock that is redeemable at the option of the holder or upon events not solely within the control of the Company is classified as mezzanine (temporary) equity in accordance with ASC 480-10-S99-3A. Such instruments are initially recorded at fair value, net of issuance costs, and are not accreted to redemption value unless redemption becomes probable.

Terms 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."

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***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 Statements of 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 11, "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 Statements of Operations.

Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods if their effect would be anti-dilutive.

The following table provides a reconciliation of the numerator used for basic and diluted (loss) earnings per share (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,**  | **For the years ended** <br> **December 31,**  |
|  | **2025** | **2024** |
| **Numerator for basic and diluted income (loss) per share:** |  |  |
| Net loss from continuing operations | $(33222) | $(8750) |
| Less: Increase to accumulated deficit due to adjustment to common stock warrants exercise price |  | 1005 |
| Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion price |  | 380 |
| Net loss from continuing operations attributable to common stockholders | $(33222) | $(10135) |
| Net income from discontinued operations, net of taxes | 11081 | 1527 |
| Net loss | $(22141) | $(8608) |

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The following outstanding Unsecured Convertible Notes, Preferred Stock, stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive:

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| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2025\*** | **2024\*** |
| Shares issuable upon conversion of Unsecured Convertible Notes | 7143 | 21429 |
| Common stock equivalent of Series B Non-Voting Convertible Preferred Stock (the "***Series B Preferred Stock***") | 3013 | 3013 |
| Stock options and RSUs | 18201 | 1372 |
| Stock warrants | 1098248 | 2167279 |
|  | 1126605 | 2193093 |

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\* 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:

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 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***

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.

***Recent Accounting Pronouncements***

In December 2025, the FASB issued Accounting Standards Update ("***ASU***") No. 2025-11, *Narrow-Scope Improvements* ("***ASU 2025-11***"). ASU 2025-11 is effective for annual reporting periods beginning after December 15, 2027. Early adoption is permitted. While the adoption of ASU 2025-11 is not expected to have an effect on our Consolidated Financial Statements, it is expected to result in incremental disclosures within the notes to our Consolidated Financial 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 is intended to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the statements of operations. ASU 2024-03 does not change the requirements for the presentation of expenses on the face of the statements of operations. Under ASU 2024-03, entities are required to disaggregate, in tabular format, expenses presented on the face of the statements of operations if they include any of the following expense categories: 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 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. While the adoption of ASU 2024-03 is not expected to have an effect on our Consolidated Financial Statements, it is expected to result in incremental disclosures within the notes to our Consolidated Financial Statements. The Company is currently evaluating ASU 2024-03.

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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 present the Company's financial instruments measured at fair value on a recurring basis as of December 31, 2025 and 2024 (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **Fair Value Measurements Using** | **Fair Value Measurements Using** | **Fair Value Measurements Using** |
|  |  | **Quoted** |  |  |
|  |  | **Prices in**  |  |  |
|  |  | **Active** |  |  |
|  |  | **Markets** | **Significant** |  |
|  |  | **for** | **Other** | **Significant** |
|  | **As of**  | **Identical**  | **Observable**  | **Unobservable** |
|  | **December**  | **Items**  | **Inputs**  | **Inputs** |
|  | **31, 2025** | **(Level 1)** | **(Level 2)** | **(Level 3)** |
| **Assets** |  |  |  |  |
| Restricted cash held as a certificate of deposit | $267 | $267 | $— | $— |
| **Liabilities** |  |  |  |  |
| Warrant liability | $30432 | $— | $30432 | $— |

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| | | | | |
|:---|:---|:---|:---|:---|
|  |  | **Fair Value Measurements Using** | **Fair Value Measurements Using** | **Fair Value Measurements Using** |
|  |  | **Quoted** |  |  |
|  |  | **Prices in**  |  |  |
|  |  | **Active** |  |  |
|  |  | **Markets** | **Significant** |  |
|  |  | **for** | **Other** | **Significant** |
|  | **As of**  | **Identical**  | **Observable**  | **Unobservable** |
|  | **December**  | **Items**  | **Inputs**  | **Inputs** |
|  | **31, 2024** | **(Level 1)** | **(Level 2)** | **(Level 3)** |
| **Assets** |  |  |  |  |
| Restricted cash held as a certificate of deposit | $477 | $477 | $— | $— |

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

The warrant liability is measured at fair value based on the intrinsic value of the warrants, which is determined using the quoted market price of the Company's common stock at the measurement date. Because the warrants themselves are not actively traded and the valuation relies on observable market inputs other than quoted prices for identical instruments, the liability is classified within Level 2 of the fair value hierarchy.

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***Black Scholes Valuation Models and Assumptions***

The Company utilizes a Black Scholes model for various valuations as outlined throughout this report. The following tables summarize the assumptions utilized for valuations impacting results for the periods reported.

***Warrant Liabilities***

Certain of the Company's warrants were 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.

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.

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| | |
|:---|:---|
|  | **December**<br> **2023**<br> **Warrants** |
| **Measurement event** | Stockholder Approval |
| **Date** | May 28, 2024 |
| **Total Value (in millions)** | $0.2 |
| **Gain (Loss) (in thousands)** | $(51) |
| **Assumptions:** |  |
| Exercise price | $43.75 |
| Market price | $24.70 |
| Volatility | 83.9% |
| Risk-free rate | 4.56% |
| Dividend yield | 0.0% |
| Term (years) | 5.1 |

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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 (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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***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.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **September 2022, November 2022,**<br> **and May 2023 Warrants** | **September 2022, November 2022,**<br> **and May 2023 Warrants** | **September 2022, November 2022,**<br> **and May 2023 Warrants** | **September 2022, November 2022,**<br> **and May 2023 Warrants** | **September 2022, November 2022,**<br> **and May 2023 Warrants** | **September 2022, November 2022,**<br> **and May 2023 Warrants** |
| **Measurement event** | Prior to amendment | Prior to amendment | Prior to amendment | After amendment | After amendment | After amendment |
| **Date** | June 14, 2024 | June 14, 2024 | June 14, 2024 | June 14, 2024 | June 14, 2024 | June 14, 2024 |
| **Total Value (in thousands)** | $66 | $66 | $66 | $100 | $100 | $100 |
| **Loss (in thousands)** | not applicable | not applicable | not applicable | $70 | $70 | $70 |
| **Assumptions:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Exercise price | $43.75 |  | 262.50 | $12.50 | 12.50 | 12.50 |
| &nbsp;&nbsp;&nbsp; Market price | $12.55 | 12.55 | 12.55 | $12.55 | 12.55 | 12.55 |
| &nbsp;&nbsp;&nbsp; Volatility | 89.3 | 89.3 | 89.3% | 89.3 | 89.3 | 89.3% |
| &nbsp;&nbsp;&nbsp; Risk-free rate | 4.27 | - | 5.08% | 4.27 | - | 5.08% |
| &nbsp;&nbsp;&nbsp; Dividend yield | 0.0 | 0.0 | 0.0% | 0.0 | 0.0 | 0.0% |
| &nbsp;&nbsp;&nbsp; Term (years) | 1.0 | - | 4.4 | 1.0 | - | 4.4% |

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***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 7, "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.

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| | | |
|:---|:---|:---|
|  | **Series F-1** | **Series F-1** |
| **Measurement event** | Prior to adjustment | After adjustment |
| **Date** | September 27, 2024 | September 27, 2024 |
| **Total value (in millions)** | $1.7 | $1.9 |
| **Deemed dividend (in millions)** | not applicable | $0.2 |
| **Assumptions:** |  |  |
| Exercise price | $5.50 | $3.30 |
| Market price | $3.55 | $3.55 |
| 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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| | | |
|:---|:---|:---|
|  | **Series F-2** | **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 |

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| | | |
|:---|:---|:---|
|  | **Series F-3** | **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 |

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***Preferred Stock Conversion Price Adjustments***

Terms of the Company's outstanding Series C Preferred Stock historically included a ratchet whereby the applicable conversion price could be adjusted (see Note 10, "Stockholders' Deficit"). The applicable ratchet provisions of the Company's outstanding Preferred Stock terminated during the year ended December 31, 2024. Prior to its termination, when a conversion price for outstanding Preferred Stock 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 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). Fair value was determined using a Black Scholes model as outlined below.

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| | | |
|:---|:---|:---|
|  | **Series C Preferred Stock** | **Series C Preferred Stock** |
| **Measurement event** | Prior to ratchet | After ratchet |
| **Date** | March 24, 2024 | March 24, 2024 |
| **Total value (a) (in millions)** | $0.5 | $0.9 |
| **Deemed dividend (in millions)** | not applicable | $0.4 |
| **Assumptions:** |  |  |
| Exercise price | $43.75 | $24.50 |
| Market price | $23.85 | $23.85 |
| 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 |

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

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***Derivative liability Issued in Conjunction with Unsecured Convertible Notes***

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 8, "Convertible Notes" for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

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| | | |
|:---|:---|:---|
|  | **Unsecured**<br> **Convertible**<br> **Notes** <br> **derivative** | **Unsecured**<br> **Convertible**<br> **Notes** <br> **derivative** |
| **Measurement event** | Issuance | Shareholder Approval |
| **Date** | March 25, 2024 | May 28, 2024 |
| **Total value (in millions)** | $0.2 | $0.2 |
| **Gain (Loss) (in thousands)** | not applicable | $(82) |
| **Assumptions:** |  |  |
| Exercise price | $24.50 | $24.50 |
| Market price | $22.55 | $24.70 |
| Volatility | 86.9% | 83.9% |
| Risk-free rate | 4.54% | 4.94% |
| Dividend yield | 0.0% | 0.0% |
| Term (years) | 2.0 | 1.8 |

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**NOTE 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS**

Prepaid expenses and other current assets consisted of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2024** |
| Prepaid insurance | $299 | $48 |
| Deferred financing costs | 241 |  |
| Other | 177 | 224 |
| Total prepaid expenses and other current assets | $717 | $272 |

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**NOTE 5. ACCRUED LIABILITIES**

Accrued liabilities consisted of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2024** |
| Taxes | $247 | $— |
| Interest on Unsecured Convertible Notes | 58 | 37 |
| Employee payroll and benefits | 33 | 360 |
| Other | 58 | 184 |
| Total accrued liabilities | $396 | $581 |

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**NOTE 6. COMMITMENTS AND CONTINGENCIES**

***Indemnification Agreements***

As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving at the Company's request in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and may enable it to recover a portion of any future payments. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, it has not recorded any liabilities for these agreements as of December 31, 2025 or December 31, 2024.

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In the normal course of business, the Company provides indemnification of varying scope under its agreements with other entities, typically its suppliers and others, including in connection with capital raises transactions. Additionally, the Company provided for certain indemnification in conjunction with the Avenova Asset Divestiture (see Note 13, "Avenova Asset Divestiture and Bridge Loan"). Pursuant to these agreements, it generally indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified parties in connection with the use or testing of its products or product candidates or with any U.S. patent or any copyright or other intellectual property infringement claims by any third party with respect to its products. The term of these indemnification agreements is generally perpetual. The potential future payments the Company could be required to make under these indemnification agreements are unlimited. Historically, costs related to these indemnification provisions have been immaterial. The Company also maintains various liability insurance policies that limit its exposure. As a result, it believes the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2025 or December 31, 2024.

***Legal Matters***

From time to time, the Company is subject to various legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. The ultimate outcome of any litigation or other legal dispute is uncertain. When a loss related to a legal proceeding or claim is probable and reasonably estimable, the Company accrues its best estimate for the ultimate resolution of the matter. If one or more legal matters are resolved against the Company in a reporting period for an amount above expectations, the Company's financial condition and operating results for that period may be adversely affected. As of December 31, 2025 and December 31, 2024, there were no legal 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. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention and other factors. The Company cannot provide assurance that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against it in the future, and these matters could relate to prior, current, or future transactions or events.

***Leases***

The Company leases office space for its corporate headquarters located in Emeryville, California. The current lease term expires on July 31, 2027. The Company recorded $815 thousand in impairment losses for the year ended December 31, 2025 related to operating lease right-of-use assets with no impairment loss for the year ended December 31, 2024

Lease costs for the years ended December 31, 2025 and 2024 were as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended<br> December 31,** | **For the years ended<br> December 31,** |
|  | **2025** | **2024** |
| Operating lease – expense | $207 | $400 |
| Operating lease – included in operating cash flow | 389 | 426 |

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The Company has measured its operating lease liabilities as the present value of minimum lease payments using its incremental borrowing rate over the remaining term for each operating lease. The weighted average remaining lease term and the weighted average discount rate for operating leases from continuing operations are summarized as follows:

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| | | |
|:---|:---|:---|
|  | **For the years ended<br> December 31,** | **For the years ended<br> December 31,** |
|  | **2025** | **2024** |
| Weighted-average remaining lease term (in years) | 1.6 | 2.6 |
| Weighted-average discount rate | 5% | 5% |

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Future lease payments under non-cancelable leases as of December 31, 2025 were as follows (in thousands):

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| | |
|:---|:---|
| 2026 | 444 |
| 2027 | 290 |
| Total future minimum lease payments | 734 |
| Less: Imputed interest | (25) |
| Total | $709 |
| **Reported as:** |  |
| Operating lease liability | $422 |
| Operating lease liability- non-current | 287 |
| Total | $709 |

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**NOTE 7. FINANCING ACTIVITIES**

***October 2025 Pre-Funded Warrants***

On October 16, 2025, the Company issued and sold pre-funded warrants (the "October 2025 Pre-Funded Warrants") to purchase an aggregate of 1,081,082 shares of Common Stock, to R01 and Framework in two transactions for aggregate net proceeds of approximately $5.9 million The purchase price was $5.50 per October 2025 Pre-Funded Warrant, representing 110% of the closing price of the Common Stock on the day before the issuance, less the $0.05 exercise price for each such October 2025 Pre-Funded Warrant. The October 2025 Pre-Funded Warrants are exercisable for shares of Common Stock at any time after January 1, 2026, subject to receipt of stockholder approval, which occurred on March 12, 2026.

***2025 Preferred Stock Purchase Agreement***

On August 19, 2025, the Company entered into a securities purchase agreement (the "***2025 Preferred Stock Purchase Agreement***") 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) after the Conversion Approval (as described below), 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.

The purchase of the 481,250 shares of Series D Preferred Stock was completed on August 19, 2025 at a price of $8.00 per share for aggregate gross proceeds of $3.9 million and net proceeds to the Company of $3.8 million after deducting $64 thousand of issuance costs (the "***Initial Series D Preferred Purchase***").

Since the Common Stock is currently listed on the NYSE American, and among these requirements are Section 713(a) and (b) of the NYSE American 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 the future conversion of the Series D Preferred Stock and the Series E Preferred Stock (the "***Conversion Approval***") which the Company received in October 2025.

In October 2025, after 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, after the Conversion Approval, pursuant to the 2025 Preferred Stock Purchase Agreement, the Company filed the certificate of designations relating to the Series E Preferred Stock and issued 268,750 shares to the Purchasers for gross proceeds of approximately $2.2 million (the "Series E Preferred Closing"). Each share of Series E Preferred Stock was eligible to convert at the option of the holder or, otherwise, automatically convert 30 business days after the Stockholder Approval, into 32 shares of Common Stock, for an aggregate of 8.6 million shares of Common Stock. 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.

***2025 Warrant Exchange and Issuance of Series F Preferred Stock***

On August 19, 2025, simultaneous with the signing of the 2025 Preferred Stock Purchase Agreement, the Company entered into warrant exchange agreements (the "***Series F Agreements***") with each of Anson Investments Master Fund LP, Hudson Bay Capital Management LP and Armistice Capital, LLC (collectively, the "***Series F Holders***"). The Series F Agreements provide for the irrevocable surrender and cancellation of all warrants beneficially owned by the Series F Holders, in exchange for the Company issuing (i) an aggregate of 1,986,568 shares of Series F Preferred Stock and (ii) an aggregate cash payment of $525 thousand to the Series F Holders. Series F-1 through F-3 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 Series F Holders if, after the effective date of the Series F Agreements, another holder of the Company's Common Stock purchase warrants receives a higher amount per underlying warrant; except that this provision shall not apply to (i) settlements with retail investor warrant holders that (1) individually is less than or equal to six and thirty hundredths percent (6.30%) of a Series F Holder's total warrants outstanding or (2) in the aggregate is less than or equal to twelve and seventy hundredths percent (12.70%) of a Series F Holder's total warrants outstanding or (ii) prior warrant settlements by the Company.

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Because the book value of the Common Stock Warrants cancelled in conjunction with the Series F Agreements exceeded the total cash payment made and carry value of the Series F Preferred Stock issued, the Company recorded a deemed capital contribution of $434 thousand upon entering the Series F Agreements.

***2024 Public Offering***

On July 26, 2024, the Company entered into an underwriting agreement with Ladenburg Thalmann & Co., Inc., as the sole underwriter (the "***Underwriter***"), relating to the issuance and sale in a public offering of: (i) 231,713 shares of common stock and 408,362 July 2024 Pre-Funded Warrants, in lieu of shares of common stock, (ii) 640,076 Series F-1 Warrants to purchase up to 640,076 shares of common stock, (iii) 640,076 Series F-2 Warrants to purchase up to 640,076 shares of common stock and (iv) 640,076 Series F-3 Warrants to purchase up to 640,076 shares of common stock.

The Series F-1 Warrants had an exercise price of $5.50 per share at issuance, were exercisable immediately upon issuance, and will expire on the five-year anniversary of the date of issuance. The Series F-2 Warrants had an exercise price of $5.50 per share at issuance, were exercisable immediately upon issuance, and expired on the six-month anniversary of the date of issuance. The Series F-3 Warrants had an exercise price of $5.50 per share at issuance, were exercisable immediately upon issuance, and will expire on the one-year anniversary of the date of issuance. The July 2024 Pre-Funded Warrants were immediately exercisable at a nominal exercise price of $0.05 per share and could be exercised at any time until the July 2024 Pre-Funded Warrants were exercised in full. As of September 30, 2024, all of the July 2024 Pre-Funded Warrants had been exercised, resulting in the Company issuing 408,362 shares of common stock. In connection with such exercises, the Company received net proceeds of approximately $20 thousand.

The July 2024 Warrants include a down round feature adjustment where the exercise price was automatically reset to a price equal to the lesser of (i) the then exercise price and (ii) 90% of the volume weighted average prices for the five (5) trading days immediately preceding the date that is sixty calendar days after issuance of the July 2024 Warrants as applicable. Such down round feature adjustment was triggered on September 27, 2024, resulting in a reduced exercise price of $3.30 per share. As a result of the reduced exercise price, a deemed dividend of $1.0 million was recognized in accordance with a Black Scholes valuation model.

The exercise price and number of shares of common stock issuable upon exercise of the July 2024 Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common stock and the exercise price. Subject to limited exceptions, a holder may not exercise any portion of its July 2024 Warrants to the extent that the holder would beneficially own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the Company's outstanding common stock after exercise.

In addition, the Company granted the Underwriter a 45-day option to purchase up to 95,454 additional shares of common stock and/or 95,454 Series F-1 Warrants to purchase up to 95,454 shares of common stock, 95,454 Series F-2 Warrants to purchase up to 95,454 shares of common stock and 95,454 Series F-3 Warrants to purchase up to 95,454 shares of common stock, or any combination thereof, as determined by the Underwriter, at the public offering price, less underwriting discounts and commissions, in each case solely to cover over-allotments, if any.

The Underwriter partially exercised this option on July 26, 2024, for (i) 67,366 shares of common stock, (ii) 67,366 Series F-1 Warrants to purchase up to 67,366 shares of common stock, (iii) 67,366 Series F-2 Warrants to purchase up to 67,366 shares of common stock and (iv) 67,366 Series F-3 Warrants to purchase up to 67,366 shares of common stock.

The 2024 Public Offering closed on July 29, 2024, and the Company received gross proceeds of $3.9 million. Net proceeds of $2.9 million were recorded as equity after taking into account underwriting discounts and commissions. A portion of the proceeds were used towards repaying the Secured Convertible Notes, which were repaid in full during the third quarter of 2024.

***2024 Warrant Reprice Transaction***

In June 2024, the Company entered into a warrant reprice transaction (the "***2024 Warrant Reprice Transaction***") with certain existing holders of (i) warrants issued in September 2022 to purchase common stock, (ii) Series A-1 warrants issued in November 2022 to purchase common stock, (iii) Series B-1 Warrants issued in May 2023 to purchase common stock, and (iv) Series B-2 Warrants issued in May 2023 to purchase common stock (collectively (i) through (iv), the "***Participant Warrants***"). The participants agreed to exercise a portion of their Participant Warrants at a reduced exercise price of $12.50 per share. Participant Warrants were exercised for an aggregate of 18,076 shares of common stock, resulting in gross proceeds of approximately $0.2 million.

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The Company also issued participants in the 2024 Warrant Reprice Transaction a new June 2024 Warrant to purchase a number of shares of common stock equal to 100% of the shares of common stock exercised. The June 2024 Warrants are substantially similar to the Participant Warrants, except that the June 2024 Warrants will (i) be initially exercisable on the six-month anniversary of the date of issuance; (ii) have an exercise price of $12.85 per share; and (iii) have a term of five (5) years and six (6) months from the date of the closing of the 2024 Warrant Reprice Transaction.

The Company incurred total issuance costs of $96 thousand in conjunction with the 2024 Warrant Reprice Transaction. The Company incurred a $69 thousand non-cash loss on the modification of common stock warrants which was recorded in "Other expense, net" during the year ended December 31, 2024.

**NOTE 8. CONVERTIBLE NOTES**

***Unsecured Convertible Notes***

On March 24, 2024, in connection with completing certain required conditions to close the DERMAdoctor Divestiture (see Note 15, "DERMAdoctor Divestiture"), the Company and the holders of the Secured Convertible Notes (as defined below) entered into a First Amendment (the "***First Amendment***") to the Company's Security Agreement, dated April 27, 2023 (the "***Security Agreement***"), to remove all of the DERMAdoctor membership units and any assets of DERMAdoctor as collateral for the Company's obligations pursuant to the Secured Convertible Notes and for DERMAdoctor to be removed as a party to the Security Agreement, and a Consent and Release (the "***Subsidiary Guarantee Consent***"), to terminate the Subsidiary Guarantee, dated April 7, 2023 (the "***Subsidiary Guarantee***") (collectively, the "***2024 Subsidiary Guarantee Termination***").

The Company issued $525 thousand aggregate principal amount of unsecured convertible notes (the "***Unsecured Convertible Notes***") in conjunction with the 2024 Subsidiary Guarantee Termination. The Unsecured Convertible Notes were due March 25, 2026 and bear no stated interest. The Unsecured Convertible Notes may be converted at a conversion price equal to $24.50 per share at any time at the election of the holder up to the amount of outstanding principal at the time of conversion subject to certain limitations such as beneficial ownership limitations.

Upon issuance in March 2024, the lender's conversion option under the Unsecured Convertible Notes represented an embedded call option requiring bifurcation as an embedded derivative liability because the common stock underlying the option required stockholder approval before the option could be exercised. The fair value of the embedded derivative was determined to be $224 thousand upon issuance in accordance with a Black Scholes valuation model. See also Note 3, "Fair Value Measurements," subheading "Black Scholes Valuation Models and Assumptions." Upon stockholder approval on May 28, 2024, the embedded call option no longer required liability treatment and was reclassified to equity. The fair value of the embedded derivative liability was determined to be $242 thousand as of May 28, 2024. The increase of $18 thousand in fair value between issuance and May 28, 2024 was recorded in other expense, net in the Consolidated Statements of Operations. See also Note 3, "Fair Value Measurements," subheading "Black Scholes Valuation Models and Assumptions."

Upon issuance, the discount to the note recorded for the embedded derivative liability and debt issuance costs were amortized to interest expense using the effective interest rate method over the term of the Unsecured Convertible Notes, assuming that the Unsecured Convertible Notes will be redeemed for cash of $525 thousand at time of maturity as of March 25, 2026. The effective interest rate on the Unsecured Convertible Notes is 144%. Interest expense recognized, including amortization of the issuance costs and debt discount, was $275 and $62 thousand, which was included in other expense, net in the Consolidated Statements of Operations for the years ended December 31, 2025 and 2024, respectively.

In December 2025, certain holders elected to convert $350 thousand aggregate principal amount of the Unsecured Convertible Notes to 14,286 shares of common stock. The conversions were accounted for as partial extinguishments of debt at carrying value in accordance with ASC 470, resulting in the reclassification of $246 thousand to stockholders' equity during the year ended December 31, 2025, with no comparable activity during the year ended December 31, 2024. Amortization of the debt discount and issuance costs ceased for the portions of the Unsecured Convertible Notes that were converted, with interest expense recognized through the respective conversion dates. The effective interest rate and amortization methodology for the remaining outstanding balance were not modified.

As of December 31, 2025, the remaining $175 thousand aggregate principal amount of Unsecured Convertible Notes outstanding were convertible into 7,143 shares of common stock. The net carrying amount of the remaining Unsecured Convertible Notes was approximately $125 thousand, reflecting approximately $50 thousand of unamortized debt discount and issuance costs. Of this amount, approximately $67 thousand was presented as Unsecured Convertible Notes on the Consolidated Balance Sheets and approximately $58 thousand of accrued interest was included in accrued liabilities. Based on the closing price of the Company's common stock of $28.20 per share on December 31, 2025, the aggregate if-converted value of the shares issuable upon conversion of the remaining notes exceeded the principal amount by approximately $26 thousand. The estimated fair value of the remaining Unsecured Convertible Notes as of December 31, 2025 was approximately $201 thousand, based on the market price of the Company's common stock and the number of shares issuable upon conversion, and is classified as Level 2 within the fair value hierarchy. Subsequent to December 31, 2025, in January 2026, all remaining outstanding Unsecured Convertible Notes were converted into 7,143 shares of common stock.

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***Secured Convertible Notes***

In May 2023, the Company issued $3.3 million aggregate principal amount Original Issue Discount Senior Secured Convertible Debentures (the "***Secured Convertible Notes***") in conjunction with a May 2023 private placement (the "***2023 Private Placement***"). The Secured Convertible Notes were issued with a $300 thousand original issue discount.

Beginning June 1, 2023, the Company was required to start making a monthly redemption of 1/18th of the original principal amount of the Secured Convertible Notes. Each monthly redemption reduced the outstanding principle of the Secured Convertible Note by $183 thousand.

The Secured Convertible Notes also provided for a redemption equal to up to 20% of the gross proceeds received by the Company from any financing completed while the Secured Convertible Notes were outstanding. In connection with the 2024 Warrant Reprice Transaction (see Note 10, "Stockholders' Deficit"), the Company made such a payment totaling $45 thousand in cash against the Secured Convertible Notes. In connection with the 2024 Public Offering (see Note 10, "Stockholders' Deficit"), the Company repaid the remaining balance of the Secured Convertible Notes with a payment totaling $433 thousand in cash. Upon full repayment, the Company was released from any further obligations under the Secured Convertible Notes with the lenders.

The discounts and debt issuance costs were amortized to interest expense using the effective interest rate method over the term of the Secured Convertible Notes. The effective interest rate on the Secured Convertible Notes was 173%. During the year ended December 31, 2024, interest expense recognized, including amortization of the issuance costs and debt discount, was $0.8 million which was included in other expense, net in the Consolidated Statements of Operations.

**NOTE 9. COMMON STOCK WARRANTS AND WARRANT LIABILITIES** 

***Summary of Outstanding Common Stock Warrants and Related Activity (after giving retroactive effect to a 1-for-5 reverse stock split that became effective February 20, 2026)***

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| | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **July 2020 Warrants**  | **TLF**<br> **Warrants**  | **November 2021**<br> **Warrants**  | **September 2022** <br> **Warrants**  | **November 2022 A-1 Warrants**  | **December 2023**<br> **Warrants**  | **June 2024 Warrants**  | **July 2024**<br> **Pre-Funded Warrants**  | **July 2024 Series F-1 Warrants**  | **July 2024 Series F-2 Warrants**  | **July 2024 Series F-3 Warrants**  | **October**<br> **2025 Pre-Funded Warrants**  | **Other Warrants**  | **Total Warrants**  |
| Outstanding at December 31, 2023 | 784 | 3 | 4593 | 1875 | 2949 | 14452 |  |  |  |  |  |  | 17537 | 42193 |
| Warrants granted |  |  |  |  |  |  | 18077 |  | 707443 | 707443 | 707443 |  | 5715 | 2146121 |
| Pre-funded Warrants granted |  |  |  |  |  |  |  | 408363 |  |  |  |  |  | 408363 |
| Warrants exercised |  |  |  | (1021) | (2495) |  |  |  |  |  |  |  | (14561) | (18077) |
| Pre-funded Warrants exercised |  |  |  |  |  |  |  | (408363) |  |  |  |  |  | (408363) |
| Warrants expired |  |  |  |  |  |  |  |  |  |  |  |  | (2976) | (2976) |
| Outstanding at December 31, 2024 | 784 | 3 | 4593 | 854 | 454 | 14452 | 18077 |  | 707443 | 707443 | 707443 |  | 5715 | 2167261 |
| Warrants granted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Pre-funded Warrants granted |  |  |  |  |  |  |  |  |  |  |  | 1081082 |  | 1081082 |
| Warrants exercised |  |  |  |  |  |  | (11751) |  | (25700) | (80546) | (105986) |  |  | (223983) |
| Warrants expired |  |  |  |  |  |  |  |  |  | (626897) | (409988) |  |  | (1036885) |
| Warrants exchanged pursuant to Series F Agreements |  |  | (536) | (522) |  | (7253) | (1815) |  | (381818) |  |  |  | (5715) | (397659) |
| Warrants repurchased |  |  | (1225) |  |  | (1858) |  |  | (297025) |  | (191469) |  |  | (491577) |
| Outstanding at December 31, 2025 | 784 | 3 | 2832 | 332 | 454 | 5341 | 4511 |  | 2900 |  |  | 1081082 |  | 1098239 |
| Weighted Averate Exercise Price at December 31, 2025 | $4566.65 | $4114.80 | $557.65 | $1102.50 | $1102.50 | $43.75 | $12.85 |  | $3.30 |  |  | $0.05 |  | $5.82 |
| Expiration Date | January 22, 2026 | January 15, 2026 | September 11, 2028 | September 11, 2028 | November 20, 2028 | June 21, 2029 | December 17, 2029 |  | July 30, 2029 |  |  | do not expire |  |  |

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Total net proceeds from warrant exercises during the years ended December 31, 2025 and 2024 was $852 thousand and $247 thousand, respectively.

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***October 2025 Pre-Funded Warrants***

In October 2025, the Company issued and sold pre-funded warrants (the "October 2025 Pre-Funded Warrants") to purchase an aggregate of 1,081,082 shares of Common Stock, to R01 and Framework for aggregate net proceeds of approximately $5.9 million The purchase price was $5.50 per October 2025 Pre-Funded Warrant, representing 110% of the closing price of the Common Stock on the day before the issuance, less the $0.05 exercise price for each such October 2025 Pre-Funded Warrant. The October 2025 Pre-Funded Warrants are exercisable for shares of Common Stock at any time after January 1, 2026, subject to receipt of stockholder approval which occurred subsequent to December 31, 2025, on March 12, 2026.

In accordance with ASC 815, the October 2025 Pre-Funded Warrants were initially classified as a liability from the date of issuance and remained classified as liability as of the year ended December 31, 2025 as shareholder approval is required before they may be exercised. The liability was recorded on each date based on the intrinsic value of the October 2025 Pre-Funded Warrants.

***July 2024 Pre-Funded Warrants***

In July 2024, in conjunction with the 2024 Public Offering, the Company issued 408,362 July 2024 Pre-Funded Warrants (in lieu of shares of common stock (see additional discussion in Note 7, "Financing Activities"). The July 2024 Pre-Funded Warrants were classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, were immediately exercisable, did not embody an obligation for us to repurchase our shares, and permitted the holders to receive a fixed number of shares of common stock upon exercise.

***Series F Warrants***

In July 2024, in conjunction with the 2024 Public Offering, the Company issued new July 2024 Warrants.

● Series F-1 Warrants exercisable for 707,442 shares of common stock for an initial exercise price of $5.50 per share through July 30, 2029; and

● Series F-2 Warrants exercisable for 707,442 shares of common stock for an initial exercise price of $5.50 per share through January 29, 2025; and

● Series F-3 Warrants exercisable for 707,442 shares of common stock for an initial exercise price of $5.50 per share through July 29, 2025.

The July 2024 Warrants were classified as a component of permanent equity. The July 2024 Warrants down round feature adjustment was triggered on September 27, 2024, resulting in a reduced exercise price of $3.30 per share. As a result of the reduced exercise price, a deemed dividend of $1.0 million was recognized in accordance with a Black Scholes valuation model. See Note 3, "Fair Value Measurements," subheading "Black Scholes Valuation Models and Assumptions."

In March 2025, the Company entered into three (3) separate confidential settlement and release agreements (collectively, the "***Settlement Agreements***") with each of Sabby Volatility Warrant Master Fund, Ltd. ("***Sabby***"), Bigger Capital Fund, LP ("***Bigger***") and District 2 Capital Fund LP ("***District 2***," and together with Sabby and Bigger, the "***Warrant Holders***") to settle certain disputed matters relating to the July 2024 Warrants held by each of the Warrant Holders. In connection with the Settlement Agreements, Series F-3 Warrants were exercised for 105,557 shares of common stock. Additionally, in conjunction with the Settlement Agreements, Series F-1 Warrants and Series F-3 Warrants exercisable for 254,545 and 148,988 shares of common stock, respectively, were repurchased by the Company for $1.8 million. The repurchase of these warrants was recorded as a reduction of additional paid-in capital in the Company's unaudited condensed consolidated balance sheet.

The Settlement Agreements include a "most favored nations" provision for each of the Warrant Holders that would increase the amount paid to the Warrant Holders if any other holder of the Company's common stock receives a higher amount per underlying warrant, as well as a mutual release of all claims by the Company and the Warrant Holders against each other, without any admission of liability by either party.

During the year ended December 31, 2025, the Company repurchased additional Series F-1 Warrants exercisable for 42,480 shares of common stock and Series F-3 Warrants exercisable for 42,480 shares of common stock for $0.2 million.

On August 19, 2025, Series F-1 Warrants exercisable for 381,818 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 7, "Financing Activities").

***June 2024 Warrants***

In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company issued new common stock purchase warrants (the "***June 2024 Warrants***") exercisable for 18,076 shares of common stock for $12.85 per share through December 17, 2029. The June 2024 Warrants were classified as a component of permanent equity.

On August 19, 2025, June 2024 Warrants exercisable for 1,814 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 7, "Financing Activities").

***March 2024 Warrant***

In March 2024, the Company executed the First Amendment and Subsidiary Guarantee Consent as part of the 2024 Subsidiary Guarantee Termination with holders of the Secured Convertible Notes (see Note 8, "Convertible Notes") in order to satisfy a closing condition for the DERMAdoctor Divestiture (see Note 15, "DERMAdoctor Divestiture"). In exchange for the consent of each holder, the option, at the holder's election, to receive upon the closing of the DERMAdoctor Divestiture either, a new common stock warrant (the "***March 2024 Warrant***"), or a new unsecured convertible note (see Note 8, "Convertible Notes"). One holder elected the option to receive a March 2024 Warrant exercisable for 5,714 shares of common stock for $24.50 per share.

The March 2024 Warrant was initially classified as a liability from the date of issuance until Company stockholder approval on May 28, 2024, at which time it was reclassified to equity.

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On August 19, 2025, all remaining March 2024 Warrants exercisable for 5,714 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 7, "Financing Activities").

***December 2023 Warrants***

In December 2023, the Company issued new common stock purchase warrants (the "***December 2023 Warrants***") exercisable for 14,451 shares of common stock for $43.75 per share through June 21, 2029.

The December 2023 Warrants were initially classified as liabilities from the date of issuance until Company stockholder approval was received on May 28, 2024, at which time it was reclassified to equity.

On August 19, 2025, December 2023 Warrants exercisable for 7,253 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 7, "Financing Activities").

During the year ended December 31, 2025, the Company repurchased December 2023 Warrants exercisable for 1,857 shares of common stock for $3 thousand.

***May 2023 Warrants***

In May 2023, the Company issued the following new common stock purchase warrants (collectively, the "***May 2023 Warrants***"):

● May 2023 Series B-1 Warrants exercisable for 14,506 shares of common stock for an initial exercise price of $227.50 per share through June 9, 2028 ("May 2023 B-1 Warrants"); and

● May 2023 Series B-2 Warrants exercisable for 14,506 shares of common stock for an initial exercise price of $227.50 per share through June 9, 2025 ("May 2023 B-2 Warrants").

In December 2023, the Company amended certain May 2023 Warrants to reduce their exercise prices to $43.75 per share. In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain May 2023 Warrants to reduce their exercise prices to $12.50 per share.

***November 2022 Warrants***

In November 2022, the Company issued the following common stock purchase warrants (collectively, the "November 2022 Warrants"):

● November 2022 Series A-1 Warrants exercisable for 2,948 shares of common stock for an initial exercise price of $1,102.50 per share through November 20, 2028 ("November 2022 A-1 Warrants"); and

● November 2022 Series A-2 Warrants exercisable for 2,948 shares of common stock for an initial exercise price of $1,102.50 per share through May 20, 2024 ("November 2022 A-2 Warrants").

In May 2023, the Company amended certain November 2022 Warrants to reduce their exercise prices from $1,102.50 per share to $262.50. In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain November 2022 Warrants to reduce their exercise prices from $262.50 per share to $12.50 per share as follows:

***September 2022 Warrants***

In September 2022, the Company issued new common stock purchase warrants (the "September 2022 Warrants") exercisable for 1,874 shares of common stock for an initial exercise price of $1,102.50 per share through September 11, 2028.

In May 2023, the Company amended certain September 2022 Warrants exercisable for 1,364 shares of common stock to reduce their exercise prices from $1,102.50 per share to $262.50 per share. In June 2024, in conjunction with the 2024 Warrant Reprice Transaction, the Company amended certain September 2022 Warrants exercisable for 1,021 shares of common stock to reduce their exercise prices from $262.50 per share to $12.50 per share. On August 19, 2025, September 2022 Warrants exercisable for 522 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 8, "Financing Activities").

***November 2021 Warrants***

In November 2021, the Company issued new common stock purchase warrants (the "November 2021 Warrants") exercisable for 6,123 shares of common stock for an initial exercise price of $3,246.25 per share through March 9, 2023.

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In September 2022, the Company amended all November 2021 Warrants to reduce their exercise prices from $3,246.25 per share to $1,102.50 per share and extend their termination date to September 11, 2028. In May 2023, the Company amended certain November 2021 Warrants exercisable for 3,062 shares of common stock to reduce their exercise prices from $1,102.50 per share to $262.50 per share. On August 19, 2025, November 2021 Warrants exercisable for 536 shares of common stock were surrendered and cancelled in conjunction with the Series F Agreements (see Note 7, "Financing Activities"). During the year ended December 31, 2025, the Company repurchased December 2023 Warrants exercisable for 1,225 shares of common stock for $3 thousand.

***July 2020 Warrants***

In July 2020, the Company issued new common stock purchase warrants (the "July 2020 Warrants") exercisable for 1,127 shares of common stock for an initial exercise price of $10,106.25 per share through January 22, 2026.

In September 2022, the Company amended certain July 2020 Warrants exercisable for 784 shares of common stock to reduce their exercise prices from $10,106.25 to $1,102.50 per share. In May 2023, in conjunction with the 2023 Private Placement, the Company amended certain July 2020 Warrants exercisable for 441 shares of common stock to reduce their exercise prices from $1,102.50 per share to $262.50 per share.

***Summary of Common Stock Warrant Liabilities***

The following roll-forward presents the Company's warrant liabilities measured at fair value as of December 31, 2025 and 2024 (in thousands). The October 2025 Pre-Funded Warrants, which have a nominal exercise price, were recorded based on the market price of the Company's common stock less the nominal exercise price upon issuance and at December 31, 2025.

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| | |
|:---|:---|
| Warrant liabilities as of December 31, 2024 | $— |
| Fair value of October 2025 Pre-Funded Warrants upon issuance | 5946 |
| Increase in fair value of October 2025 Pre-Funded Warrants during period | 24486 |
| Warrant liabilities as of December 31, 2025 | $30432 |

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**NOTE 10. STOCKHOLDERS' DEFICIT**

***Authorized Share Capital***

Under the Company's Amended and Restated Certificate of Incorporation, as amended, the Company is authorized to issue up to 1,500,000,000 shares of common stock and up to 5,000,000 shares of preferred stock with rights and preferences as may be approved by the Company's Board. As further described in Note 19, "Subsequent Events", the Company's Amended and Restated Certificate of Incorporation was further amended to increase the number of authorized shares of common stock from 1,500,000,000 to 5,000,000,000 subsequent to December 31, 2025.

***Preferred Stock***

There were four series of preferred stock of the Company outstanding during the year ended December 31, 2025 – the Series B Non-Voting Convertible Preferred Stock ("***Series B Preferred Stock***"), Series D Preferred Stock, Series E Preferred Stock and the Series F Voting Retractable Preferred Stock ("***Series F Preferred Stock***"). The rights and preferences of each are described below.

***Series B Preferred Stock***

The Company issued 15,000 shares of Series B Preferred Stock in November 2021 in connection with a private placement transaction. For both years ending December 31, 2025 and December 31, 2024, 131 shares of Series B Preferred Stock remained outstanding. As of December 31, 2025, outstanding shares of Series B Preferred Stock were convertible at the option of the holder into 3,013 shares of common stock at a conversion price of $43.75.

The Series B Preferred Stock does not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of the Company. Each share of Series B Preferred Stock is convertible into $1,000.00 of common stock at a conversion price per share of $43.75.

***Series D Preferred Stock***

The Company issued 481,250 shares of Series D Preferred Stock on August 19, 2025 in connection with the 2025 Preferred Stock Purchase Agreement. The Series D Preferred Stock was non-voting, except for certain protective provisions, and is entitled to dividends and liquidation rights on an as-converted-to-common basis. There were no redemption or repurchase rights that required cash settlement for the Series D Preferred Stock. The Company was not obligated to redeem or repurchase any shares of the Series D Preferred Stock. In October 2025, after the Stockholder Approval, each share of Series D Preferred Stock automatically converted into 32 shares of Common Stock. As of December 31, 2025, no shares of Series D Preferred Stock remained outstanding. See also Note 7, "Financing Activities".

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***Series E Preferred Stock***

The rights and preferences of the Series E Preferred Stock are identical to those of the Series D Preferred Stock described above except that conversion is at the option of the holder. In October 2025, each share of Series E Preferred Stock was converted into 32 shares of Common Stock. As of December 31, 2025, no shares of Series E Preferred Stock remained outstanding. See also Note 7, "Financing Activities".

***Series F Preferred Stock***

The Series F Preferred Stock is not convertible into Common Stock or any other equity instrument and has no dividend rights. The Series F Preferred Stock has voting rights similar to Common Stock with each share of Series F Preferred Stock representing the voting equivalent of approximately 2.12 shares of Common Stock and a liquidation preference equivalent to common stock up to its redemption amount. The Series F Preferred Stock has a total aggregate fixed redemption value of $525 thousand in cash. The redemption terms provide that, after the earlier of (i) Conversion Approval (see Note 7, "Financing Activities") or (ii) December 31, 2025, holders may redeem the Series F Preferred Stock in exchange for $525 thousand total in cash at any time. The Company may also force redemption of outstanding shares at any time after December 31, 2025. Once redeemed, the shares are cancelled and extinguished; and they revert to authorized but unissued status.

The Series F Preferred Stock is redeemable at the option of the holder. Accordingly, until redemption election is made, the Series F Preferred Stock is classified as mezzanine equity (temporary equity) on the Company's Consolidated Balance Sheet, between liabilities and stockholders' equity, at its redemption value. The Company will not accrete the carrying value of the Series F Preferred Stock to its redemption amount since they are equivalent. In October 2025, the Company obtained the Conversion Approval and 639,935 shares of Series F Preferred Stock were redeemed for a $175 thousand cash payment. As of December 31, 2025, 1,346,633 shares of Series F Preferred Stock with a redemption value of $350 thousand remained outstanding. Subsequent to December 31, 2025, in February 2026, an additional 639,935 shares of Series F Preferred Stock were redeemed for a $175 thousand cash payment.

***Dividends***

On August 26, 2025, the Special Transaction Committee of the Board of Director and the Company's Board of Directors declared a special cash dividend of $4.00 per share for the Company's common stock (the "***Special Dividend***"). The dividend totaling $4.8 million was paid on September 29, 2025 to stockholders of record of Common Stock at the close of business on September 15, 2025.

**NOTE 11. STOCK-BASED COMPENSATION**

***Equity Compensation Plans***

In October 2007, the Company adopted the 2007 Omnibus Incentive Plan (the "***2007 Plan***") to provide for the grant of equity awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and stock appreciation rights to employees, directors and outside consultants, as determined by the Board. The 2007 Plan expired on March 15, 2017. Upon expiration, new awards cannot be issued pursuant to the 2007 Plan, but outstanding awards continue to be governed by its terms. Stock options granted under the 2007 Plan expire no later than ten years from the date of grant. All stock options outstanding under the 2007 Plan were fully vested as of December 31, 2025.

In March 2017, the Company adopted the 2017 Omnibus Incentive Plan (the "***2017 Plan***"), which was approved by stockholders on June 2, 2017, to provide for the grant of equity awards, such as nonqualified stock options ("***NQSOs***"), incentive stock options ("***ISOs***"), restricted stock, performance shares, stock appreciation rights ("**SARs**"), RSUs and other share-based awards to employees, directors, and consultants, as determined by the Board. The 2017 Plan does not affect awards previously granted under the 2007 Plan. Upon adoption, the 2017 Plan allowed for awards of up to 16,249 shares of the Company's common stock, plus an automatic annual increase in the number of shares authorized for awards on the first day of each of the Company's fiscal years beginning January 1, 2018 through January 1, 2027 equal to (i) 4% of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of common stock as determined by the Board. On November 25, 2025, the number of shares available for future awards under the 2017 Plan was increased by 239,086 shares, which included 200,000 shares the Company's stockholders approved for issuance under the Plan pursuant to a stockholder vote at the Company's 2025 stockholder meeting on October 16, 2025. As of December 31, 2025, there were 223,952 shares available for future awards under the 2017 Plan.

Under the terms of the 2017 Plan, the exercise price of NQSOs, ISOs and SARs may not be less than 100% of the fair market value of the Company's common stock on the date of grant and, if ISOs are granted to an owner of more than 10% of the Company's common stock, then not less than 110% of the fair market value of the Company's common stock on the date of grant. The term of option awards will not be longer than ten years or, in the case of ISOs, no longer than five years with respect to holders of more than 10% of the Company's common stock. Stock options granted to employees generally vest over four years, while options granted to directors and consultants typically vest over a shorter period, subject to continued service. RSUs granted to directors typically vest over 1 year. The Company issues new shares of Company common stock to satisfy exercises of options under or settlement of RSUs from the 2007 Plan and the 2017 Plan.

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***Summary of Outstanding Equity Awards***

The following table summarizes information about the Company's stock options and RSUs outstanding at December 31, 2025, and activity during the year ended December 31, 2025 (in thousands except per share and years):

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| | | | | |
|:---|:---|:---|:---|:---|
| **(in thousands, except years**<br> **and per share data)** | **Awards\*** | **Weighted-**<br> **Average** <br> **Exercise** <br> **Price\*** | **Weighted-**<br> **Average**<br> **Remaining** <br> **Contractual** <br> **Life (years)**  | **Aggregate** <br> **Intrinsic** <br> **Value** |
| Outstanding at December 31, 2024 | 1 | $2358.20 | 8.3 | $3 |
| Restricted stock units vested | (1) |  |  |  |
| Restricted stock units granted | 18 |  |  |  |
| Options forfeited/cancelled | (—) | 4749.95 |  |  |
| Outstanding at December 31, 2025 | 18 | 137.40 | 9.7 | 508 |
| Vested and expected to vest at December 31, 2025 | 18 | 137.40 | 9.7 | 508 |
| Vested and exercisable at December 31, 2025 | 1 | 12480.35 | 2.7 |  |

---

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

Aggregate intrinsic value is calculated as the difference between the closing market price of the Company's common stock as quoted on the NYSE American and the exercise price of the underlying stock options as of the applicable measurement date for option awards that have an exercise price that is lower than the market price. There were no stock option awards exercised during the years ended December 31, 2025 or 2024.

As of December 31, 2025, the total unrecognized compensation cost related to unvested stock options and RSUs was approximately $81 thousand. This amount is expected to be recognized as stock-based compensation expense in the Company's Consolidated Statements of Operations over the remaining weighted average vesting period of 0.8 years.

***Equity Awards to Employees and Directors***

The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards as of the date of grant by applying the Black-Scholes option pricing model using the single-option valuation approach. The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note 2, "Summary of Significant Accounting Policies," for a description of the accounting policies that the Company applied to value its stock-based awards.

During each of the years ended December 31, 2025 and 2024, the Company did not grant any stock options to employees and directors to purchase shares of the Company's common stock.

Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

During each of the years ended December 31, 2025 and 2024, the Company granted 18,000 and 1,030 RSUs, respectively, to directors.

For the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation expense of $29 thousand and $84 thousand, respectively, for equity awards to employees and directors.

***Stock-Based Awards to Non-Employees***

The Company did not grant options or restricted stock to non-director non-employees during the years ended December 31, 2025 and 2024.

For the year ended December 31, 2024, the Company recognized stock-based compensation expense of $13 thousand, as it relates to non-director non-employees. The Company did not recognize stock-based compensation expense as it relates to non-employees for the year ended December 31, 2025.

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***Stock-Based Compensation Expense***

Total stock-based compensation expense recognized for the years ended December 31, 2025 and 2024 was approximately $29 thousand and $148 thousand, respectively, and is included in general and administrative expense in the Company's Consolidated Statements of Operations.

Of these amounts, approximately $29 thousand and $84 thousand for the years ended December 31, 2025 and 2024, respectively, relate to employees supporting continuing operations.

For the year ended December 31, 2024, the remaining stock-based compensation expense relates to employees and non-employees associated with the Company's discontinued operations. No stock-based compensation expense was recognized for employees non-employees associated with discontinued operations during the year ended December 31, 2025.

The Company's equity compensation plans are administered on a centralized, corporate basis and the related awards result in an increase to consolidated equity. Management determined that allocating stock-based compensation expense to discontinued operations components would not provide meaningful information to investors. Accordingly, stock-based compensation is presented within continuing operations in the Consolidated Financial Statements.

**NOTE 12. EMPLOYEE BENEFIT PLAN** 

The Company has a 401(k) plan covering all eligible employees. The Company provides matching contributions equal to 100% of the first 3% of compensation deferred, plus 50% of the next 2% of compensation deferred. The Company contributed $37 thousand and $45 thousand to the plan in the years ended December 31, 2025 and 2024, respectively.

**NOTE 13. AVENOVA ASSET DIVESTITURE AND BRIDGE LOAN**

On January 17, 2025, the Company completed the sale of its eyecare products sold under the Avenova brand and related assets (the "***Avenova Assets***") to PRN Physician Recommended Nutriceuticals, LLC, a Delaware limited liability company ("***PRN***"), which constituted substantially all of the Company's revenue generating and operating assets (the "***Avenova Asset Divestiture***"). The Avenova Asset Divestiture was consummated pursuant to the Asset Purchase Agreement, dated September 19, 2024, as amended by Amendment No. 1 to the Asset Purchase Agreement, dated November 5, 2024 (as so amended, the "***Purchase Agreement***"). The Purchase Agreement provided for, among other terms, a base purchase price of $11.5 million for the Avenova Assets and for PRN to provide the Company with up to a $1.0 million secured promissory note (the "***Bridge Loan***"). Amounts borrowed under the Bridge Loan were required to be used for working capital purposes, bore interest at a rate of 10% per annum and were secured by all of the Company's assets as collateral. On November 22, 2024, the Company requested and received $0.5 million under the Bridge Loan.

In accordance with the Purchase Agreement, at the closing of the Avenova Asset Divestiture the Company received the cash purchase price equal to $11.5 million, less (i) the $507,954 balance of the Bridge Loan, including accrued interest, which was discharged with collateral released and (ii) $500,000, which amount was deposited into an escrow account (the "***Escrow***") for up to six (6) months to be used for the Company's indemnification obligations under the Purchase Agreement or the payment of the Net Working Capital Adjustment (as defined below) after the closing. The final amount of the purchase price that the Company received in the Avenova Asset Divestiture was subject to a post-closing working capital adjustment, upward or downward, that was limited to an amount of up to $500,000 (the "***Net Working Capital Adjustment***"). The Net Working Capital Adjustment was mutually determined by PRN and the Company based upon the difference between the amount of the Company's Net Working Capital (as defined in the Purchase Agreement) immediately prior to the closing and the agreed upon target working capital value of $800,000. The Net Working Capital Adjustment was determined to be $365,566, which reduced the amount of total proceeds that we received from the Avenova Asset Divestiture. The Company recorded a gain of $10.7 million on the Avenova Asset Divestiture during the year ended December 31, 2025, net of the agreed upon Net Working Capital Adjustment.

In connection with the closing of the Avenova Asset Divestiture on January 17, 2025, the Company entered into a Transition Services Agreement, dated January 17, 2025 with PRN, pursuant to which the Company agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and operational support for a period of four (4) months after the closing of the Avenova Asset Divestiture (the "***PRN Transition Services Agreement***"). In exchange for providing such services, PRN and the Company agreed upon service fees to be paid to the Company. The Company recognized $16 thousand of income under the PRN Transition Services Agreement for the year ended December 31, 2025, which was included in other expense, net in the Company's Consolidated Statements of Operations.

The accounting requirements for reporting results related to the Avenova Assets as discontinued operations were met during the first quarter of 2025. Accordingly, the Consolidated Financial Statements and Notes to the Consolidated Financial Statements reflect the results related to the Avenova Assets as a discontinued operation for the periods presented.

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In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the Consolidated Balance Sheets. The assets and liabilities related to the Avenova Assets have been reflected as discontinued operations in the Consolidated Balance Sheets as of December 31, 2024, and consist of the following (in thousands):

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| | |
|:---|:---|
|  | **As of**<br> **December 31,**<br> **2024** |
| **ASSETS** |  |
| Current assets: |  |
| Accounts receivable, net | $352 |
| Inventory, net | 765 |
| Prepaid expenses and other current assets | 62 |
| Total current assets, discontinued operations | 1179 |
| Property and equipment, net, discontinued operations | 9 |
| Total assets, discontinued operations | $1188 |
| **LIABILITIES** |  |
| Liabilities: |  |
| Current liabilities: |  |
| Accounts payable | $471 |
| Accrued liabilities | 676 |
| Total current liabilities, discontinued operations | $1147 |

---

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Operations. Results related to the Avenova Asset for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Operations and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,**  | **For the years ended** <br> **December 31,**  |
|  | **2025** | **2024** |
| Net sales | $433 | $9781 |
| Cost of goods sold | 170 | 3300 |
| Gross profit | 263 | 6481 |
| Operating expenses: |  |  |
| Research and development |  | 2 |
| Sales and marketing | 224 | 4034 |
| Total operating expenses | 224 | 4036 |
| Operating income | 39 | 2445 |
| Gain on divestiture | 10700 |  |
| Net income from discontinued operations before income taxes | 10739 | 2445 |
| Provision for income taxes | 230 |  |
| Net income from discontinued operations, net of taxes | $10509 | $2445 |

---

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Cash Flows. Results related to the Avenova Asset for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Cash Flows and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,** | **For the years ended** <br> **December 31,** |
|  | **2025** | **2024** |
| **Operating activities:** |  |  |
| Net income from discontinued operations, net of taxes | $10509 | $2445 |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Non-cash gain on divestiture | (10700) |  |
| Changes in operating assets and liabilities: |  |  |
| Accounts receivable | (89) | 43 |
| Inventory | 73 | (264) |
| Prepaid expenses and other current assets |  | (16) |
| Other assets | 9 | 5 |
| Accounts payable and accrued liabilities | (252) | 199 |
| **Net cash (used in) provided by operating activities, discontinued operations** | (450) | 2412 |
| **Investing activities:** |  |  |
| Proceeds from divestiture | 11000 |  |
| **Net cash provided by investing activities, discontinued operations** | 11000 |  |
| **Net increase in cash and cash equivalents, discontinued operations** | $10550 | $2412 |

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**NOTE 14. PHASEONE DIVESTITURE** 

On January 3, 2025, the Company entered into a Trademark Acquisition Agreement with its distributor, PhaseOne Health LLC ("***PhaseOne***"), that provided for the purchase by PhaseOne of two of the Company's wound care trademarks (the "***Wound Care Trademarks***") for a purchase price of $500,000 (the "***Trademark Acquisition Agreement,***" and such sale, the "***PhaseOne Divestiture***"). In connection with the PhaseOne Divestiture, the Company also entered into a Transition Services Agreement, dated January 3, 2025, with PhaseOne (the "***PhaseOne Transition Services Agreement***"), pursuant to which the Company: (i) provided limited transition services to PhaseOne until January 10, 2025; (ii) sold the Company's existing PhaseOne finished goods inventory from an outstanding purchase order to PhaseOne for an aggregate payment of $126,000; and (iii) a limited amount of remaining componentry inventory. In addition, the PhaseOne Transition Services Agreement provided that the existing supplier and distributor relationship between the Company and PhaseOne would be terminated upon the closing of the PhaseOne Divestiture. The Company completed the PhaseOne Divestiture on January 8, 2025. The Company recorded a net gain of $0.5 million as a result of the PhaseOne Divestiture during the year ended December 31, 2025.

The accounting requirements for reporting results related to the Wound Care Trademarks as discontinued operations were met during the first quarter of 2025. Accordingly, the Consolidated Financial Statements and Notes to Consolidated Financial Statements reflect the results related to the Wound Care Trademarks as a discontinued operation for the years presented.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of discontinued operations in the Consolidated Balance Sheets. The assets and liabilities related to the Wound Care Trademarks have been reflected as discontinued operations in the Consolidated Balance Sheets as of December 31, 2024, and consist of the following (in thousands):

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| | |
|:---|:---|
|  | **As of**<br> **December 31,**<br> **2024** |
| **ASSETS** |  |
| Current assets: |  |
| Accounts receivable, net | $6 |
| Inventory | 48 |
| Total current assets, discontinued operations | $54 |
| **LIABILITIES** |  |
| Liabilities: |  |
| Current liabilities: |  |
| Accounts payable | $43 |
| Total current liabilities, discontinued operations | $43 |

---

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Operations. Results related to the Wound Care Trademarks for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Operations and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,**  | **For the years ended**<br> **December 31,**  |
|  | **2025** | **2024** |
| Net sales | $122 | $258 |
| Cost of goods sold | 75 | 147 |
| Gross profit | 47 | 111 |
| Operating expenses: |  |  |
| Research and development | 3 | 40 |
| Total operating expenses | 3 | 40 |
| Operating income | 44 | 71 |
| Gain on divestiture | 500 |  |
| Net income from discontinued operations before income taxes | 544 | 71 |
| Provision for income taxes | 14 |  |
| Net income from discontinued operations, net of taxes | $530 | $71 |

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In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Cash Flows. Results related to the Wound Care Trademarks for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Cash Flows and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024** |
| **Operating activities:** |  |  |
| Net income from discontinued operations | $530 | $71 |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Non-cash gain on divestiture | (500) |  |
| Changes in operating assets and liabilities: |  |  |
| Accounts receivable | 6 | 6 |
| Inventory | 43 | 12 |
| Accounts payable and accrued liabilities | (38) | (21) |
| **Net cash provided by operating activities, discontinued operations** | 45 | 68 |
| **Investing activities:** |  |  |
| Proceeds from divestiture | 500 |  |
| **Net cash provided by investing activities, discontinued operations** | 500 |  |
| **Net increase in cash and cash equivalents, discontinued operations** | $541 | $68 |

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**NOTE 15. DERMADOCTOR DIVESTITURE**

On March 12, 2024, the Company entered into an agreement to sell 100% of the membership units of DERMAdoctor for a closing purchase price of $1.1 million (the "***DERMAdoctor Divestiture***"). The sale of the membership units closed, and the DERMAdoctor Divestiture occurred, on March 25, 2024. The accounting requirements for reporting the DERMAdoctor business as discontinued operations were met during the first quarter of 2024. Accordingly, the Consolidated Financial Statements and Notes to Consolidated Financial Statements reflect the results of the DERMAdoctor business as a discontinued operation for the years presented.

**Revision of Prior-Period Financial Statements**

During the preparation of the Company's consolidated financial statements for the year ended December 31, 2025, the Company identified an error in the presentation of the loss on the DERMAdoctor Divestiture and related divestiture proceeds in its previously issued consolidated financial statements for the year ended December 31, 2024. The loss on divestiture of approximately $0.9 million had been presented within continuing operations, and the related $1.1 million of proceeds from divestiture had been presented within investing activities of continuing operations in the Consolidated Statements of Cash Flows. In accordance with ASC 205-20-45-3 through 45-4, the gain or loss on disposal of a discontinued component and the related cash flows should be presented within discontinued operations. The Company has revised the prior-period presentation to reflect the loss on divestiture and related cash flows within discontinued operations. This revision affected the presentation of loss from continuing operations, loss from discontinued operations, related earnings per share from continuing operations and discontinued operations, and certain cash flow subtotals. Loss per share from continuing operations increased by $0.26 per share, with an equal offset to loss per share from discontinued operations. The revision did not affect total net loss, total net loss per share attributable to common stockholders, total assets, total liabilities, stockholders' equity, total cash flows, or the Company's financial position for the year ended December 31, 2024.

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**Results of DERMAdoctor**'**s operations**

In accordance with the provisions of ASC 205-20, *Presentation of Financial Statements*: *Discontinued Operations* ("***ASC 205-20***"), the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Operations. The results of DERMAdoctor's operations for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Operations and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,**  | **For the years ended**<br> **December 31,**  |
|  | **2025** | **2024**<br> **(As Revised)** |
| Net sales | $— | $717 |
| Cost of goods sold |  | 493 |
| Gross profit |  | 224 |
| Operating expenses: |  |  |
| Research and development |  | 2 |
| Sales and marketing |  | 292 |
| General and administrative |  | 48 |
| Total operating expenses |  | 342 |
| Operating loss |  | (118) |
| Loss on divestiture |  | (871) |
| Net loss from discontinued operations | $— | $(989) |

---

In accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations of the discontinued operations in the Consolidated Statements of Cash Flows. The results of DERMAdoctor for the years ended December 31, 2025 and 2024 have been reflected as discontinued operations in the Consolidated Statements of Cash Flows and consist of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024**<br> **(As Revised)** |
| **Operating activities:** |  |  |
| Net loss from discontinued operations | $— | $(989) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| Non-cash loss on divestiture |  | 865 |
| Changes in operating assets and liabilities: |  |  |
| Accounts receivable |  | (262) |
| Inventory |  | 183 |
| Prepaid expenses and other current assets |  | (4) |
| Other assets |  | 15 |
| Accounts payable and accrued liabilities |  | 63 |
| Operating lease liabilities |  | (31) |
| **Net cash used in operating activities, discontinued operations** |  | (160) |
| **Investing activities:** |  |  |
| Proceeds from divestiture |  | 1070 |
| Cash transferred to New Age Investments, LLC |  | (46) |
| **Net cash provided by investing activities, discontinued operations** |  | 1024 |
| **Net increase in cash and cash equivalents, discontinued operations** | $— | $864 |

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**NOTE 16. SUMMARY OF DISCONTINUED OPERATIONS**

As part of the comprehensive realignment of the Company's business during 2024 and 2025, the Company completed the Avenova Asset Divestiture, the PhaseOne Divestiture, and the DERMAdoctor 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 Consolidated Financial Statements included in this Annual Report.

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The following tables summarize the amounts included in discontinued operations in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows and reconciles those amounts to the individual discontinued operations described in the notes to the Consolidated Financial Statements (in thousands):

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>**For the year ended December 31, 2025**</u> | **Avenova**<br> **Asset** <br> **Divestiture** | **PhaseOne** <br> **Divestiture** | **DERMA** <br> **doctor** <br> **Divestiture** | **China** <br> **NeutroPhase** <br> **product line** | **Total** |
| Net income, net of taxes | $10509 | $530 | $– $| 42 | $11081 |
| Net increase in cash, cash equivalents and restricted cash | 10550 | 541 | – | 42 | 11133 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| <u>**As of and for the year ended December 31, 2024**</u> | **Avenova** <br> **Asset** <br> **Divestiture** | **PhaseOne** <br> **Divestiture** | **DERMA** <br> **doctor** <br> **Divestiture** | **China**<br> **NeutroPhase** <br> **product line** | **Total** |
| Current assets | $1179 | $54 | $— | $— | $1233 |
| Other assets | 9 |  |  |  | 9 |
| Current liabilities | 1147 | 43 |  |  | 1190 |
| Net income (loss), net of taxes | 2445 | 71 | (989) |  | 1527 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 2412 | 68 | 864 | (45) | 3299 |

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Additional information regarding the Avenova Asset Divestiture, the PhaseOne Divestiture, and the DERMAdoctor Divestiture and related results from discontinued operations is provided in Note 13, "Avenova Asset Divestiture and Bridge Loan," Note 14, "PhaseOne Divestiture," and Note 15, "DERMAdoctor Divestiture," respectively.

Following the 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 the Company's strategic shift to operate as a digital asset treasury company, the Company decided to exit its involvement in the China NeutroPhase product line, which represented the Company's remaining legacy wound care activity. The limited results of these activities are included in discontinued operations above.

**NOTE 17. INCOME TAXES** 

For the years ended December 31, 2025 and 2024, loss before provision for income taxes consisted of the following (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024** |
| United States | $(33222) | $(8750) |
| International |  |  |
|  | $(33222) | $(8750) |

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For the years ended December 31, 2025 and 2024, the federal and state income tax provision is summarized as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,** | **For the years ended** <br> **December 31,** |
|  | **2025** | **2024** |
| **Current** |  |  |
| Federal | $— | $— |
| State |  |  |
| Foreign |  |  |
| Other |  |  |
| Total current tax expense | $— | $— |
| **Deferred** |  |  |
| Federal |  |  |
| State |  |  |
| Foreign |  |  |
| Other |  |  |
| Total deferred tax expense | $— | $— |
| Income tax provision | $— | $— |

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Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

For the year ended December 31, 2025, the Company recorded income tax expense of approximately $244 thousand, which was entirely attributable to discontinued operations. As a result, no income tax expense was recorded for continuing operations.

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The tax effects of significant items comprising the Company's deferred taxes as of December 31, 2025 and 2024 are as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended** <br> **December 31,** | **For the years ended** <br> **December 31,** |
|  | **2025** | **2024** |
| **Deferred tax assets:** |  |  |
| Net operating losses | $647 | $40689 |
| Stock options | 474 | 573 |
| Operating lease liabilities | 213 | 245 |
| Property and equipment | 23 | 18 |
| Accruals | 248 | 311 |
| Research and development credits |  | 641 |
| Other deferred tax assets | 6 | 6 |
| Total deferred tax assets | 1611 | 42483 |
| **Deferred tax liabilities:** |  |  |
| Operating lease right-of-use assets | (213) | (245) |
| Total deferred tax liabilities | (213) | (245) |
| Valuation allowance | (1398) | (42238) |
| Net deferred taxes | $— | $— |

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ASC 740, *Income Taxes*, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

The valuation allowance decreased by $41.0 million and increased by $1.9 million during the years ended December 31, 2025 and 2024, respectively. The decrease in the valuation allowance during 2025 primarily reflects the reduction of deferred tax assets associated with pre-change net operating losses and tax credits following the 2025 ownership change under Section 382.

Net operating loss and tax credit carryforwards as of December 31, 2025, are as follows (in thousands):

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| | | |
|:---|:---|:---|
|  |  | **Expiration** |
|  | **Amount** | **Years** |
| Net operating losses, federal | $2955 | Does Not Expire |
| Net operating losses, state | $348 | Beginning in 2045 |
| Tax credits, federal | $— |  |
| Tax credits, state | $— |  |

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A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the below years are as follows (in thousands):

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| | | |
|:---|:---|:---|
|  | **For the years ended**<br> **December 31,** | **For the years ended**<br> **December 31,** |
|  | **2025** | **2024** |
| Unrecognized benefit - beginning of period | $974 | $974 |
| Change during the period | (974) |  |
| Unrecognized benefit - end of period | $— | $974 |

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The entire amount of the unrecognized tax benefits would not impact our effective tax rate if recognized. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense and were immaterial for the years ended December 31, 2025 and 2024. The Company files income tax returns in the United States, California and Florida. Other jurisdictions are not significant. The tax years 2005 - 2024 (except 2007 and 2009) remain open in the federal, California and Florida jurisdictions. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

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Differences between the statutory tax rate and the Company's effective tax rate for the year ended December 31, 2025 is presented prospectively in accordance with ASU 2023-09 below (in thousands):

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| | | |
|:---|:---|:---|
| US Federal Statutory Tax Rate | $(6977) | 21.0% |
| State and Local income taxes, net of federal income tax effect |  | —% |
| Change in valuation allowance | (32214) | 97% |
| Limitation of net operating losses and credits due to ownership change | 33887 | (102.0%) |
| **Nontaxable or non-deductible items:** |  |  |
| Warrant/equity expenses | 5142 | (15.5%) |
| Other | 162 | (0.5%) |
| Total | $— | —% |

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The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows for the year ended December 31, 2024 (prior to the adoption of ASU 2023-09):

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| | |
|:---|:---|
| Statutory rate | 21.0% |
| State tax | 3.4% |
| Stock-based compensation expense | (1.0%) |
| Change in valuation allowance | (18.3%) |
| Warrant/equity expenses | (3.3%) |
| Expiration of tax attributes | (1.8%) |
| Total | 0.0% |

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In each year presented above, California comprised the majority of the amounts included in the "State and local income taxes, net of federal income tax effect" line in the rate reconciliation above.

Cash paid for income taxes (net of refunds) by jurisdiction during the year ended December 31, 2025 was as follows (in thousands) which is included in other expense, net as part of continuing operations in the Consolidated Statements of Operations:

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| | |
|:---|:---|
| California | $3 |
| New Jersey | 3 |
| South Carolina | 2 |
| New York | 1 |
| Other | 1 |
| Total | $10 |

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**NOTE 18. RELATED PARTY TRANSACTIONS**

R01 Fund LP ("R01"), a significant stockholder of the Company, has provided certain consulting services to the Company through one of its employees. During the year ended December 31, 2025, the Company engaged this individual directly to provide consulting services related to general corporate matters and digital asset treasury operations. The consulting agreement provides for a monthly fee of $25 thousand and continues until terminated by either party. Total fees paid by the Company for these services were approximately $53 thousand for the year ended December 31, 2025.

**NOTE 19. SUBSEQUENT EVENTS**

The Company has evaluated all subsequent events through the filing date of this Form 10-K with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the consolidated financial statements as of December 31, 2025, and events which occurred subsequently but were not recognized in the consolidated financial statements. Except as described below, there were no subsequent events which required recognition, adjustment to, or disclosure in, the audited consolidated financial statements.

***Reverse Stock Split***

On February 20, 2026, we effected 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.

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***Conversion of Remaining Unsecured Convertible Notes***

In January 2026, all remaining outstanding Unsecured Convertible Notes were converted into 7,143 shares of common stock.

***Warrant Exercises***

In January 2026, warrants were exercised as follows:

● All remaining December 2023 Warrants were exercised for 5,341 shares of common stock resulting in gross proceeds of $234 thousand to the Company.

● All remaining June 2024 Warrants were exercised for 4,511 shares of common stock resulting in gross proceeds of $58 thousand to the Company.

***Conversion of Remaining Series B Preferred Stock***

In January 2026, all outstanding shares of Series B Preferred Stock were converted into 3,013 shares of common stock at a conversion price of $43.75.

***January 2026 Private Placement and January 2026 Pre-Funded Warrant Issuance***

On January 16, 2026, the Company, entered into a Securities Purchase Agreement (the "January 2026 Private Placement") with each of R01 Fund LP, Framework Ventures IV L.P., Tether Investments, S.A. de C.V. and Sky Frontier Foundation (together, the "Purchasers"). Pursuant to the January 2026 Private Placement, the Company issued and sold pre-funded warrants (the "January 2026 Pre-Funded Warrants") to purchase an aggregate of 167,539,227 shares of the Company's common stock, par value $0.01 per share for aggregate gross proceeds of approximately $137.4 million, including $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 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 purchase price was $0.85 per January 2026 Pre-Funded Warrant, and the January 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 January 2026 Pre-Funded Warrants becoming exercisable 6 months after execution of the January 2026 Private Placement, 30% of the January 2026 Pre-Funded Warrants becoming exercisable 9 months after execution of the January 2026 Private Placement and the remaining 50% of the January 2026 Pre-Funded Warrants becoming exercisable 12 months after execution of the January 2026 Private Placement, each subject to receipt of stockholder approval.

The January 2026 Private Placement 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 January 2026 Private Placement was executed, as long as a Purchaser holds at least fifty percent (50%) of the aggregate number of January 2026 Pre-Funded Warrants and/or shares of Common Stock as originally purchased by such Purchaser pursuant to the January 2026 Private Placement.

The January 2026 Pre-Funded Warrants were issued and sold in a transaction exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D. The investors in this transaction are accredited investors as defined in Rule 501(a) of Regulation D. The securities issued have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

The January 2026 Pre-Funded Warrants required stockholder approval prior to exercise and are therefore classified as a liability upon issuance and measured at fair value until such approval is obtained. Because the warrants were issued with a nominal exercise price and the issuance price implied a value below the market trading price of the Company's common stock at issuance, the initial fair value of the warrant liability is expected to exceed the proceeds received from the financing, resulting in a non-cash loss recognized upon issuance. On March 12, 2026, the Company's stockholders approved the issuance of the shares underlying the warrants. As a result, the warrant liability would be reclassified to stockholders' equity at its fair value on the approval date and would no longer be subject to subsequent remeasurement thereafter.

The January 2026 Private Placement is a non-recognized (Type II) subsequent event under ASC 855 reflecting conditions arising after December 31, 2025.

***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, par value $0.01 per share, 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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The Company received approximately $13.5 million in gross proceeds from the sale of 1.3 million shares of its common stock subsequent to December 31, 2025 and through March 16, 2026 pursuant to the ATM Sales Agreement.

***Redemption of Series F Preferred Stock***

In February 2026, a redemption of 639,935 shares of Series F Preferred Stock for a $175 thousand cash payment was completed. After this redemption, 710,270 shares of Series F Preferred Stock with a redemption value of $175 thousand remained outstanding.

***March 2026 Special Meeting of Stockholders***

On March 12, 2026, the Company held a Special Meeting of Stockholders at which the Company's stockholders approved certain proposals previously described in the definitive proxy statement filed with the Securities and Exchange Commission.

At the Special Meeting, stockholders approved:

● The issuance of 167,539,227 shares of common stock upon the exercise of the January 2026 Pre-Funded Warrants;

● The issuance of 1,081,082 shares of common stock upon the exercise of the October 2025 Pre-Funded Warrants;

● An amendment to the Company's amended and restated certificate of incorporation to increase the number of authorized shares of common stock from 1,500,000,000 to 5,000,000,000; and

● The adoption of the Company's 2026 Equity Incentive Plan.

As a result of the foregoing approvals, the contractual limitations on the exercisability of the Company's outstanding pre-funded warrants related to the required shareholder approval have been satisfied. The warrants remain subject to their respective terms and conditions, including beneficial ownership limitations.

The amendment to increase the authorized shares became effective upon the filing of the certificate of amendment with the Secretary of State of the State of Delaware on March 12, 2026.

***Purchases and Sales of Digital Assets***

The Company sold 35 million USDT tokens and 16 million USDS tokens that were received in conjunction with the January 2026 Private Placement for net proceeds of approximately $51.0 million in cash subsequent to December 31, 2025.

Subsequent to December 31, 2025 and through March 16, 2026, the Company deployed approximately $70.7 million in cash to acquire approximately 1.1 billion SKY tokens. As of March 16, 2026 the Company held approximately 2.1 billion SKY tokens with an approximate value of $161.4 million, including staking rewards earned to date.

***Legal Proceedings and Threatened Legal Proceedings Related to the January 2026 Private 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. This purported stockholder has requested that the Company reimburse their attorneys' fees allegedly incurred in connection with the Stockholder Complaint. 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. The event is a non-recognized (Type II) subsequent event under ASC 855 reflecting conditions arising after December 31, 2025.

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| | |
|:---|:---|
| **ITEM 9.**  | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE** |

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None.

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| | |
|:---|:---|
| **ITEM 9A.**  | **CONTROLS AND PROCEDURES** |

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**Evaluation of Disclosure Controls and Procedures**

As of the end of the period covered by this annual report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the Exchange Act.

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

Based upon that evaluation at December 31, 2025, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure, at the reasonable assurance level, that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

**Management's Report on Internal Control over Financial Reporting**.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025. Our management utilized the criteria set forth in "Internal Control-Integrated Framework (2013)" issued by the Committee of Sponsoring Organizations of the Treadway Commission to conduct an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025. Our management has concluded that, as of December 31, 2025, our internal control over financial reporting was effective based on these criteria.

**Changes in Internal Control Over Financial Reporting**

There were no changes in our internal control over financial reporting which has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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| | |
|:---|:---|
| **ITEM 9B.**  | **OTHER INFORMATION** |

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During the three months ended December 31, 2025, none of our directors or Section 16 officers adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" as each such term is defined in Item 408 of SEC Regulation S-K.

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| | |
|:---|:---|
| **ITEM 9C.**  | **DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS** |

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Not applicable.

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**PART III**

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

Unless otherwise indicated, all share amounts and per share information presented in this Part III have been adjusted to give retroactive effect to the Company's 1-for-5 reverse stock split that became effective on February 20, 2026.

**Board of Directors**

Our Board is currently comprised of four directors. The following table sets forth the name and age (as of March 19, 2026) of each director, indicating all positions and offices with us currently held by the director.

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Age** | **Title** | **Director Since** |
| Paul E. Freiman, Ph.D. | 91 | Independent Director | May 2002 |
| Michael Kazley | 35 | Chairman & Chief Executive Officer | October 2025 |
| Swan Sit | 48 | Independent Director | December 2019 |
| Yenyou (Jeff) Zheng, Ph.D. | 69 | Independent Director | September 2019 |

---

Below is certain biographical information with respect to our directors:

***Dr. Freiman*** has been an independent pharmaceutical professional and consultant since January 2009. He was also a board member of Chronix Biomedical Inc., a private molecular diagnosis company, from 2009 until its acquisition by Oncocyte Corporation in April 2021. Dr. Freiman's prior experience includes serving as the president and chief executive officer of Neurobiological Technologies, Inc. (OTC: NTII) and a member of its board of directors from April 1997 until 2009. Dr. Freiman's prior experience also includes serving as the former chairman and chief executive officer of Syntex from 1989 to 1994. He is credited with much of the marketing success of Syntex's lead product, Naprosyn, and was responsible for moving the product to over-the-counter status, marketed as Aleve. Dr. Freiman served as chairman of the board of Neurotrope, Inc. (OTCBB: BLFL) from 2013 until August 2016. Dr. Freiman served as chairman of Penwest Pharmaceutical Co. until 2010 and served on the board of directors of Otsuka American Pharmaceuticals, Inc. and Otsuka America, Inc. until 2011, NeoPharm, Inc. until 2010 and Calypte Biomedical Corporation until September 2009. Dr. Freiman also served on the board (including as chairman) of the Pharmaceutical Research and Manufacturers Association of America. He has also served on a number of industry task forces both domestically and internationally. Dr. Freiman received a B.S. in pharmacy from Fordham University and an honorary doctorate from the Arnold & Marie Schwartz College of Pharmacy.

***Mr. Kazley*** has served as Chairman and Chief Executive Officer since October 2025. He has served as the Managing Member and General Partner of R01 Fund LP since 2023. Prior to his time at R01 Fund LP, Mr. Kazley served as a special limited partner for JDS Crypto LP, a private digital asset focused family office, from 2022 to 2023, and served as Chief Executive Officer of Crescent Crypto Asset Management from 2019 to 2022, where he managed a crypto index fund and a discretionary long-biased hedge fund, and became sole manager in 2020. Prior to co-founding Crescent Crypto Asset Management in 2017, he co-founded Cedar Lake Capital Management LP, an investment firm, in 2015. He began his investment career at Goldman Sachs in 2013. Mr. Kazley earned a Bachelor of Science in Industrial and Labor Relations from Cornell University.

***Ms. Sit*** currently acts as an independent business consultant to various public and private companies. Ms. Sit also serves as a director of Edgewell Personal Care Company (NYSE: EPC) since September 2020. She previously served as the Vice President of NA Digital Commerce Capabilities, Business Operations and Service and the Vice President of Global Digital Marketing of Nike, Inc. from 2018 to 2019. Prior to such position, Ms. Sit served as the Vice President of Global Digital of Revlon and Elizabeth Arden, Inc. from 2015 to 2017 and the Executive Director of Strategy and Planning, Online of The Estée Lauder Companies, Inc. Ms. Sit brings business experience including digital transformation experience supplemented by management consulting, brand management and advertising. Ms. Sit has built front-end consumer experiences across ecommerce, omnichannel, mobile, media, social, apps and innovation as well as integrated back-end operations. Ms. Sit received an MBA from Columbia Business School and a B.A. in Economics from Harvard University.

***Dr. Jeff Zheng*** has served as the Director of Business Development of, and as a broker with, Craft Capital Management LLC since September 2019. Dr. Jeff Zheng is also currently an independent director with Mars Acquisition Corp. Prior to that, Dr. Jeff Zheng served as the Director of Business Development of Spartan Securities Group, Ltd. from 2014 to August 2019. Dr. Jeff Zheng's experience includes providing innovative financial solutions and consulting services for initial public offering underwriting and investment banking as well as corporate financing solutions with a particular focus on Chinese companies listed overseas. Dr. Jeff Zheng previously served as a financial advisor for various Canadian public companies including: P & P Ventures Inc. (TSX-V: PPV.H) where he served as president and a director; Damon Capital Corp (TSX-V: DAM.H), where he served as Chief Financial Officer and a director; and Cantronic Systems Inc. (TSX-V: CTS), where he served as a director and chair of the audit committee. Dr. Jeff Zheng received a Ph.D. in physics from Flinders University of South Australia.

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**Executive Officers**

The following table sets forth the name, age (as of March 19, 2026) and title of our executive officers. Executive officers are elected annually by our Board and serve at the Board's discretion.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Title** |
| Michael Kazley | 35 | Chairman & Chief Executive Officer |
| Tommy Law | 40 | Chief Financial Officer and Treasurer |

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Set forth below is a description of the background of Mr. Law. Mr. Kazley's background is described above in the section "Board of Directors."

***Mr. Law*** has served as the Company's Chief Financial Officer and Treasurer since February 2023. Mr. Law joined the Company in December 2019 and has served in a variety of positions, including as the Corporate Controller (September 2022 until February 2023). As the Corporate Controller, Mr. Law was responsible for annual and quarterly filings with the SEC, as well as managing the periodic financial close process. Prior to serving as the Corporate Controller, Mr. Law served the Company as Assistant Controller (April 2022 to September 2022), Accounting Manager (June 2020 to April 2022) and Senior Accountant (December 2019 to June 2020). Prior to joining the Company, Mr. Law was a Senior Accountant at KP LLC, a marketing solutions company, from January 2017 to December 2019. Previously, he served as Accounting Manager at Hitachi Solutions America, Ltd., an information technology company, from 2012 to 2015. Mr. Law received his B.S. in Business Administration, Accounting from San Jose State University.

There is no arrangement or understanding between any director or executive officer and any other person pursuant to which he or she was or is to be selected as a director, nominee or officer. There are no family relationships among any of our officers or directors.

**Code of Ethics and Business Conduct**

Our Board has adopted a Code of Ethics and Business Conduct (the "***Code of Ethics***") which applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) and employees. The full text of our Code of Ethics is available on the Corporate Governance section of our website at www.novabay.com. We intend to disclose future amendments to certain provisions of the Code of Ethics, and any waivers of provisions of the Code of Ethics required to be disclosed under the rules of the SEC, at the same location on our website.

**Delinquent Section 16(a) Reports**

Under the federal securities laws, our directors and officers and any persons holding more than ten percent (10%) of our common stock are required to report their ownership of our common stock and any changes in that ownership to the SEC. Specific due dates for these reports have been established, and we are required to report in this report any failure to file by these dates.

In making this statement, we have relied upon examination of the copies of Forms 3, 4 and 5, and amendments to these forms, provided to us and the written representations of our directors, executive officers and ten percent (10%) stockholders. Based solely on our review of copies of the reports on the Section 16(a) forms filed with the SEC with respect to the fiscal year ended December 31, 2025, and the written representations received from the reporting persons that no other reports were required, we believe that all directors, executive officers and persons who own more than ten percent (10%) of our common stock have complied with the reporting requirements of Section 16(a) and have filed all reports required by such section.

**Changes to the Procedures in Recommending Nominees to the Board of Directors**

In connection with the January 2026 Private Placement, the Company and the Purchasers entered into 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. 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.

**Audit Committee**

Our Audit Committee is composed of Dr. Jeff Zheng (Chair), Dr. Freiman and Ms. Sit. Dr. Jeff Zheng qualifies as an "audit committee financial expert" as that term is defined in the rules and regulations established by the SEC. Dr. Jeff Zheng is independent under the NYSE American Rules.

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**Insider Trading Policy**

We have adopted an insider trading policy which prohibits our directors, officers and employees from engaging in transactions in our securities while in the possession of material non-public information (other than pursuant to a pre-approved trading plan that complies with Rule 10b5-1 under the Exchange Act); trading in the securities of other companies while in possession of material non-public information that they become aware of in the course or working for the Company; and disclosing material non-public information to unauthorized persons outside our Company. We have also implemented processes for the Company that we believe are reasonably designed to promote compliance with insider trading laws, rules, and regulations, and applicable stock exchange listing standards.

Our insider trading policy restricts trading by directors, officers and certain key employees during blackout periods, which generally begin on the 15th calendar day of the last month of each fiscal quarter and end after the second full business day after the issuance of our quarterly earnings release. Additional blackout periods may be imposed with or without notice, as the circumstances require.

Our insider trading policy also prohibits our directors, officers and employees from purchasing financial instruments (such as zero-cost collars and forward sale contracts) designed to hedge or offset any decrease in the market value of our common stock they hold, directly or indirectly. In addition, directors, officers and employees are generally prohibited from pledging our common stock to secure personal loans or other obligations, including by holding their common stock in a margin account.

**ITEM 11. EXECUTIVE COMPENSATION**

**Summary Executive Compensation Table**

The following table shows information regarding the compensation earned during the fiscal years ended December 31, 2025 and December 31, 2024 by (1) our Chairman & Chief Executive Officer, (2) our Chief Financial Officer, and (3) our former Chief Executive Officers (collectively, the "NEOs").

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name and principal**<br> **position(s)** | **Fiscal**<br> **year** | **Salary<br> ($)** | **Bonus** <br> **($)** | **All other**<br> **compensation (1)(2)<br> ($)** | **Total<br> ($)** |
| Michael Kazley, | 2025 | $- | $- | $- | $- |
| *Chairman & Chief Executive Officer (3)* | 2024 |  |  |  |  |
| Justin M. Hall, Esq. | 2025 | $271554 | $- | $978045 | $1249600 |
| *Former Chief Executive Officer (4)* | 2024 | 350000 |  | 15177 | 365177 |
| David Lazar | 2025 | $- | $- | $- | $- |
| *Former Chief Executive Officer (5)* | 2024 |  |  |  |  |
| Tommy Law | 2025 | $170000 | $259250 | $7547 | $436797 |
| *Chief Financial Officer* | 2024 | 170000 | 42500 | 7696 | 220196 |

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(1) In 2025 the amount includes $962,500 paid to Mr. Hall as severance pursuant to his prior employment agreement. The 2025 amounts also included: (a) individual life insurance premiums paid for by the Company for Mr. Law and Mr. Hall of $747 and $1,545, respectively; and (b) 401(k) plan matching contributions paid for by the Company for Mr. Law and Mr. Hall of $6,800 and $14,000, respectively. In 2024, the amounts included: (a) individual life insurance premiums paid for by the Company for Mr. Law and Mr. Hall of $896 and $1,854, respectively; and (b) 401(k) plan matching contributions paid for by the Company for Mr. Law and Mr. Hall of $0, $6,800 and $13,323, respectively.

(2) In connection with the closing of the Avenova Asset Sale, we entered into the PRN Transition Services Agreement with PRN, pursuant to which we agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and operational support for a period of four (4) months after the closing of the Avenova Asset Sale in exchange for agreed upon service fees to be paid to us. As part of the PRN Transition Services Agreement, PRN entered into a consulting agreement with Tommy Law, our Chief Financial Officer, for certain services with a one-time payment of $85,000 which was made by PRN to Mr. Law when all such services were complete and excluded from the table above accordingly.

(3) Mr. Kazley has served as the Company's Chief Executive Officer since October 16, 2025. Mr. Kazley is employed and compensated by Fund Manager LLC. The Company does not pay any compensation or management fees to Fund Manager LLC for the services of our Chief Executive Officer.

(4) Mr. Hall served as the Company's Chief Executive Officer until August 19, 2025.

(5) Mr. Lazar served as the Company's Chief Executive Officer from August 19, 2025 until October 16, 2025 but did not receive any compensation for such service.

*2025 and 2024 Base Salaries and Target Bonus Amounts*

Mr. Kazley was not paid a base salary in 2025. Mr. Law was paid a 2025 base salary of $170,000 and had a target bonus percentage of base salary of 25% in 2025. Mr Hall was paid a base salary of $350,000 and had a target bonus percentage of base salary of 50% in 2025 and 2024.

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*2025 and 2024 Cash Bonuses*

The Board, upon the recommendation of the Compensation Committee of the Board (the "***Compensation Committee***"), determined not to award any bonuses to its NEOs for fiscal year 2025 or 2024 performance, except for Mr. Law, who received a $42,500 bonus for fiscal year 2023 performance. The amount listed in the "Bonus" column for Mr. Law for 2025 represents discretionary incentive compensation, determined by the Board based on its qualitative assessment of individual performance and retention considerations.

*2025 and 2024 Equity Awards*

The Board, upon the recommendation of the Compensation Committee, determined not to grant any equity awards for the 2025 fiscal year or 2024 fiscal year to any of its NEOs.

**Outstanding Equity Awards at Fiscal Year End**

The following table presents the outstanding equity awards held by each of our NEOs as of December 31, 2025. Stock options were granted pursuant to our 2007 Plan thereafter until its expiration in March 2017, and all awards since then have been pursuant to our 2017 Plan. The options granted under our 2007 Plan and 2017 Plan are not exercisable until they have vested.

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | Option Awards | Option Awards | Option Awards | | **Stock Awards** | **Stock Awards** | **Stock Awards** | **Stock Awards** |
| **Name** | **Grant date** | **Number of**<br> **securities** <br> **underlying** <br> **unexercised** <br> **options (#)** <br> **exercisable(1)** | **Number of** <br> **securities** <br> **underlying** <br> **unexercised** <br> **options (#)** <br> **unexercisable(1)** | **Option** <br> **exercise**<br> **price<br> ($)** | **Option** <br> **expiration** <br> **date** | **Number of** <br> **shares or units of** <br> **stock that have** <br> **not vested<br> (#)** | **Market value of** <br> **shares or units** <br> **of stock that** <br> **have not vested<br> ($)** | **Equity**<br> **incentive plan** <br> **awards:** <br> **number of** <br> **unearned**<br> **shares, units or** <br> **other rights** <br> **that have not** <br> **vested<br> (#)** | **Equity incentive**<br> **plan awards:**<br> **market or payout**<br> **value of unearned** <br> **shares, units or**<br> **other rights that**<br> **have not vested<br> ($)** |
| Michael Kazley. |  |  |  | $- |  |  | $- |  | $- |
| Justin M. Hall, Esq. | 08/20/20 | 58 |  | $6064 | 08/20/30 |  | $- |  | $- |
|  | 05/31/18 | 24 |  | $13475 | 05/31/28 |  | $- |  | $- |
|  | 01/25/17 | 4 |  | $22050 | 01/25/27 |  | $- |  | $- |
|  | 06/06/16 | 18 |  | $17028 | 06/06/26 |  | $- |  | $- |
| Tommy Law | 06/08/20 | 1 |  | $5451 | 06/08/30 |  | $- |  | $- |
|  | 08/20/20 | 5 |  | $6064 | 08/20/30 |  | $- |  | $- |

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(1) Unless otherwise noted, each option vested as to 25% of the shares underlying the option on the first anniversary of the grant date, with the remainder vesting every three months in 12 equal installments thereafter. Options expire ten (10) years from the date of grant. All of the options were fully vested as of December 31, 2025.

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**Employment-Related Agreements and Potential Payments upon Termination or Change in Control**

Mr. Kazley is not party to an employment agreement with the Company.

The principal terms of Mr. Law's employment agreement and Mr. Hall's employment and separation agreements are summarized below.

*Tommy Law*

Mr. Law's employment agreement provides for at-will employment and a term commencing on August 19, 2025 and continuing to and including the first anniversary of such date, unless earlier terminated in accordance with the terms of the employment agreement. Mr. Law's employment agreement provides for an annual base salary of one hundred seventy thousand dollars ($170,000).

In addition, Mr. Law is eligible to participate in any bonus plan that is deemed appropriate by the Board. The bonus amount shall be determined by the Board, in its sole discretion, based upon several factors, including: (i) the fulfillment, during the relevant year, of specific milestones and tasks delegated, for such year, to the executive as set by the executive and the Company's Chief Executive Officer and/or the Board, before the end of the first calendar quarter; (ii) the evaluation of the executive by the Company's Chief Executive Officer and/or the Board; (iii) the Company's financial, product and expected progress; and (iv) other pertinent matters relating to the Company's business and valuation. The Compensation Committee has the sole discretion to pay any or all of the annual bonus in cash or as equity compensation (which would be fully vested as of the date of grant).

The Company paid Mr. Law a one-time cash retention payment in the amount of $170,000 in 2025 based on his remaining employed by the Company through the filing of the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2025.

In the event the Company terminates Mr. Law for cause, he would be entitled to any earned but unpaid wages or other compensation (including reimbursements of his outstanding expenses incurred and submitted in compliance with Company policies and unused vacation) earned through the termination date.

In the event the Company terminates Mr. Law without cause or at the expiration of the term, provided such termination constitutes a "separation from service" as such term is defined in Section 409A of the Code and, subject to his compliance with his confidentiality, proprietary rights, and conflicting employment obligations and his execution of a release of claims in favor of the Company, he would be entitled to an amount equal to his then-current annual base salary, payable in a lump-sum within sixty (60) days following Mr. Law's separation from service in addition to Mr. Law's earned wages and other compensation (including reimbursements of his outstanding expenses incurred and submitted in compliance with Company policies and unused vacation) through the date his employment is terminated from the Company.

Moreover, all outstanding equity awards held by Mr. Law will be subject to full accelerated vesting on the date of termination without cause or at the expiration of the term, and the exercise period shall be extended to three (3) years from the date of termination.

*Justin Hall*

Prior to his termination of employment, Mr. Hall was party to an employment agreement with the Company that provided for an annual base salary of three hundred fifty thousand dollars ($350,000).

Mr. Hall's employment with the Company terminated in connection with, and as a condition to, the transactions contemplated by the 2025 Preferred Stock Purchase Agreement. In connection with his termination of employment, the Company agreed to pay Mr. Hall a cash payment in two installments, each in the amount of $481,250, less required taxes and withholdings, plus $8,777.61 in COBRA payments per installment. In connection therewith, Mr. Hall agreed to resign as Chief Executive Officer of the Company, and to resign as a director on the Board. The agreement included a mutual release of claims and mutual non-disparagement obligations.

**Director Compensation**

The compensation and benefits for service as non-employee members of our Board is determined by the Board. Directors employed by the Company, such as Mr. Kazley, are not compensated for service on the Board or any committee of the Board; however, the Company reimburses all directors for any out-of-pocket expenses incurred in connection with attending meetings of the Board and committees of the Board.

The Board, upon the recommendation of the Compensation Committee, approved the Non-Employee Director Compensation Program, effective January 1, 2024 (the "***2024 Non-Employee Director Compensation Plan***"). Under the 2024 Non-Employee Director Compensation Plan, each director receives his or her annual retainer compensation in cash and an annual grant of 6,000 RSUs. All cash compensation is payable quarterly on the first (1st) business day of the quarter.

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Approved non-employee director compensation for 2025 was as follows:

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| | | |
|:---|:---|:---|
| **Board Meetings** | **Chair of Committees** | **All Other Committee Members** |
| *Chair of the Board*: Annual cash compensation of $52,000 per year. | *Chair of the Audit Committee*: Annual cash compensation of $17,500 per year. | *Member of the Audit Committee*: Annual cash compensation of $7,500 per year. |
| *Member of the Board*: The annual fee consists of: (i) $40,000 in cash and (ii) 6,000 restricted stock units granted. The restricted stock units are granted at the Company's Annual Meeting of Stockholders, and vest on the one year anniversary of the grant date. | *Chair of the Compensation Committee*: Annual cash compensation of $13,000 per year. | *Member of the Compensation Committee*: Annual cash compensation of $6,000 per year for each committee. |
|  | *Chair of the N&CG Committee*: Annual cash compensation of $10,000 per year. | *Member of the N&CG Committee:* Annual cash compensation of $5,000 per year for each committee.<br>Non-employee directors also may be granted additional awards under our equity incentive plans at the discretion of our Board. |

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The compensation received during 2025 by each non-employee director is set forth below:

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Fees Earned or** <br> **Paid in Cash<br> ($)** | **Stock** <br> **Awards(1)<br> ($)** | **Total<br> ($)** |
| Paul E. Freiman, Ph.D. | $77500 | $34200 | $111700 |
| Swan Sit | $58500 | $34200 | $92700 |
| Yenyou (Jeff) Zheng, Ph.D. | $73000 | $34200 | $107700 |
| Julie Garlikov (2) | $80000 | $- | $80000 |
| Mijia (Bob) Wu, M.B.A. (2) | $80000 | $- | $80000 |
| Sean Zheng (2) | $80000 | $- | $80000 |

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(1) These amounts represent the aggregate grant date fair value of $5.70 per share for the 6,000 RSUs granted to each director as part of his or her annual fee in fiscal year 2025. The assumptions used to determine the value of RSUs are described in Note 11 "Stock-Based Compensation" to the Company's consolidated financial statements in this annual report. At December 31, 2025, each of Dr. Freiman, Ms. Sit, and Dr. Jeff Zheng had an aggregate of 6,000 unvested RSUs. At December 31, 2025, the aggregate number of vested stock options for each of the non-employee directors who served in 2025 and held stock options was as follows (with no such director holding any unvested stock options at such time): Dr. Freiman, 22; Ms. Sit, 4; Dr. Jeff Zheng, 4; and Mr. Wu, 16.

(2) Ms. Garlikov and Messrs. Wu and Zheng each served as members of the Company's Board of Directors until October 16, 2025.

**Pay-Versus-Performance**

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, the Company is providing the following disclosure about the relationship between executive pay actually paid (as defined by SEC rules) and the Company's financial performance.

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**Pay-Versus-Performance Table**

In accordance with SEC rules, the table below sets forth the following information for the fiscal years ended December 31, 2025, 2024 and 2023: (i) the total compensation reported for the Company's principal executive officer ("PEO") and the non-PEO named executive officers ("NEOs") in the "Summary Compensation Table" included in this report and, with respect to fiscal year 2023, the "Summary Compensation Table" included in the Company's Proxy Statement filed with the SEC on May 18, 2023; (ii) the compensation "actually paid" to the PEO and the non-PEO NEOs, calculated in accordance with SEC rules and as described in the footnotes below; (iii) the Company's total stockholder return ("TSR"); and (iv) the Company's net income (loss). The amounts reported in the "Summary Compensation Table" and the compensation actually paid amounts do not reflect the actual amounts of compensation earned by, or paid to, our NEOs during the applicable years, but rather are amounts determined in accordance with Item 402(v) of Regulation S-K.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Fiscal Year** | **Summary** <br> **Compensation** <br> **Table Total for PEO** | **Compensation**<br> **"Actually Paid"** <br> **to PEO(1)** | **Average**<br> **Summary**<br> **Compensation** <br> **Table Total for** <br> **Non-PEO** <br> **Named Executive** <br> **Officers(2)** | **Average** <br> **Compensation**<br> **"Actually Paid"** <br> **Total for Non PEO**<br> **Named Executive**<br> **Officers(3)** | **Value of Initial** <br> **Fixed $100** <br> **Investment based** <br> **on NBY TSR(4)** | **Net Income**<br> **(in thousands)(5)** |
| 2025 | $1249600 | $1249600 | $436797 | $436797 | $9.44 | $(22141) |
| 2024 | $365177 | $366461 | $220196 | $220295 | $0.88 | $(7223) |
| 2023 | $364146 | $358857 | $190840 | $189734 | $10.46 | $(9640) |

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(1) Compensation actually paid (as defined by SEC rules) to the CEO for each period presented reflects the amount set forth in column (1), adjusted as set forth below in the Reconciliation of Compensation Actually Paid Table. David Lazar served as the Company's Chief Executive Officer from August 19, 2025 until October 16, 2025 but did not receive any compensation for such service.

(2) Mr. Law, our Chief Financial Officer, was the Company's only non-CEO named executive officer ("NEO") for fiscal years 2025 and 2024. Mr. Law, Dr. Kunin, our former Chief Product Officer, and Mr. Jones, our former Chief Financial Officer, were the Company's non-CEO NEOs in fiscal year 2023. Dr. Kunin resigned effective November 5, 2023 and Mr. Jones resigned effective February 15, 2023. Amounts in 2023 for the NEOs other than the CEO are weighted averages based on the number of days the applicable NEOs served.

(3) Average compensation actually paid (as defined by SEC rules) to the Company's NEOs (except the CEO) for each period presented reflects the amount set forth in column (3), adjusted as set forth below in the Reconciliation of Compensation Actually Paid Table.

(4) Reflects the TSR of a $100 investment in the Company from the beginning of fiscal year 2023 through each of the fiscal years ended December 31, 2025, 2024 and 2023. The Company's TSR includes share price appreciation or depreciation and assumes reinvestment of dividends, including the Company's one-time special cash dividend paid in 2025.

(5) Reflects "Net loss" as reported in the Company's Consolidated Statements of Operations included in this report and, with respect to fiscal year 2023, the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

**Reconciliation of Compensation Actually Paid Table**

The following table details the applicable adjustments that were made to determine compensation actually paid (amounts are weighted-averages for the NEOs other than the CEO in 2023 based on the number of days served):

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Fiscal Year** | **Reported**<br> **Summary<br> Compensation<br> Table Total**<br> **($)** | **Deduct:** <br> **Reported<br> value of equity<br> awards**<br> **($)(a)** | **Add: Equity**<br> **award**<br> **adjustments<br> ($)(b)** | **Deduct:** <br> **Reported<br> change in the<br> actuarial** <br> **present value<br> of pension** <br> **benefits**<br> **($)(c)** | **Add: Pension<br> benefit** <br> **adjustments<br> ($)(c)** | **Compensation<br> actually paid<br> ($)** |
| CEO |  |  |  |  |  |  |
| 2025 | $1249600 | $- | $- | $- | $- | $1249600 |
| 2024 | $365177 | $- | $1284 | $- | $- | $366461 |
| 2023 | $364146 | $- | $(5289) | $- | $- | $358857 |
| *NEOs (except the Chief Executive Officer)* | | | | | | |
| 2025 | $436797 | $- | $- | $- | $- | $436797 |
| 2024 | $220196 | $- | $99 | $- | $- | $220295 |
| 2023 | $190840 | $- | $(1106) | $- | $- | $189734 |

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(a) As provided in the "Summary Compensation Table" provided in this report, as relates to the fiscal year ended December 31, 2023, the 2023 Proxy Statement. No equity awards were granted to any NEO in the fiscal years presented.

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(b) The equity award adjustments for each applicable period include the subtraction of the following (amounts are weighted-averages for the NEOs other than the CEO in 2023 and 2022 based on the number of days served):

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Fiscal Year** | **Period-end fair<br> value of equity<br> awards granted<br> during the period**<br> **($)** | **Changes in value<br> of prior years'<br> awards unvested at<br> fiscal year end**<br> **($)** | **Fair value as<br> of vesting date<br> of equity awards granted and vested<br> in the period**<br> **($)** | **Change in value<br> of prior years'<br> awards that vested<br> in year reported**<br> **($)** | **Fair value at**<br> **the end of**<br> **the prior period**<br> **of equity awards**<br> **that failed to meet**<br> **vesting conditions**<br> **in the period**<br> **($)** | **Value of dividends**<br> **or other earnings**<br> **paid on stock or**<br> **option awards not**<br> **otherwise reflected**<br> **in fair value or**<br> **total compensation**<br> **($)** | **Total equity award adjustments**<br> **($)** |
| CEO |  |  |  |  |  |  |  |
| 2025 | $- | $- | $- | $- | $- | $- | $- |
| 2024 | $- | $- | $- | $1284 | $- | $- | $1284 |
| 2023 | $- | $(2974) | $- | $(2315) | $- | $- | $(5289) |
| *NEOs (except the Chief Executive Officer)* | | | | | | | |
| 2025 | $- | $- | $- | $- | $- | $- | $- |
| 2024 | $- | $- | $- | $99 | $- | $- | $99 |
| 2023 | $- | $(83) | $- | $(1023) | $- | $- | $(1106) |

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(c) In the periods presented and consistent with the "Summary Compensation Table" provided in this report and, as relates to the fiscal year ended December 31, 2023, the 2023 Proxy Statement, the Company did not have: (i) a change in the actuarial present value of the accumulated benefit under any defined benefit or actuarial pension plans or (ii) any service cost or prior service cost related to any defined benefit or actuarial pension plans.

**Pay-Versus-Performance Relationship**

The Company believes the table above shows the alignment between compensation actually paid to the CEO and our other non-CEO NEOs and the Company's performance. The charts below show, for the past three years, the relationship of the CEO and the other non-CEO NEOs compensation "actually paid" and (i) the Company's TSR and (ii) the Company's net loss.

![bar01.jpg](bar01.jpg)

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![bar02.jpg](bar02.jpg)

**Policies and Practices for Granting Equity Awards**

We do not currently grant new awards of stock options, stock appreciation rights or similar option-like equity awards. Accordingly, we have no specific policy or practice on the timing of grants of such awards in relation to the disclosure of material nonpublic information.

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

**Equity Compensation Plan Information**

The following table provides information as of December 31, 2025, with respect to shares of our common stock that may be issued under existing equity compensation plans.

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| | | | |
|:---|:---|:---|:---|
| **Plan category** | **Number of** <br> **Securities to be**<br> **Issued Upon** <br> **Exercise of** <br> **Outstanding** <br> **Options and** <br> **Rights(3)** | **Weighted Average** <br> **Exercise Price of** <br> **Outstanding** <br> **Options and**<br> **Rights(4)** | **Number of** <br> **Securities** <br> **Remaining** <br> **Available For** <br> **Future Issuance**<br> **under Equity** <br> **Compensation** <br> **Plans (excluding** <br> **some securities**<br> **reflected in first** <br> **column)(2)** |
| Equity compensation plans approved by security holders(1) | 18201 | $137.40 | 223952 |
| Equity compensation plans not approved by security holders |  |  |  |
| Total | 18201 | $137.40 | 223952 |

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(1) Consists of the 2007 Omnibus Incentive Plan and the 2017 Omnibus Incentive Plan. No additional option grants are being made under the 2002 Stock Option Plan, 2005 Stock Option Plan or 2007 Omnibus Incentive Plan. The 2017 Omnibus Incentive Plan became effective on June 2, 2017, and 223,952 shares were available for future awards under the plan as of December 31, 2025. On March 12, 2026, the Company's stockholders approved an amendment to the 2017 Omnibus Incentive Plan increasing the number of shares authorized for issuance by 200,000 shares which is not reflected in the table above as of December 31, 2025.

(2) Upon adoption, the 2017 Omnibus Incentive Plan allowed for awards of up to 13,249 shares of the Company's common stock, , after giving retroactive effect to the Company's 1-for-5 reverse stock split effective February 20, 2026, plus an automatic annual increase in the number of shares authorized for awards on the first day of each of the Company's fiscal years beginning January 1, 2018 through January 1, 2027 equal to (i) 4% of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of common stock as determined by the Board.

(3) Securities listed in this column consisted of options to purchase 201 shares and 18 thousand restricted stock units.

(4) The weighted average exercise price relates only to the stock options.

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**Security Ownership of Certain Beneficial Owners and Management** 

The following table indicates information as of March 17, 2026 regarding the beneficial ownership of our securities by:

● each person who is known by us to beneficially own more than five percent (5%) of our securities;

● our current executive officers;

● each of our directors; and

● all of our directors and executive officers as a group.

The percentage of shares beneficially owned is based on 26,625,029 shares of common stock outstanding as of March 16, 2026. Except as indicated in the footnotes to this table, and as affected by applicable community property laws, all persons listed have sole voting and investment power for all shares shown as beneficially owned by them and no shares are pledged.

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| | | |
|:---|:---|:---|
| **Name and Address of Beneficial Owner (1)** | **Number of Shares** <br> **Beneficially** <br> **Owned** | **Percent of** <br> **Class** |
| <u>Beneficial Owners Holding More Than 5%</u> |  |  |
| R01 Fund LP<br> 1111 Lincoln Road, Suite 500, Miami Beach, FL, 33139 (2) | 11361216 | 42.7% |
| Framework Ventures IV L.P.<br> 600 Montgomery Street, Floor 42, San Francisco, CA, 94111 (3) | 11361216 | 42.7% |
| <u>Executive Officers and Directors</u> |  |  |
| Michael Kazley (2) | 11361216 | 42.7% |
| Tommy Law | 6 | \* |
| Paul E. Freiman, Ph.D. (4) | 207 | \* |
| Swan Sit (5) | 172 | \* |
| Yenyou (Jeff) Zheng, Ph.D. (6) | 172 | \* |
| All directors and executive officers as a group (5 persons) | 11361773 | 42.7% |

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\* Less than one percent (1%).

(1) The address for each director and executive officer of NovaBay listed is c/o NovaBay Pharmaceuticals, Inc., 2000 Powell Street, Suite 1150, Emeryville, CA 94608. The number of shares beneficially owned and percent of class is calculated in accordance with SEC rules. A beneficial owner is deemed to beneficially own shares the beneficial owner has the right to acquire within sixty (60) days of March 17, 2026. For purposes of calculating the percent of class held by a single beneficial owner, the shares that such beneficial owner has the right to acquire within sixty (60) days of March 17, 2026 are also deemed to be outstanding; however, such shares are not deemed to be outstanding for purposes of calculating the percentage ownership of any other beneficial owner.

(2) Consists of 11,361,216 shares of Common Stock held by R01 Fund LP. Does not include 540,541 shares of Common Stock issuable upon the exercise of the October Pre-Funded Warrants and 53,670,974 shares of Common Stock issuable upon the exercise of the 2026 Pre-Funded Warrants, as the exercise of such warrants is subject to a 9.99% beneficial ownership limitation that restricts the holder from exercising the warrants to the extent such exercise would result in the holder beneficially owning more than 9.99% of the Company's outstanding Common Stock and no portion of the 2026 Pre-Funded Warrants will not become exercisable until July 16, 2026. The shares of Common Stock may also be deemed to be beneficially owned by R01 Capital LLC, R01 Capital Manager LLC and Michael Kazley, each of which disclaims beneficial ownership of such shares except to the extent of its or his pecuniary interest therein, if any. R01 Capital LLC is the general partner of R01 Fund LP. R01 Capital Manager LLC is the investment manager for R01 Capital. Michael Kazley is the managing member of R01 Capital Manager LLC..

(3) Consists of 11,361,216 shares of Common Stock held by Framework Ventures IV L.P. Does not include 540,541 shares of Common Stock issuable upon the exercise of the October Pre-Funded Warrants and 50,109,253 shares of Common Stock issuable upon the exercise of the 2026 Pre-Funded Warrants, as the exercise of such warrants is subject to a 9.99% beneficial ownership limitation that restricts the holder from exercising the warrants to the extent such exercise would result in the holder beneficially owning more than 9.99% of the Company's outstanding Common Stock and no portion of the 2026 Pre-Funded Warrants will not become exercisable until July 16, 2026. The shares of Common Stock may also be deemed to be beneficially owned by Framework Ventures IV GP LLC, Framework Ventures Management LLC, Michael Anderson and Vance Spencer, each of whom disclaims beneficial ownership of such shares except to the extent of his or its pecuniary interest therein, if any. Framework Ventures IV GP LLC is the general partner of Framework Ventures IV L.P. Framework Ventures Management LLC is the investment manager of Framework Ventures IV LP. Michael Anderson and Vance Spencer are members and managers of Framework Ventures IV GP LLC and the managing members of Framework Ventures Management LLC.

(4) Consists of (i) 206 shares of Common Stock held directly by Dr. Freiman and (ii) 1 share of Common Stock held by the Paul Freiman and Anna Mazzuchi Freiman Trust, of which Dr. Freiman and his spouse are trustees (with sole voting power over 1 share, shared voting power over 1 share, sole investment power over no shares and shared investment power over 1 shares).

(5) Consists of 172 shares of Common Stock held directly by Ms. Sit.

(6) Consists of 172 shares of Common Stock held directly by Dr. Jeff Zheng.

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**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

**Certain Relationships and Related Party Transactions**

NovaBay's Audit Committee has the responsibility of reviewing any possible related party transactions. In conducting its review, the Audit Committee applies the principles of the Code of Ethics and its Conflict of Interest Policy to: (i) the relationship of the related persons to the transaction; (ii) the relationship between the Company and the related persons; (iii) the importance of the interest to the related persons; and (iv) the amount involved in the transaction. Since December 31, 2023, there has not been any transaction, nor is there any proposed transaction, in which NovaBay was a participant, and in which a "related party" of NovaBay had or is expected to have a direct or indirect material interest, in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent (1%) of the average of NovaBay's total assets at the end of the last two (2) completed fiscal years, that would require disclosure, except for the following:

***Consulting Agreement***

In connection with the closing of the Avenova Asset Sale, we entered into the PRN Transition Services Agreement with PRN, pursuant to which we agreed to provide services to PRN with respect to specified accounting, marketing, sales, customer service, regulatory and operational support for a period of four (4) months after the closing of the Avenova Asset Sale in exchange for agreed upon service fees to be paid to us. As part of the PRN Transaction Services Agreement, PRN entered into a consulting agreement with Tommy Law, our Chief Financial Officer, for certain services with a one-time payment of $85,000 to be made by PRN to Mr. Law when all such services are complete.

***October 2025 Pre-Funded Warrant Issuance.***

On October 16, 2025, the Company issued and sold the October Pre-Funded Warrants to purchase an aggregate of 1,081,082 shares of the Company's Common Stock (or 540,541 shares to each of R01 Fund LP and Framework Ventures IV L.P.) in two transactions for aggregate gross proceeds of approximately $6,000,000. On the original issuance date, the purchase price was $5.50 per October Pre-Funded Warrant, representing 110% of the closing price of the common stock on the day before the issuance, less the $0.05 exercise price for each such October Pre-Funded Warrant. The October Pre-Funded Warrants are exercisable for shares of common stock at any time after January 1, 2026, subject to receipt of stockholder approval. Our Chief Executive Officer and Chairman of our Board of Directors, Michael Kazley, is the managing member of R01 Capital Manager LLC. R01 Capital Manager LLC is the investment manager for R01 Capital LLC, and R01 Capital LLC is the general partner of R01 Fund LP. Accordingly, the issuance of the October Pre-Funded Warrants to R01 Fund LP constituted a related party transaction. The October Pre-Funded Warrants were issued and sold in transactions exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D.

***January 2026 Pre-Funded Warrant Issuance***

In connection with the private placement announced on January 16, 2026 (the "Private Placement"), R01 Fund LP and Framework Ventures IV L.P. purchased 2026 Pre-Funded Warrants to purchase 53,679,974 and 50,109,253 shares, respectively, of the Company's Common Stock at a purchase price of $0.85 per share underlying the warrants. This amounted to contributions of approximately 698,276,083 SKY tokens from R01 Fund LP, and a combination of $25,000,000 and 245,323,607 SKY tokens from Framework Ventures IV L.P., equating to total contributions of approximately $45.4 million and $41.0 million from R01 and Framework, respectively. The Private Placement generated aggregate gross proceeds of approximately $138.4 million, including $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 $61.4million). The value of the stablecoins and SKY tokens was determined based on their approximate respective fair values as of the closing date of the Private Placement. Once the 2026 Pre-Funded Warrants become fully exercisable, we expect that R01 Fund LP and Framework Ventures IV L.P. will control approximately 34% and 32%, respectively, of our outstanding Common Stock. Our Chief Executive Officer and Chairman of our Board of Directors, Michael Kazley, is the managing member of R01 Capital Manager LLC. R01 Capital Manager LLC is the investment manager for R01 Capital LLC, and R01 Capital LLC is the general partner of R01 Fund LP. Accordingly, the investment by R01 Fund LP constituted a related party transaction. The terms of the securities sold to R01 Fund LP and Framework Ventures IV L.P. were the same as those offered to the other investors participating in the Private Placement. The 2026 Pre-Funded Warrants were issued and sold in transactions exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D.

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***Consulting Services***

During the year ended December 31, 2025, the Company engaged an employee of R01 Fund LP, a significant stockholder of the Company, to provide consulting services related to general corporate matters and digital asset treasury operations. The consulting agreement provides for a monthly fee of $25 thousand and continues until terminated by either party. Total fees paid by the Company for these services were approximately $53 thousand during the year ended December 31, 2025.

Michael Kazley, the Company's Chief Executive Officer and Chairman of the Board, is the managing member of R01 Capital Manager LLC, the investment manager for R01 Capital LLC, which serves as the general partner of R01 Fund LP. Accordingly, the consulting arrangement constituted a related party transaction.

***Investors***' ***Rights***

In connection with the Private Placement, 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 (i) R01, Framework and Sky Frontier Foundation customary demand rights for their shares of Common Stock underlying the 2026 Pre-Funded Warrants, (ii) customary piggyback registration rights for all of the Purchasers and (iii) 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.

**Independence of Directors**

Our Board has reviewed the independence of our directors using the NYSE American independence standards. Based on this review, we have determined that each of Dr. Freiman, Ms. Sit and Dr. Jeff Zheng satisfies the requirements for "independence" as defined in the NYSE American Company Guide. The remaining directors, who are not independent, do not and will not serve on any committees of the Board as long as they are not independent.

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

**Fees Paid to Independent Registered Public Accounting Firm**

WithumSmith+Brown, PC ("**Withum**") served as the Company's independent registered public accounting firm through January 2026. As previously disclosed in Current Reports on Form 8-K filed January 27, 2026 and January 29, 2026, the Company engaged CBIZ CPAs P.C. ("**CBIZ**") as its independent registered public accounting firm.

The following table sets forth the fees billed or expected to be billed to the Company for the fiscal years ended December 31, 2025 and 2024.

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| | | |
|:---|:---|:---|
|  | **2025** | **2024** |
| Audit Fees – CBIZ | $301875 | $― |
| Audit Fees – Withum | 230440 | 492960 |
| Total Fees | $532315 | $492960 |

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Audit fees consist of fees billed or expected to be billed for professional services rendered and related out-of-pocket expenses incurred in connection with the audit and quarterly reviews of our consolidated financial statements and other engagements, such as review of documents filed with the SEC, including fees associated with the review of registration statements, comfort letters and consents.

**Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services**

All engagements for services by the Company's independent registered public accounting firms are subject to prior approval by the Audit Committee; however, de minimis non-audit services may be approved in accordance with applicable SEC rules. The Audit Committee approved all services provided by the Company's independent registered public accounting firms for the fiscal years ended December 31, 2025 and December 31, 2024.

------

[**Table of Contents**](#toc)

**PART IV**

---

| | |
|:---|:---|
| **ITEM 15.**  | **EXHIBITS, FINANCIAL STATEMENT SCHEDULES** |

---

(a) Documents filed as part of this annual report:

(1) *Financial Statements*. The financial statements listed in the Index for Item 8 hereof are filed as part of this annual report.

(2) *Financial Statement Schedules*. All schedules have been omitted because they are not required or the required information is included in our Consolidated Financial Statements and notes thereto in Item 8 above.

(3) *Exhibits*. The following exhibits are filed as part of this Annual Report on Form 10-K:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Incorporation by Reference** | **Incorporation by Reference** | **Incorporation by Reference** | **Incorporation by Reference** | **Incorporation by Reference** | **Filed**<br> **Herewith** |
| **Exhibit**<br> **Number** | **Exhibit Description** | **Form** | **File**<br> **Number** | **Exhibit/**<br> **Form 8-K**<br> **Item**<br> **Reference** | **Filing**<br> **Date** |  |
| 2.1 | [<u>Membership Unit Purchase Agreement dated September 27, 2021, by and among the Company, DERMAdoctor, the Founders and the Sellers (as defined therein)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774921022779/ex_286899.htm) | 8-K | 001-33678 | 2.1 | 9/28/2021 |  |
| 2.2 | [<u>Membership Unit Purchase Agreement dated March 12, 2024, by and among NovaBay Pharmaceuticals, Inc., DERMAdoctor, LLC and New Age Investments, LLC</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924007754/ex_639108.htm) | 8-K | 001-33678 | 2.1 | 03/14/2024 |  |
| 2.3\* | [<u>Asset Purchase Agreement, dated September 19, 2024, by and among NovaBay Pharmaceuticals, Inc. and PRN Physician Recommended Nutriceuticals, LLC</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924029642/ex_725605.htm) | 8-K | 001-33678 | 2.1 | 9/20/2024 |  |
| 2.4\* | [<u>Amendment No. 1 to Asset Purchase Agreement, dated as of November 5, 2024, between PRN Physician Recommended Nutriceuticals, LLC and NovaBay Pharmaceuticals, Inc.</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774924033650/ex_743011.htm) | 8-K | 001-33678 | 2.1 | 11/06/2024 |  |
| 2.5\* | [<u>Trademark Acquisition Agreement, dated January 3, 2025, by and between NovaBay Pharmaceuticals, Inc. and Phase One Health, LLC</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925000796/ex_762783.htm) | 8-K | 001-33678 | 2.1 | 1/10/2025 |  |
| 3.1 | [<u>Amended and Restated Certificate of Incorporation of NovaBay Pharmaceuticals, Inc.</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774918005177/ex_107885.htm) | 10-K | 001-33678 | 3.1 | 3/21/2018 |  |
| 3.2 | [<u>Amendment to the Amended and Restated Certificate of Incorporation, dated June 4, 2018</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774918011215/ex_115851.htm) | 8-K | 001-33678 | 3.1 | 6/04/2018 |  |
| 3.3 | [<u>Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 27, 2020</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920011939/ex_188182.htm) | 8-K | 001-33678 | 3.1 | 5/28/2020 |  |
| 3.4 | [<u>Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 24, 2021</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774921013167/ex_252546.htm) | 8-K | 001-33678 | 3.1 | 5/24/2021 |  |
| 3.5 | [<u>Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated January 31, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922002101/ex_330469.htm) | 8-K | 001-33678 | 3.1 | 2/1/2022 |  |
| 3.6 | [<u>Amendment to Amended and Restated Certificate of Incorporation, as amended, dated November 14, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922027767/ex_448350.htm) | 8-K | 001-33678 | 3.1 | 11/18/2022 |  |
| 3.7 | [<u>Amendment to the Amended and Restated Certificate of Incorporation, as amended, dated May 30, 2024</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774924018930/ex_681989.htm) | 8-K | 001-33678 | 3.1 | 5/31/2024 |  |
| 3.8 | [<u>Certificate of Designation for the Series B Preferred Stock</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774921024705/ex_300010.htm) | 8-K | 001-33678 | 3.1 | 11/1/2021 |  |
| 3.9 | [<u>Certificate of Designation for the Series C Preferred Stock</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922027767/ex_448351.htm) | 8-K | 001-33678 | 3.2 | 11/18/2022 |  |
| 3.10 | [<u>Bylaws, as amended and restated effective June 13, 2023</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923017421/ex_533113.htm) | 8-K | 001-33678 | 3.1 | 6/14/2023 |  |
| 4.1 | [Description of Securities](ex_932889.htm) |  |  |  |  | X |
| 4.2 | [<u>Form of Warrant pursuant to the Services Agreement with TLF Bio Innovation Lab, LLC, dated May 13, 2020</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920011168/ex_186813.htm) | 8-K | 001-33678 | 4.1 | 5/18/2020 |  |
| 4.3 | [<u>Form of July 2020 Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920015464/ex_194651.htm) | 8-K | 001-33678 | 4.1 | 7/21/2020 |  |
| 4.4 | [<u>Form of Amended July 2020 Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422213.htm) | 8-K | 001-33678 | 4.1 | 9/13/2022 |  |
| 4.5 | [<u>Form of Amended November 2021 Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422214.htm) | 8-K | 001-33678 | 4.2 | 9/13/2022 |  |
| 4.6 | [<u>Form of September 2022 Warrant (2020 participants)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422215.htm) | 8-K | 001-33678 | 4.3 | 9/13/2022 |  |
| 4.7 | [<u>Form of September 2022 Warrant (2021 participants)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422216.htm) | 8-K | 001-33678 | 4.4 | 9/13/2022 |  |
| 4.8 | [<u>Form of Series A-1 Long-Term Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422217.htm) | 8-K | 001-33678 | 4.5 | 9/13/2022 |  |
| 4.9 | [<u>Form of Series A-2 Short-Term Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422218.htm) | 8-K | 001-33678 | 4.6 | 9/13/2022 |  |
| 4.10 | [<u>Form of Original Issue Discount Secured Senior Convertible Debentures</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508269.htm) | 8-K | 001-33678 | 4.1 | 4/27/2023 |  |
| 4.11 | [<u>Form of Series B-1 Long-Term Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508270.htm) | 8-K | 001-33678 | 4.2 | 4/27/2023 |  |
| 4.12 | [<u>Form of Series B-2 Short-Term Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508271.htm) | 8-K | 001-33678 | 4.3 | 4/27/2023 |  |
| 4.13 | [<u>Form of Warrant Amendment Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508272.htm) | 8-K | 001-33678 | 4.4 | 4/27/2023 |  |

---

------

[**Table of Contents**](#toc)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 4.14 | [<u>Form of Series C Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923035032/ex_608120.htm) | 8-K | 001-33678 | 4.1 | 12/21/2023 |
| 4.15 | [<u>Form of Series D Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009117/ex_644165.htm) | 8-K | 001-33678 | 4.2 | 3/25/2024 |
| 4.16 | [<u>Form of Series E Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774924020277/ex_688392.htm) | 8-K | 001-33678 | 4.1 | 6/14/2024 |
| 4.17 | [<u>Form of Unsecured Convertible Notes</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009117/ex_644166.htm) | 8-K | 001-33678 | 4.3 | 3/25/2024 |
| 4.18 | [<u>Form of Pre-Funded Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704468.htm) | 8-K | 001-33678 | 4.4 | 7/29/2024 |
| 4.19 | [<u>Form of Series F-1 Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704465.htm) | 8-K | 001-33678 | 4.1 | 7/29/2024 |
| 4.20 | [<u>Form of Series F-2 Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704466.htm) | 8-K | 001-33678 | 4.2 | 7/29/2024 |
| 4.21 | [<u>Form of Series F-3 Common Stock Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704467.htm) | 8-K | 001-33678 | 4.3 | 7/29/2024 |
| 4.22 | [<u>Form of Pre-Funded Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774926001459/ex_908513.htm) | 8-K | 001-33678 | 4.1 | 1/16/2026 |
| 4.23 | [<u>Form of October 2025 Pre-Funded Warrant</u>](http://www.sec.gov/Archives/edgar/data/1389545/000182912625008237/novabay_ex4-1.htm) | 8-K | 001-33678 | 4.1 | 10/20/2025 |
| 10.1 | [<u>Director and Officer Indemnity Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922007543/ex_346224.htm) | 10-K | 001-33678 | 10.1 | 3/29/2022 |
| 10.2+ | [NovaBay Pharmaceuticals, Inc. 2007 Omnibus Incentive Plan (as amended and restated)](http://www.sec.gov/Archives/edgar/data/1389545/000143774917001041/ex99-1.htm) | S-8 | 333-215680 | 99.1 | 1/24/2017 |
| 10.3+ | [<u>NovaBay Pharmaceuticals, Inc. 2017 Omnibus Incentive Plan</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774917010557/ex99-1.htm) | S-8 | 333-218469 | 99.1 | 6/02/2017 |
| 10.4+ | [<u>NovaBay Pharmaceuticals, Inc. 2017 Omnibus Incentive Plan (Form Agreements to the 2017 Omnibus Incentive Plan)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774917010557/ex99-2.htm) | S-8 | 333-218469 | 99.2 | 6/02/2017 |
| 10.5+ | [<u>Executive Employment Agreement (Employment Agreement of Justin M. Hall)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920001861/ex_171553.htm) | 8-K | 001-33678 | 10.1 | 2/6/2020 |
| 10.6+ | [First Amendment to the Executive Employment Agreement with Justin M. Hall, dated January 26, 2022](http://www.sec.gov/Archives/edgar/data/1389545/000143774922001821/ex_325549.htm) | 8-K | 001-33678 | 10.6 | 1/28/2022 |
| 10.7+ | [<u>Second Amendment to Executive Employment Agreement with Justin M. Hall, effective December 31, 2023</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923034081/ex_604715.htm) | 8-K | 001-33678 | 10.3 | 12/11/2023 |
| 10.8+ | [<u>Third Amendment to Executive Employment Agreement with Justin M. Hall, effective December 31, 2024</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774925001566/ex_767713.htm) | 8-K | 001-33678 | 10.4 | 1/22/2025 |
| 10.9+ | [<u>2024 Non-Employee Director Compensation Plan</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009417/ex_643824.htm) | 10-K | 001-33678 | 10.8 | 3/26/2024 |
| 10.10 | [<u>Office Lease (between the Company and KBSIII Towers at Emeryville, LLC)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774916038133/ex10-1.htm) | 8-K | 001-33678 | 10.1 | 8/26/2016 |
| 10.11 | [<u>First Amendment to Office Lease by and between the Company and KBSIII Towers at Emeryville, LLC, dated January 24, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922001821/ex_325548.htm) | 8-K | 001-33678 | 10.2 | 1/28/2022 |
| 10.12† | [<u>International Distribution Agreement (by and between the Company and Pioneer Pharma Co. Ltd.)</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774912002793/ex10-18.htm) | 10-K | 001-33678 | 10.18 | 3/27/2012 |
| 10.13 | [<u>Form of Exercise Agreement with Holders of 2019 Domestic Warrants</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920015464/ex_194652.htm) | 8-K | 001-33678 | 10.1 | 7/21/2020 |
| 10.14 | [<u>Form of Exercise Agreement with Holders of 2019 Foreign Warrants</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920015464/ex_194653.htm) | 8-K | 001-33678 | 10.2 | 7/21/2020 |
| 10.15 | [<u>Form of Reprice Agreement with Ladenburg</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774920015464/ex_194654.htm) | 8-K | 001-33678 | 10.3 | 7/21/2020 |
| 10.16 | [<u>Form of Securities Purchase Agreement, dated October 29, 2021</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774921024705/ex_300009.htm) | 8-K | 001-33678 | 1.1 | 11/01/2021 |
| 10.17 | [<u>Form of Registration Rights Agreement, dated October 29, 2021</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774921024705/ex_300012.htm) | 8-K | 001-33678 | 10.1 | 11/01/2021 |
| 10.18\* | [Form of 2020 Warrant Reprice Letter Agreement, dated September 9, 2022](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422219.htm) | 8-K | 001-33678 | 10.1 | 9/13/2022 |
| 10.19\* | [<u>Form of 2021 Warrant Reprice Letter Agreement, dated September 9, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422220.htm) | 8-K | 001-33678 | 10.2 | 9/13/2022 |
| 10.20 | [<u>Form of Securities Purchase Agreement, dated September 9, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422221.htm) | 8-K | 001-33678 | 10.3 | 9/13/2022 |
| 10.21 | [<u>Form of Registration Rights Agreement, dated November 18, 2022</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774922022258/ex_422222.htm) | 8-K | 001-33678 | 10.4 | 9/13/2022 |

---

------

[**Table of Contents**](#toc)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| 10.22+ | [<u>Consulting Agreement between the Company and Andrew Jones, dated February 15, 2023</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923008843/ex_486069.htm) | 10-K | 001-33678 | 10.33 | 3/31/2023 |  |
| 10.23 | [<u>Form of Letter Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923035032/ex_608121.htm) | 8-K | 001-33678 | 10.1 | 12/21/2023 |  |
| 10.24 | [<u>Form of Securities Purchase Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508273.htm) | 8-K | 001-33678 | 10.1 | 4/27/2023 |  |
| 10.25\* | [<u>Form of Security Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508274.htm) | 8-K | 001-33678 | 10.2 | 4/27/2023 |  |
| 10.26\* | [<u>Form of First Amendment to the Security Agreement, dated March 24, 2024</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009117/ex_644163.htm) | 8-K | 001-33678 | 10.3 | 3/25/2024 |  |
| 10.27 | [<u>Form of Subsidiary Guarantee</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508275.htm) | 8-K | 001-33678 | 10.3 | 4/27/2023 |  |
| 10.28\* | [<u>Form of Consent and Release, dated March 24, 2024</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009117/ex_644164.htm) | 8-K | 001-33678 | 10.4 | 3/25/2024 |  |
| 10.29 | [<u>Form of Voting Commitment</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508276.htm) | 8-K | 001-33678 | 10.4 | 4/27/2023 |  |
| 10.30 | [<u>Form of Registration Rights Agreement</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774923011416/ex_508277.htm) | 8-K | 001-33678 | 10.5 | 4/27/2023 |  |
| 10.31 | [<u>Form of Letter Agreement, dated June 14, 2024</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774924020277/ex_688393.htm) | 8-K | 001-33678 | 10.1 | 6/14/2024 |  |
| 10.32\* | [<u>Underwriting Agreement, dated July 26, 2024, by and between the Company and Ladenburg Thalmann & Co., Inc.</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704469.htm) | 8-K | 001-33678 | 1.1 | 7/29/2024 |  |
| 10.33 | [<u>Warrant Agency Agreement, dated July 29, 2024, by and between the Company and Equiniti Trust Company, LLC</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924023740/ex_704464.htm) | 8-K | 001-33678 | 10.1 | 7/29/2024 |  |
| 10.34\* | [<u>Secured Promissory Note, dated as of November 5, 2024, between NovaBay Pharmaceuticals, Inc., as borrower, and PRN Physician Recommended Nutriceuticals, LLC, as lender.</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774924033650/ex_743012.htm) | 8-K | 001-33678 | 10.1 | 11/06/2024 |  |
| 10.35 | [<u>Transition Services Agreement, dated as of January 3, 2025, by and between NovaBay Pharmaceuticals, Inc. and Phase One Health, LLC</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925000796/ex_762784.htm) | 8-K | 001-33678 | 10.1 | 1/10/2025 |  |
| 10.36 | [<u>Engagement Agreement, dated March 4, 2025, by and between NovaBay Pharmaceuticals, Inc. and Lucid Capital Markets, LLC</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925006555/ex_786880.htm) | 8-K | 001-33678 | 10.1 | 3/7/2025 |  |
| 10.37\* | [<u>Settlement and Release Agreement, dated March 5, 2025, by and between NovaBay Pharmaceuticals, Inc. and Sabby Volatility Warrant Master Fund Ltd.</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925007045/ex_787934.htm) | 8-K | 001-33678 | 10.1 | 3/11/2025 |  |
| 10.38\* | [<u>Settlement and Release Agreement, dated March 10, 2025, by and between NovaBay Pharmaceuticals, Inc. and Bigger Capital Fund, LP</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925007045/ex_787935.htm) | 8-K | 001-33678 | 10.2 | 3/11/2025 |  |
| 10.39\* | [<u>Settlement and Release Agreement, dated March 10, 2025, by and between NovaBay Pharmaceuticals, Inc. and District 2 Capital Fund LP</u>](http://www.sec.gov/Archives/edgar/data/0001389545/000143774925007045/ex_787936.htm) | 8-K | 001-33678 | 10.3 | 3/11/2025 |  |
| 10.40 | [<u>Amended and Restated Employment Agreement, dated August 19, 2025, by and between the Company and Justin Hall</u>](http://www.sec.gov/Archives/edgar/data/1389545/000182912625006520/novabay_ex10-6.htm) | 8-K | 001-33678 | 10.6 | 8/19/2025 |  |
| 10.41 | [<u>Employment Agreement, dated August 19, 2025, by and between the Company and Tommy Law</u>](http://www.sec.gov/Archives/edgar/data/1389545/000182912625006520/novabay_ex10-7.htm) | 8-K | 001-33678 | 10.7 | 8/19/2025 |  |
| 10.42 | [<u>Settlement Agreement and General and Mutual Release, dated August 19, 2025, by and between the Company and Justin Hall</u>](http://www.sec.gov/Archives/edgar/data/1389545/000182912625006520/novabay_ex10-8.htm) | 8-K | 001-33678 | 10.8 | 8/19/2025 |  |
| 10.43 | [<u>Form of Settlement Agreement and General and Mutual Release with Resigning Non-Employee Directors</u>](http://www.sec.gov/Archives/edgar/data/1389545/000182912625006520/novabay_ex10-9.htm) | 8-K | 001-33678 | 10.9 | 8/19/2025 |  |
| 10.44 | [<u>ATM Sales Agreement, by and between NovaBay Pharmaceuticals, Inc. and Virtu Americas LLC, dated January 20, 2026</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774926001490/ex_909459.htm) | 8-K | 001-33678 | 1.1 | 1/20/2026 |  |
| 10.45 | [Securities Purchase Agreement, by and among NovaBay Pharmaceuticals, Inc., R01 Fund LP, Framework Ventures IV L.P., Tether Investments, S.A. de C.V. and Sky Frontier Foundation, dated January 16, 2026](ex_932869.htm) | 8-K | 001-33678 | 10.1 | 1/16/2026 | X |
| 10.46 | [Investors' Rights Agreement, by and among NovaBay Pharmaceuticals, Inc., R01 Fund LP, Framework Ventures IV L.P., Tether Investments, S.A. de C.V. and Sky Frontier Foundation, dated January 16, 2026](http://www.sec.gov/Archives/edgar/data/1389545/000143774926001459/ex_908523.htm) | 8-K | 001-33678 | 10.2 | 1/16/2026 |  |
| 10.47 | [Trademark Acquisition Agreement, dated January 3, 2025, by and between NovaBay Pharmaceuticals, Inc. and Phase One Health, LLC](http://www.sec.gov/Archives/edgar/data/1389545/000143774925000796/ex_762783.htm) | 8-K | 001-33678 | 2.1 | 1/10/2025 |  |
| 10.48+ | [Consulting Agreement between the Company and Henry Blynn, dated October 16, 2025.](ex_934966.htm) |  |  |  |  | X |
| 10.49+ | [First Amendment to Consulting Agreement by and between NovaBay Pharmaceuticals, Inc. and Henry Blynn, dated February 3, 2026.](ex_934973.htm) |  |  |  |  | X |
| 19 | [NovaBay Insider Trading Policy](ex_932890.htm) |  |  |  |  | X |
| 21 | [Subsidiaries of the Company](ex_931911.htm) |  |  |  |  | X |
| 23.1 | [Consent of WithumSmith+Brown PC](ex_931912.htm) |  |  |  |  | X |
| 23.2 | [Consent of CBIZ, Inc.](ex_932888.htm) |  |  |  |  | X |
| 31.1 | [Certification of the Principal Executive Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a)](ex_931913.htm) |  |  |  |  | X |
| 31.2 | [Certification of the Principal Financial Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a)](ex_931914.htm) |  |  |  |  | X |
| 32.1 | [Certification by the Chief Executive Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)](ex_931915.htm) |  |  |  |  | X |

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[**Table of Contents**](#toc)

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|:---|:---|:---|:---|:---|:---|:---|
| 32.2 | [Certification by the Chief Financial Officer of NovaBay Pharmaceuticals, Inc., as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350)](ex_931916.htm) |  |  |  |  | X |
| 97 | [<u>NovaBay Pharmaceuticals, Inc. Policy for Recoupment of Incentive Compensation</u>](http://www.sec.gov/Archives/edgar/data/1389545/000143774924009417/ex_642661.htm) | 10-K | 001-33678 | 97 | 3/26/2024 |  |
| 101.INS | Inline XBRL Instance Document |  |  |  |  | X |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document  |  |  |  |  | X |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  | X |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase |  |  |  |  | X |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document |  |  |  |  | X |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  | X |
| 104 | The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments) |  |  |  |  | X |

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| | |
|:---|:---|
| + | Indicates a management contract or compensatory plan or arrangement. |
| † | NovaBay Pharmaceuticals, Inc. has been granted confidential treatment with respect to certain portions of this exhibit (indicated by asterisks), which have been separately filed with the Securities and Exchange Commission. |
| \* | Certain schedule and exhibits were omitted as well as confidential portions of this exhibit by means of marking such portions with brackets because the confidential portions (i) are not material and the type of information that is typically treated as private or confidential and/or (ii) would be competitively harmful if publicly disclosed. |

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|:---|:---|
| **ITEM 15.**  | **FORM 10-K SUMMARY** |

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None.

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[**Table of Contents**](#toc)

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: March 19, 2026 |  |  |
|  | By: | /s/ Michael Kazley |
|  |  | Michael Kazley <br> Chief Executive Officer, Chairman of the Board<br> *(principal executive officer)* |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: March 19, 2026 |  |  |
|  | By: | /s/ Tommy Law |
|  |  | Tommy Law<br> Chief Financial Officer<br> *(principal financial officer)* |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: March 19, 2026 |  |  |
|  | By: | /s/ Paul E. Freiman |
|  |  | Paul E. Freiman, Ph.D<br> *(director)* |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: March 19, 2026 |  |  |
|  | By: | /s/ Swan Sit |
|  |  | Swan Sit<br> *(director)* |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Date: March 19, 2026 |  |  |
|  | By: | /s/ Yenyou (Jeff) Zheng |
|  |  | Yenyou (Jeff) Zheng<br> *(director)* |

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## Exhibit 4.1

**Exhibit 4.1**

**DESCRIPTION OF SECURITIES**

Our authorized capital stock consists of 5,000,000,000 shares of common stock, $0.01 par value per share ("Common Stock"), and 5,000,000 shares of preferred stock, $0.01 par value per share. A description of material terms and provisions of our Amended and Restated Certificate of Incorporation, as amended ("Certificate of Incorporation") and Bylaws, as amended and restated ("Bylaws") affecting the rights of holders of our capital stock is set forth below. The description is intended as a summary, and is qualified in its entirety by reference to our Certificate of Incorporation, our Bylaws, and the applicable provisions of the Delaware General Corporation Law ("DGCL").

On February 20, 2026, we effected a 1-for-5 reverse stock split and 5 shares of our outstanding Common Stock decreased to one share of Common Stock. Similarly, the number of shares of Common Stock issuable upon the exercise of outstanding stock options or warrants, the conversion of convertible preferred stock, or upon the vesting of outstanding restricted stock units, decreased on a 1-for-5 basis and the exercise price of each outstanding option and warrant increased proportionately.

**Common Stock**

*Dividend rights*. Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our Common Stock are entitled to receive dividends out of funds legally available if our Board of Directors (the "Board"), in its discretion, determines to issue dividends and then only at the times and in the amounts that our Board may determine.

*Voting rights*. Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders, except for a vote on any amendment to the Certificate of Incorporation (including any certificate of designation filed with respect to any series of preferred stock) that relates solely to the terms of one or more outstanding series of preferred stock, if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to the Certificate of Incorporation (including any certificate of designation filed with respect to any series of preferred stock). Our Certificate of Incorporation does not provide for the right of stockholders to cumulate votes for the election of directors. Our Certificate of Incorporation establishes a classified Board, divided into three classes with staggered three-year terms. Only one class of directors is elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.

*No preemptive or similar rights*. Our Common Stock is not entitled to preemptive rights and is not subject to conversion, redemption or sinking fund provisions. The rights, preferences and privileges of the holders of our Common Stock are subject to, and may be adversely affected by, the rights of the holders of any series of our preferred stock outstanding at the time or that we may designate and issue in the future.

*Right to receive liquidation distributions*. Upon our dissolution, liquidation or winding-up, the assets legally available for distribution to holders of our Common Stock are distributable ratably among the holders of our Common Stock, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of our preferred stock.

**Anti-takeover effects of provisions of our Certificate of Incorporation, our Bylaws and Delaware law**

*Our Certificate of Incorporation and Bylaws*

------

The foregoing provisions make it difficult for holders of our Common Stock to replace our Board. In addition, the authorization of undesignated preferred stock makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our Company.

*Section 203 of the DGCL*

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This section prevents some Delaware corporations from engaging, under some circumstances, in a business combination, which includes a merger or sale of at least 10% of the corporation's assets with any 'interested stockholder', meaning a stockholder who (i) owns 15% or more of the corporation's outstanding voting stock or (ii) is an affiliate or associate of the corporation and was the owner of 15% or more of the corporation's outstanding voting stock at any time within the three-year period prior to the determination of interested stockholder status, unless:

● the transaction is approved by the board of directors of the corporation prior to the time that the interested stockholder became an interested stockholder;

● upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or

● at or subsequent to such time that the stockholder became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders by at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

A Delaware corporation may "opt out" of these provisions with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. We do not plan to "opt out" of these provisions. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.

**Transfer Agent and Registrar**

Equiniti Trust Company, LLC, located in New York, NY, is the transfer agent and registrar for our Common Stock. The transfer agent's address is 28 Liberty Street, Floor 53, New York, NY 10005.

**Listing on the NYSE American**

Our Common Stock is listed on the NYSE American under the symbol "NBY."

## Exhibit 10.45

**Exhibit 10.45**

***Execution Version***

**SECURITIES PURCHASE AGREEMENT**

This Securities Purchase Agreement (this "<u>Agreement</u>") is dated as of January 16, 2026, between NovaBay Pharmaceuticals, Inc., a Delaware corporation (the "<u>Company</u>"), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a "<u>Purchaser</u>" and collectively, the "<u>Purchasers</u>").

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act (as defined below), and/or Rule 506 of Regulation D promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

**ARTICLE I**<br> **DEFINITIONS**

Section 1.1 <u>Definitions</u>. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings set forth in this <u>Section</u><u> </u><u>1.1</u>:

"<u>30-Day ADV</u>" means the average daily trading volume of the Common Stock for thirty (30) consecutive Trading Days immediately preceding the applicable Trading Day, as reported by the Company's principal Trading Market.

"<u>Acquiring Person</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>4.6</u>.

"<u>Action</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(j)</u>.

"<u>Affiliate</u>" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

"<u>Agreement</u>" shall have the meaning ascribed to such term in the Preamble.

"<u>BHCA</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(hh)</u>.

"<u>Board of Directors</u>" means the board of directors of the Company.

"<u>Board Recommendation</u>" means, with respect to any Covered Matter, the recommendation of the Board of Directors that the stockholders of the Company vote "for," "against" or "abstain" on such Covered Matter as set forth in the applicable proxy statement or other solicitation materials of the Company.

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"<u>Business Day</u>" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

"<u>Closing</u>" means the closing of the purchase and sale of the Securities pursuant to <u>Section</u><u> </u><u>2.1</u>.

"<u>Closing Date</u>" means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers' obligations to pay the Subscription Amount and (ii) the Company's obligations to deliver the Securities, in each case, have been satisfied or waived.

"<u>Commission</u>" means the United States Securities and Exchange Commission.

"<u>Common Stock</u>" means the common stock of the Company, $0.01 par value per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

"<u>Common Stock Authorization Proposal</u>" means approval by the stockholders of the Company at a special meeting of the stockholders of the Company of an increase in the aggregate amount of authorized shares of common stock from 1,500,000,000 to 5,000,000,000.

"<u>Common Stock Equivalents</u>" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

"<u>Company</u>" shall have the meaning ascribed to such term in the Preamble.

"<u>Covered Matters</u>" means (i) the Stockholder Approval (including the Issuance Proposals and the Common Stock Authorization Proposal), (ii) any adjournment or postponement proposals reasonably necessary to solicit additional proxies or votes for the matters described in clause (i), and (iii) any other proposal submitted to the stockholders of the Company during the Voting Support Period that, in the good faith judgment of the Board of Directors, is necessary in order to issue the Securities or the maintain of the Company's listing on its principal Trading Market; provided that Covered Matters shall exclude any Excluded Matters.

"<u>Digital Asset Consideration</u>" means, with respect to any Purchaser, the portion of such Purchaser's Subscription Amount, if any, elected to be paid in SKY, USDS and/or USDT in accordance with <u>Section</u><u> </u><u>2.1</u>.

"<u>Disclosure Time</u>" means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.

------

"<u>Designated Wallet</u>" means a digital asset wallet address designated in writing by the Company that is capable of receiving SKY, USDS and/or USDT, as applicable.

"<u>Disclosure Schedules</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1</u>.

"<u>Disqualification Event</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(oo)</u>.

"<u>Enforceability Exceptions</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(c)</u>.

"<u>Environmental Laws</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(m)</u>.

"<u>ERISA</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(tt)</u>.

"<u>ERISA Affiliate</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(tt)</u>.

"<u>Existing Holder</u>" means any Purchaser that, together with its Affiliates, beneficially owned shares of Common Stock or Common Stock Equivalents prior to the date of this Agreement.

"<u>Existing Holder Securities</u>" means, with respect to any Existing Holder, all shares of Common Stock and Common Stock Equivalents beneficially owned by such Existing Holder and its Affiliates, whether acquired prior to, on, or subsequent to the date of this Agreement, including the Securities acquired pursuant to this Agreement.

"<u>Evaluation Date</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(s)</u>.

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"<u>Excluded Matters</u>" means any proposal relating to (i) a merger, consolidation, business combination or similar transaction (other than a proposal included within the definition of Covered Matters), (ii) a liquidation, dissolution or winding up of the Company, (iii) the removal or election of directors (other than proposals necessary to maintain a quorum or as otherwise included within the definition of Covered Matters), or (iv) any matter for which the Board of Directors has changed, withdrawn or qualified the applicable Board Recommendation

"<u>FCPA</u>" means the Foreign Corrupt Practices Act of 1977, as amended.

"<u>Federal Reserve</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(hh)</u>.

"<u>GAAP</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(h)</u>.

"<u>GDPR</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(uu)</u>.

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"<u>Hazardous Materials</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(m)</u>.

"<u>Indebtedness</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(cc)</u>.

"<u>Intellectual Property Rights</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(p)</u>.

"<u>Investor Rights Agreement</u>" means that certain Investor Rights Agreement entered into on the date hereof by the Company and the Purchasers.

"<u>Issuance Proposals</u>" means the approval by the stockholders of the Company at a special meeting of the stockholders of the Company of (i) the issuance of securities in an aggregate amount equal to twenty percent (20%) or more of the presently outstanding common stock and (ii) the issuance of Pre-Funded Warrants to the Purchasers.

"<u>Issuer Covered Person</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(oo)</u>.

"<u>IT Systems and Data</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(ss)</u>.

"<u>Legend Removal Request Date</u>" shall have the meaning ascribed to such term in <u>Section 4.1(c)</u>.

"<u>Liens</u>" means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

"<u>Material Adverse Effect</u>" shall have the meaning assigned to such term in <u>Section</u><u> </u><u>3.1(b)</u>.

"<u>Material Permits</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(n)</u>.

"<u>Money Laundering Laws</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(ii)</u>.

"<u>New Sales Agreement</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>4.18</u>.

"<u>Non-Cash Amount</u>" means the Digital Asset Consideration.

"<u>NYSE</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>2.3(b)(viii)</u>.

"<u>OFAC</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(ff)</u>.

"<u>Outside Date</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>5.1(b)</u>.

"<u>PCAOB</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(jj)</u>.

------

"<u>Per Share Purchase Price</u>" means $0.17, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement and prior to the Closing Date, provided that the portion of the exercise price of each Pre-Funded Warrant that will be prefunded at the Closing and included in the Subscription Amount shall be the Per Share Purchase Price minus $0.01.

"<u>Person</u>" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"<u>Personal Data</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(uu)</u>.

"<u>Policies</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(uu)</u>.

"<u>Pre-Funded Warrants</u>" means collectively, the Pre-Funded Common Stock Purchase Warrants, each to purchase one share of Common Stock at a per share exercise price equal to the Per Share Purchase Price, with all but $0.01 of such exercise price, per share issuable to each Purchaser pursuant to this Agreement, prefunded at the Closing, each in the form of <u>Exhibit</u><u> </u><u>A</u>.

"<u>Privacy Laws</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(uu)</u>.

"<u>Proceeding</u>" means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"<u>Purchaser</u>" shall have the meaning ascribed to such term in the Preamble.

"<u>Purchaser Digital Wallet</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.2(k)</u>.

"<u>Purchaser Party</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>8</u>.

"<u>Required Approvals</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(e)</u>.

"<u>Rule 144</u>" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"<u>Rule 424</u>" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

"<u>SEC Reports</u>" shall have the meaning ascribed to such term in <u>Section</u><u> </u><u>3.1(h)</u>.

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"<u>Securities</u>" means the Shares and the Pre-Funded Warrants.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

"<u>Security Breach</u>" means any unauthorized access, acquisition, disclosure or loss of Personal Data in a manner that compromises the security, integrity, or confidentiality of Personal Data.

"<u>Shares</u>" means the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants.

"<u>Short Sales</u>" means all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).

"<u>SKY</u>" means Sky, the native governance token of the Sky Protocol, which is a decentralized protocol developed around USDS.

"<u>Stockholder Approval</u>" means the approval by the stockholders of the Company at a special meeting of the Issuance Proposals and the Common Stock Authorization Proposal.

"<u>Subject Securities</u>" means, with respect to any Purchaser, all shares of Common Stock or other voting securities of the Company that are owned, directly or indirectly, of record or beneficially by such Purchaser as of the relevant record date or are thereafter acquired by such Purchaser during the Voting Support Period.

"<u>Subscription Amount</u>" means, as to each Purchaser, the aggregate amount to be paid for the Shares and Pre-Funded Warrants purchased hereunder as specified below such Purchaser's name on the signature page of this Agreement and next to the heading "Subscription Amount," in United States dollars and in immediately available funds and/or delivery of Digital Asset Consideration, in each case as elected by the applicable Purchaser in accordance with <u>Section</u><u> </u><u>2.1</u> (excluding for the avoidance of doubt, if applicable, $0.01 of such Purchaser's aggregate exercise price of the Pre-Funded Warrants, which amounts shall be paid as and when such Pre-Funded Warrants are exercised for cash).

"<u>Subsidiary</u>" means any subsidiary of the Company as set forth in <u>S</u><u>chedule 3.1(a)</u> and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

"<u>Trading Day</u>" means a day on which the principal Trading Market is open for trading.

"<u>Trading Market</u>" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

------

"<u>Transaction</u>" shall mean the transaction contemplated by this Agreement.

"<u>Transaction Documents</u>" means this Agreement, the Investor Rights Agreement, the Pre-Funded Warrants and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

"<u>Transfer Agent</u>" means Equiniti Trust Company, LLC, with a mailing address of 28 Liberty Street, Floor 53, New York, NY 10005, email address of Suzanne.Bennett@equiniti.com, and any successor transfer agent of the Company.

"<u>USDS</u>" means a collateral-backed stablecoin pegged to the U.S. dollar.

"<u>USDT</u>" means a collateral-backed stablecoin pegged to the U.S. dollar.

"<u>Voting Support Period</u>" means the period beginning on the date of this Agreement and ending on the earliest to occur of (i) the date that is twelve (12) months following the Closing Date, (ii) the date on which all Covered Matters submitted for a stockholder vote during such period have been finally voted upon and (iii) the termination of this Agreement pursuant to <u>Section</u><u> </u><u>5.1</u>.

"<u>Warrant Pool</u>" shall have the meaning ascribed to such term in <u>Schedule 3.1(g)</u>.

**ARTICLE II**<br> **PURCHASE AND SALE**

Section 2.1 <u>Closing</u>. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, an aggregate of $134,031,381 of Pre-Funded Warrants, at the Per Share Purchase Price. Each Purchaser shall deliver (i) to the Company via wire transfer immediately available funds in cash, and/or (ii) to the Designated Wallet via transfer funds in SKY, USDS and/or USDT, in each case, in an aggregate amount equal to such Purchaser's Subscription Amount as set forth on the signature page hereto executed by such Purchaser. If the Purchaser elects to pay all or a portion of the Subscription Amount in SKY, then the value of SKY shall be treated as functionally equivalent to U.S. dollars, with a fixed exchange rate of $0.0615. If the Purchaser elects to pay all or a portion of the Subscription Amount in USDS, such USDS shall be valued at U.S. $1.00 per $1.00 USDS for all purposes of this Agreement. If the Purchaser elects to pay all or a portion of the Subscription Amount in USDT, such USDT shall be valued at U.S. $1.00 per $1.00 USDT for all purposes of this Agreement. In respect of each Purchaser, the portion of the Subscription Amount to be paid in SKY, USDS and/or USDT shall be referred to as the "<u>Non-Cash Amount</u>" or "<u>Digital Asset Consideration</u>." At the Closing, following the delivery of the Subscription Amounts to the Company, the Company shall deliver to each Purchaser its Pre-Funded Warrants as determined pursuant to <u>Section</u><u> </u><u>2.2(a)</u>, and the Company and each Purchaser shall deliver the other items set forth in <u>Section</u><u> </u><u>2.2</u> deliverable at the Closing. The Closing shall occur remotely by the electronic exchange of documents and signatures. In the event that the Closing does not occur within five (5) Business Days after the date hereof, upon the request of one or more Purchasers, the Company shall promptly (but not later than two (2) Business Days thereafter) return the previously wired or transferred Subscription Amount to such respective Purchaser by wire transfer of United States dollars in immediately available funds, SKY, USDS and/or USDT, in each case, in the same form of consideration received as the Subscription Amount from such Purchaser (cash, SKY, USDS and/or USDT), to the account or digital wallet specified by such Purchaser, and any book entries for the Shares or Pre-Funded Warrants contemplated to be issued to such Purchaser shall be deemed cancelled.

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Section 2.2 <u>Deliveries</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to create a share reserve, which will reserve the aggregate number of Shares equal to the Purchasers' aggregate Subscription Amount divided by the Per Share Purchase Price, such transfer agent instructions to have been previously reviewed by the Transfer Agent prior to delivery hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) for each Purchaser of Pre-Funded Warrants pursuant to <u>Section</u><u> </u><u>2.1</u>, a Pre-Funded Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to the portion of such Purchaser's Subscription Amount applicable to Pre-Funded Warrants divided by the Per Share Purchase Price (minus $0.01), with an exercise price prefunded at the Closing and included in such Subscription Amount (other than $0.01 per share of Common Stock, subject to adjustment therein);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) as applicable, (x) if the Subscription Amount is to be paid in cash, the Company shall have provided each Purchaser with the Company's wire instructions on Company letterhead and executed by the Company's Chief Executive Officer or Chief Financial Officer or (y) if the Subscription Amount is to be paid in SKY,USDS and/or USDT, the Company shall have provided each Purchaser with the Designated Wallet on Company letterhead and executed by the Company's Chief Executive Officer or Chief Financial Officer, in each case at least two (2) Business Days prior to the Closing Date; and the Investor Rights Agreement duly executed by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) this Agreement duly executed by such Purchaser;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) (x) if the Subscription Amount is to be paid in cash, such Purchaser's Subscription Amount by wire transfer to the account specified in writing by the Company and/or (y) if the Subscription Amount is to be paid in SKY, USDS and/or USDT, such Purchaser's Subscription Amount by transfer of the Non-Cash Amount to the Designated Wallet (with the applicable digital asset(s) and amount(s) specified in writing by such Purchaser); and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Investor Rights Agreement, duly executed by such Purchaser.

Section 2.3 <u>Closing Conditions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The obligations of the Company hereunder in connection with the Closing are subject to the satisfaction or waiver in writing of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless such representation or warranty is expressly made as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) as of such date);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by each Purchaser of the items set forth in <u>Section</u><u> </u><u>2.2(b)</u> of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The respective obligations of each Purchaser hereunder in connection with the Closing are subject to the satisfaction or waiver in writing of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless such representation or warrants is expressly made as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) as of such date);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed or complied with in all material respects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the delivery by the Company of the items set forth in <u>Section</u><u> </u><u>2.2(a)</u> of this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) evidence of insurance coverage to the reasonable satisfaction of each Purchaser based on advice of counsel in light of the operations of the Company as disclosed in the Form 8-K relating to this Agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) from the date hereof to and including the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company's principal Trading Market and, at any time prior to and including the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities. Notwithstanding the foregoing, this Subsection (v) shall not be construed to include suspension of trading of the Common Stock in the Company's principal Trading Market on the date hereof for the purpose of disclosure of this Agreement and the Transaction Documents, nor shall there have occurred any material outbreak or significant escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, makes it impracticable or inadvisable to purchase the Pre-Funded Warrants at the Closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) the Company shall have filed with NYSE American LLC ("<u>NYSE</u>") a Notification Form: Listing of Additional Shares Application with respect to the Shares; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) a duly executed certificate of the Company's Chief Executive Officer or Chief Financial Officer, dated as of the Closing Date, certifying as to the fulfillment of the conditions specified in <u>Section</u><u> </u><u>2.3(b)(i)</u>, <u>Section</u><u> </u><u>2.3(b)(ii)</u>, <u>Section</u><u> </u><u>2.3(b)(iv)</u> and <u>Section</u><u> </u><u>2.3(b)(vii)</u>.

**ARTICLE III**<br> **REPRESENTATIONS AND WARRANTIES**

Section 3.1 <u>Representations and Warranties of the Company</u>. Except as set forth in the disclosure schedules to this Agreement delivered by the Company to the Purchasers dated as of the date hereof (the "<u>Disclosure Schedules</u>"), the Company hereby represents and warrants as of the date hereof and as of the Closing Date to each Purchaser as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Subsidiaries</u>. All of the direct and indirect subsidiaries of the Company are set forth on <u>S</u><u>chedule 3.1(a)</u>. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Organization and Qualification</u>. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of or default under any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary. No Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification, except as would not reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "<u>Material Adverse Effect</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Authorization; Enforcement</u>. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company's stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which the Company is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law (collectively, the "<u>Enforceability Exceptions</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>No Conflicts</u>. Except as set forth on <u>Schedule 3.1(d)</u>, the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments (whether automatic or upon making of an election or otherwise), acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Filings, Consents and Approvals</u>. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or regulatory authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to <u>Section</u><u> </u><u>4.10</u> of this Agreement, (ii) the notice and/or application(s), if any, to each applicable Trading Market for the issuance and sale of the Securities and (iii) obtaining the Stockholder Approval (collectively, the "<u>Required Approvals</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Issuance of the Securities</u>. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Capitalization</u>. The authorized shares of capital stock of the Company as of the date hereof is as set forth on <u>Schedule 3.1(g)</u>. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company's stock incentive plans, and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. The Shares will not be subject to any preemptive rights of any holders of any security of the Company or similar contractual right granted by the Company. Except as a result of the purchase and sale of the Securities or, as set forth in <u>Schedule 3.1(g)</u>, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers). There are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, and have been issued in compliance with all applicable federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities except for the Required Approvals. There are no stockholder agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>SEC Reports; Financial Statements</u>. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, as well as the Form 8-K relating to this transaction and information filed therewith, being collectively referred to herein as the "<u>SEC Reports</u>") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. There are no material outstanding or unresolved comments in comment letters from the staff of the Division of Corporation Finance of the Commission with respect to any of the SEC Reports as of the date hereof. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the SEC Reports fairly presents the information called for in all material respects and has been prepared in accordance with the Commission's rules and guidelines applicable thereto. No other financial statements or supporting schedules are required to be included in the SEC Reports. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved ("<u>GAAP</u>"), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Material Changes; Undisclosed Events, Liabilities or Developments</u>. Since the date of the latest audited financial statements included within the SEC Reports: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock incentive plans. The Company does not have pending before the Commission any request for confidential treatment of information. No event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws that will not be publicly disclosed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Litigation</u>. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "<u>Action</u>") that (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <u>Labor Relations</u>. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company. None of the Company's or its Subsidiaries' employees is a member of a union that relates to such employee's relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <u>Compliance</u>. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) <u>Environmental Laws</u>. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, "<u>Hazardous Materials</u>") into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder ("<u>Environmental Laws</u>"), except where such noncompliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses except where the failure to receive any such permits, licenses or approvals would not, individually or in the aggregate; reasonably be expected to have a Material Adverse Effect; and (iii) are in compliance with all terms and conditions of any such permit, license or approval except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) <u>Regulatory Permits</u>. The Company and the Subsidiaries possess all certificates, authorizations approvals, consents, registrations, licenses, qualifications, certifications, and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports ("<u>Material Permits</u>"), except where the failure to possess any such Material Permit would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit. The Company is and has been in compliance with any term of any such Material Permits, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) <u>Title to Assets</u>. The Company and the Subsidiaries have good and marketable title in fee simple to, or have valid and marketable rights to lease or otherwise use, all real property and good and marketable title in all personal property that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens that do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and the payment of which is neither delinquent nor subject to penalties. Neither the Company nor any of its Subsidiaries has received any written notice of any claim of any sort that has been asserted by anyone adverse to the rights of the Company or its Subsidiaries under any of the leases or subleases or licenses or with respect to the properties mentioned above, or affecting or questioning the rights of the Company or any Subsidiary to the continued possession or use of the leased or subleased or licensed premises or the properties mentioned above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) <u>Intellectual Property</u>. To the knowledge of the Company, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports (collectively, the "Intellectual Property Rights"). None of the Company nor any Subsidiary has received a notice (written or otherwise) that (i) any of, the Intellectual Property Rights has expired, terminated or been abandoned, or (ii) is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person. To the knowledge of the Company, all material Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the material Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) <u>Insurance</u>. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) <u>Transactions with Affiliates and Employees</u>. Except as set forth in the SEC Reports, none of the officers, directors or beneficial holders of 5% or more of any class of capital stock of the Company, or any officers or directors of any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock incentive plan of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) <u>Sarbanes-Oxley; Internal Accounting Controls</u>. The Company and the Subsidiaries are in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal controls over financial reporting sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, and in particular provide reasonable assurance that: (i) the maintenance of records accurately and fairly reflect the transactions and disposition of the assets of the Company; (ii) t transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management an directors of the Company; and (iii) unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements are adequately detected. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. The Company's certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the "<u>Evaluation Date</u>"), and the disclosure controls and procedures are effective in all material respects to perform the functions for which they were established. The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no material weaknesses in the Company's internal control over financial reporting (whether or not remediated) and no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company or its Subsidiaries.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) <u>Certain Fees</u>. No brokerage or finder's fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) <u>Private Placement</u>. Assuming the accuracy of the Purchasers' representations and warranties set forth in <u>Section</u><u> </u><u>3.2</u>, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. Subject to obtaining the Stockholder Approval, the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) <u>Investment Company</u>. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an "investment company" subject to registration under the Investment Company Act of 1940, as amended. This representation assumes that SKY is not deemed a security.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) <u>Registration Rights</u>. Other than each of the Purchasers with respect to the Securities, no Person has any right to cause the Company or any Subsidiary to effect a registration under the Securities Act of any securities of the Company or any Subsidiary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) <u>Listing and Maintenance Requirements</u>. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate, or which to its knowledge is likely to have the effect of terminating, the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Other than as disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in material compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) <u>Application of Takeover Protections</u>. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company's issuance of the Securities and the Purchasers' ownership of the Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) <u>No General Solicitation</u>. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. Assuming the accuracy of the Purchasers' representations and warranties under this Agreement and their respective Accredited Investor Questionnaires, the form of which is attached hereto as <u>Exhibit B</u>, the Company has offered the Securities for sale only to the Purchasers and certain other "accredited investors" within the meaning of Rule 501 under Regulation D promulgated pursuant to the Securities Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) <u>Disclosure</u>. Except as will be publicly disclosed on Form 8-K pursuant to <u>Section</u><u> </u><u>4.5</u> below, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that constitutes or would reasonably be expected to constitute material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers in this Agreement (including the schedules hereto) regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in <u>Section</u><u> </u><u>3.2</u> hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) <u>No Integrated Offering</u>. Assuming the accuracy of the Purchasers' representations and warranties set forth in <u>Section</u><u> </u><u>3.2</u>, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) <u>Solvency</u>. After giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company's assets exceeds the amount that will be required to be paid on or in respect of the Company's existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company's assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. As of the date hereof, the Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash reasonably expected to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. The Company's SEC Reports set forth as of the date of its most recently filed periodic report under the Exchange Act, all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness. For the purposes of this Agreement, "<u>Indebtedness</u>" means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 individually or in the aggregate (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company's consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 individually or in the aggregate due under leases required to be capitalized in accordance with GAAP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) <u>Taxes</u>. The Company and its Subsidiaries each (i) has duly and timely filed all United States federal, state and local income, all foreign income and franchise, and all other material tax returns, reports and declarations required to be filed, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except for such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established by the Company on its books and records and (iii) has set aside on its books and records provisions reasonably adequate for the payment of all material accrued but unpaid taxes. There are no claims, assessments, demands, actions, suits, proceedings, or audits asserted or now in progress, or to the Company's knowledge, threatened, against the Company or any Subsidiary with respect to taxes, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) <u>Foreign Corrupt Practices</u>. Neither the Company, nor any Subsidiary nor any of the Company's directors or officers, nor, to the knowledge of the Company or any Subsidiary, any agent, employee, affiliate or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA. Each of the Company and its Subsidiaries have implemented and maintain policies and procedures that the Company reasonably believes are adequate to ensure compliance in all material respects with the FCPA.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) <u>Office of Foreign Assets Control</u>. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department ("<u>OFAC</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) <u>U.S. Real Property Holding Corporation</u>. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the "<u>Code</u>"), and the Company shall so certify upon Purchaser's request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) <u>Bank Holding Company Act</u>. Neither the Company nor any of its Subsidiaries nor, to the Company's knowledge, any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the "<u>BHCA</u>") and to regulation by the Board of Governors of the Federal Reserve System (the "<u>Federal Reserve</u>"). Neither the Company nor any of its Subsidiaries nor, to the Company's knowledge, any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries nor, to the Company's knowledge, any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Anti-Money Laundering</u>. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the "<u>Money Laundering Laws</u>"), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(jj) <u>Accountants</u>. The Company's independent registered public accounting firm is WithumSmith+Brown, PC. To the best knowledge of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and the rules of the Public Company Accounting Oversight Board ("<u>PCAOB</u>"), (ii) is expected to express its opinion with respect to the financial statements to be included in the Company's Annual Report for the fiscal year ended December 31, 2025, (iii) is in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X under the Securities Act and (iv) has not had its registration suspended or revoked and has not requested such registration be withdrawn.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(kk) <u>Acknowledgment Regarding Purchasers</u><u>'</u> <u>Purchase of Securities</u>. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers' purchase of the Securities. The Company further represents to each Purchaser that the Company's decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ll) <u>Acknowledgment Regarding Purchaser</u><u>'</u><u>s Trading Activity.</u> Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for <u>Section</u><u> </u><u>3.2(i)</u> and <u>Section</u><u> </u><u>4.13</u> hereof), it is understood and acknowledged by the Company that: (i) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or "derivative" transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company's publicly-traded securities and (ii) any Purchaser, and counter-parties in "derivative" transactions to which any such Purchaser is a party, directly or indirectly, may presently have a "short" position in the Common Stock and (iii) each Purchaser shall not be deemed to have any affiliation with or control over any arm's length counter-party in any "derivative" transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Shares are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(mm) <u>Regulation M Compliance.</u> The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii) above, compensation paid to the Placement Agents in connection with the placement of the Securities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(nn) <u>Stock Option Plan</u>. Any stock option granted by the Company under a stock incentive plan was granted (i) in accordance therewith and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under any stock option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(oo) <u>No Disqualification Events</u>. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an "<u>Issuer Covered Person</u>" and, together, "<u>Issuer Covered Persons</u>") is subject to any of the "Bad Actor" disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a "<u>Disqualification Event</u>"), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(pp) <u>Other Covered Persons</u>. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(qq) <u>Notice of Disqualification Events; S-3 Eligibility</u>. The Company will notify the Purchasers in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, reasonably be expected to become a Disqualification Event relating to any Issuer Covered Person, in each case of which it is aware. The Company is currently eligible to use Form S-3 to register for resale the Registrable Securities (as defined in the Investor Rights Agreement) pursuant to the terms and conditions set forth in the Investor Rights Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(rr) <u>No Disagreements with Accountants</u>. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants which could affect the Company's ability to perform any of its obligations under any of the Transaction Documents.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ss) <u>Cybersecurity.</u> (i) (a) To the Company's knowledge, there has been no material Security Breach or other material compromise of or relating to any of the Company's or any Subsidiary's information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it) equipment or technology (collectively, "<u>IT Systems and Data</u>") and (b) the Company and the Subsidiaries have not been notified in writing of, and has no knowledge of any event or condition that would reasonably be expected to result in, any Security Breach or compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its Personal Data and the integrity, continuous operation, redundancy and security of all IT Systems and Data and Personal Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery technology consistent with industry standards and practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(tt) <u>ERISA Compliance</u>. Except as otherwise disclosed in the SEC Reports, the Company and its Subsidiaries and any "employee benefit plan" (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, "<u>ERISA</u>")) established or maintained by the Company, its Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in all material respects with ERISA. "<u>ERISA Affiliate</u>" means, with respect to the Company or any of its Subsidiaries, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Code and the regulations and published interpretations thereunder of which the Company or such Subsidiary is a member. No "reportable event" (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates. No "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates, if such "employee benefit plan" were terminated, would have any "amount of unfunded benefit liabilities" (as defined under ERISA). Neither the Company, its Subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan" established or maintained by the Company, its Subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(uu) <u>Compliance with Data Privacy Laws</u>. (i) The Company and the Subsidiaries are, and at all times during the last three (3) years were, in material compliance with all applicable state, federal and foreign data privacy and security laws and regulations known to the Company, including, without limitation, the European Union General Data Protection Regulation ("<u>GDPR</u>") (EU 2016/679) (collectively, "<u>Privacy Laws</u>"); and (ii) the Company and the Subsidiaries have in place, materially comply with, and take appropriate steps reasonably designed to ensure compliance with their policies and procedures relating to data privacy and security and the collection, storage, use, disclosure, handling and analysis of Personal Data (as defined below) (the "<u>Policies</u>"). "<u>Personal Data</u>" means (i) a natural person's name, street address, telephone number, email address, photograph, social security number, bank information, or customer or account number; (ii) any information which would qualify as "personally identifying information" under the Federal Trade Commission Act, as amended; (iii) "personal data" as defined by GDPR; and (iv) any other piece of information that allows the identification of such natural person, or his or her family, or permits the collection or analysis of any identifiable data related to an identified person's health or sexual orientation. The execution, delivery and performance of the Transaction Documents will not result in a material breach of any Privacy Laws. In the past three (3) years, neither the Company nor the Subsidiaries (i) to the knowledge of the Company, has received written notice of any actual or potential liability of the Company or the Subsidiaries under, or actual or potential violation by the Company or the Subsidiaries of, any of the Privacy Laws; (ii) is currently conducting or paying for, in whole or in part, any investigation, remediation or other corrective action pursuant to any regulatory request or demand pursuant to any Privacy Law; or (iii) is a party to any order, decree, or agreement by or with any court or arbitrator or governmental or regulatory authority that imposed any obligation or liability under any Privacy Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vv) <u>Forward-Looking Statements</u>. Each financial or operational projection or other "forward-looking statement" (as defined by Section 27A of the Securities Act or Section 21E of the Exchange Act) contained in the SEC Reports (i) was so included by the Company in good faith and with reasonable basis after due consideration by the Company of the underlying assumptions, estimates and other applicable facts and circumstances and (ii) as required, is accompanied by cautionary statements identifying factors that could cause actual results to differ materially from those in such forward-looking statement. No such statement was made that was false or misleading with the knowledge of a director or senior manager of the Company that it was false or misleading.

Section 3.2 <u>Representations and Warranties of the Purchasers</u>. Each Purchaser, for itself and for no other Purchaser on a several and not a joint basis, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Organization; Authority</u>. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents to which such Purchaser is a party and performance by such Purchaser of the transactions contemplated thereby have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except as limited by the Enforceability Exceptions.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>No Conflicts</u>. The execution, delivery and performance of the Transaction Documents by such Purchaser to which it is a party, the purchase of the Securities in accordance with their terms and the consummation by the Purchaser of the other transactions contemplated hereby will not conflict with or result in any violation of, breach or default by such Purchaser (with or without notice or lapse of time, or both) under, conflict with, or give rise to a right of termination, cancellation or acceleration of any obligation, a change of control right or to a loss of a material benefit under (i) any provision of the organizational documents of the Purchaser, including, without limitation, its incorporation or formation papers, bylaws, indenture of trust or partnership or operating agreement, as may be applicable or (ii) any agreement or instrument, undertaking, credit facility, franchise, license, judgment, order, ruling, statute, law, ordinance, rule or regulations, applicable to such Purchaser or its respective properties or assets, except, in the case of clause (ii), as would not, individually or in the aggregate, be reasonably expected to materially delay or hinder the ability of the Purchaser to perform its obligations under the Transaction Documents to which it is a party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Brokers and Finders</u>. The Purchaser has not retained, utilized or been represented by any broker or finder in connection with the transactions contemplated by this Agreement whose fees the Company would be required to pay.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Purchase for Own Account</u>. Such Purchaser understands that the Securities are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser's right to sell the Securities pursuant to a registration statement, an exemption from registration under applicable federal and state securities laws or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business and is not a party to any binding commitments and has no current plan or intention to sell the stock of the Company purchased pursuant to this Agreement, other than binding commitments it may have to transfer and/or pledge such stock upon Closing to a prime broker under and in accordance with its prime brokerage agreement with such broker, provided in each case that such transfer and/or pledge does not immediately result in the Purchaser losing beneficial ownership (as such term is defined in Securities Act Rule 13d-3) over such securities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Investment Representations and Warranties</u>. The Purchaser hereby represents and warrants that, at the time such Purchaser was offered the Securities, it was, and as of the date hereof, it is, and on each date on which it exercises any Pre-Funded Warrants, it will be either (i) if an entity, a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) or an "accredited investor" as that term is defined in Rule 501(a) under Regulation D promulgated pursuant to the Securities Act; or (ii) if an individual, is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D of the Securities Act and either (x) a "qualified purchaser" as that term is defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended or (y) an employee or affiliate of the Company. The Purchaser has such knowledge and experience in financial and business matters as to be able to protect its own interests in connection with an investment in the Securities and such Purchaser has had an opportunity to seek, and has sought, such accounting, legal, business and tax advice as such Purchaser has considered necessary to make an informed investment decision. The Purchaser further represents and warrants that (x) it is capable of evaluating the merits and risk of such investment, and (y) has exercised independent judgment in evaluating its participation in the purchase of the Securities. The Purchaser understands and agrees that the offering and sale of the Securities has not been registered under the Securities Act or any applicable state securities laws and is being made in reliance upon federal and state exemptions for transactions not involving a public offering which depend upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>General Solicitation</u>. Such Purchaser represents that (i) Purchaser was contacted regarding the sale of the Securities by the Company (or authorized representative thereof) and such Purchaser had a prior pre-existing relationship with the Company under the U.S. securities laws and interpretations, (ii) to the knowledge of such Purchaser, no Securities were offered or sold to it by means of any form of general solicitation, and such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Certain Transactions and Confidentiality</u>. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor, to such Purchaser's knowledge, has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first communicated with the Company or any other Person representing the Company regarding the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser's representatives, including, without limitation, its officers, directors, employees, partners, legal and other advisors, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Non-Reliance</u>. Such Purchaser acknowledges that it is not relying upon, and has not relied upon, any statement, representation or warranty made by any Person (including, without limitation, the Company or any of its Affiliates or representatives), other than statements made by the Company in the SEC Reports and the representations, warranties, covenants and agreements of the Company contained in the Transaction Documents, in making its investment or decision to invest in the Company. Such Purchaser agrees that none of any other Purchaser pursuant to this Agreement or the other Transaction Documents related to the offering of the Securities (including the controlling persons, officers, directors, partners, agents or employees of any such Purchaser) shall be liable (including, without limitation, for or with respect to any losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses or disbursements incurred by such person or entity), whether in contract, tort or otherwise, or have any liability or obligation to such Purchaser or any other Purchaser, or any person claiming through such Purchaser or any other Purchaser, pursuant to this Agreement or the other Transaction Documents related to the offering of the Securities, the negotiation hereof or the subject matter hereof, or the transactions contemplated hereby, for any action heretofore or hereafter taken or omitted to be taken by any of the foregoing in connection with the purchase of the Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Securities Not Registered; Legends</u>. Such Purchaser acknowledges and agrees that the Securities are being offered in a transaction not involving any public offering within the meaning of the Securities Act, and the Purchaser understands that the Securities have not been registered under the Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration requirements of the Securities Act, and that the Securities must continue to be held and may not be offered, resold, transferred, pledged or otherwise disposed of by the Purchaser unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration and in each case in accordance with any applicable securities laws of any state of the United States. The Purchaser understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions including, but not limited to, the time and manner of sale, the holding period and on requirements relating to the Company which are outside of the Purchaser's control and which the Company may not be able to satisfy, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. Such Purchaser acknowledges and agrees that it has been advised to consult legal counsel prior to making any offer, resale, transfer, pledge or disposition of any of the Securities. Such Purchaser acknowledges that no federal or state agency has passed upon or endorsed the merits of the offering of the Securities or made any findings or determination as to the fairness of this investment.

In addition, the Securities may contain a legend regarding affiliate status of the Purchaser, if applicable.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Disqualification Event</u>. To the extent such Purchaser is one of the covered persons identified in Rule 506(d)(1), the Purchaser represents that no Disqualification Event is applicable to the Purchaser, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. The Purchaser hereby agrees that, to the extent such Purchaser is one of the covered persons identified in Rule 506(d)(1), it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to the Purchaser prior to the Closing Date, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <u>Subscription in SKY</u>. If Purchaser is paying all or part of the Subscription Amount in SKY (i) Purchaser has all rights, title and interest in and to the SKY, to be contributed by it to the Company pursuant to this Agreement, (ii) such SKY, is held in a digital wallet held or operated by or on behalf of the Purchaser at or by an appropriately regulated custodian and/or in accordance with industry-standard security practices (the "<u>Purchaser Digital Wallet</u>") and neither such SKY, nor such Purchaser Digital Wallet is subject to any liens, encumbrances or other restrictions, (iii) Purchaser has taken commercially reasonable steps to protect its Purchaser Digital Wallet and such SKY, and (iv) Purchaser has the exclusive ability to control such Purchaser Digital Wallet, including by use of "private keys" or other equivalent means or through custody arrangements or other equivalent means.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <u>Subscription in USDS and/or USDT</u>. If Purchaser is paying all or part of the Subscription Amount in USDS and/or USDT: (i) Purchaser has all rights, title and interest in and to the USDS and/or USDT, as applicable, to be contributed by it to the Company pursuant to this Agreement, (ii) such USDS and/or USDT is held in a Purchaser Digital Wallet and neither such USDS and/or USDT, as applicable, nor such Purchaser Digital Wallet is subject to any liens, encumbrances or other restrictions, (iii) Purchaser has taken commercially reasonable steps to protect its Purchaser Digital Wallet and such USDS and/or USDT, as applicable, and (iv) Purchaser has the exclusive ability to control such Purchaser Digital Wallet, including by use of "private keys" or other equivalent means or through custody arrangements or other equivalent means.

**ARTICLE IV**<br> **OTHER AGREEMENTS OF THE PARTIES**

Section 4.1 <u>Transfer Restrictions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Notwithstanding any other provision of this <u>Article</u><u> </u><u>IV</u>, each Purchaser covenants that the Securities may only be disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with applicable state and federal securities laws. In connection with any transfer of Securities other than (i) pursuant to an effective registration statement, (ii) to the Company or to an Affiliate of a Purchaser, or (iii) pursuant to Rule 144 (*provided* that the Purchaser provides the Company with reasonable assurances (in the form of seller and, if applicable, broker representation letters) that the securities may be sold pursuant to such rule),the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer of such transferred Securities does not require registration under the Securities Act. As a condition of transfer (other than pursuant to an effective registration statement or Rule 144), any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Purchasers agree to the placement, so long as is required by this <u>Section</u><u> </u><u>4.1</u>, of a legend or book entry notation on or with respect to any of the Securities in substantially the following form:

"THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In connection with any sale, assignment, transfer or other disposition of the Shares by a Purchaser pursuant to Rule 144 or pursuant to any other exemption under the Securities Act such that such Purchaser acquires freely tradable shares and upon compliance by the Purchaser with the requirements of this Agreement, if requested by the Purchaser by written notice to the Company, the Company shall, as soon as reasonably practicable following such written notice, provide to the Purchaser and the Transfer Agent, as applicable, all customary and reasonably requested documentation, representations and legal opinions (or cause its counsel to provide such legal opinions) in connection with, and shall, request the Transfer Agent to remove any restrictive legends related to the book entry account holding such shares and make a new, unlegended entry for such book entry shares sold or disposed of without restrictive legends as soon as reasonably practicable following any such request therefor from the Purchaser (such date, the "<u>Legend Removal Request Date</u>"), provided that the Company has timely received from the Purchaser customary representations and other documentation reasonably acceptable to the Company in connection therewith. The Company shall be responsible for the fees of its Transfer Agent, its legal counsel and all DTC fees associated with such legend removal.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In addition to each Purchaser's other available remedies, the Company shall pay to a Purchaser, in cash, if the Company fails to (i) issue and deliver (or cause to be delivered) to such Purchaser by the third Trading Day following the Legend Removal Request Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends and (ii) if after the third Trading Day following the Legend Removal Request Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser's actual, documented total purchase price (including reasonable brokerage commissions and other reasonable out-of-pocket expenses) for the shares of Common Stock so purchased over the product of (A) such number of Securities that the Company was required to deliver to such Purchaser by the third Trading Day following the Legend Removal Request Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Securities and ending on the date of such delivery and payment under this <u>Section</u><u> </u><u>4.1(d)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will only sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements (or any exemption therefrom), or an exemption from the registration requirements under federal and state securities laws, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates or book entry statements representing Securities as set forth in this <u>Section</u><u> </u><u>4.1</u> is predicated upon the Company's reliance upon this understanding.

Section 4.2 <u>Furnishing of Information; Public Information</u>. Until no Purchaser owns Securities, the Company covenants to use commercially reasonable efforts to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

Section 4.3 <u>Integration</u>. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

Section 4.4 <u>Shares</u>. If all or any portion of a Pre-Funded Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Shares or if the Pre-Funded Warrant is exercised via cashless exercise and the Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without volume or manner-of-sale restrictions, the Shares issued pursuant to any such exercise shall be issued free of all legends. The Company shall use its best efforts to keep one or more registration statements registering the issuance or resale of the Shares effective pursuant to the terms of the Investor Rights Agreement.

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Section 4.5 <u>Securities Laws Disclosure; Publicity</u>. The Company shall, by the Disclosure Time, file a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and any other material non-public information provided to the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents, if any, including the Transaction Documents as exhibits thereto. Notwithstanding the foregoing, including, any disclosure required to be included in such Form 8-K, except as may otherwise be agreed with a given Purchaser, without such Purchaser's prior written consent (email being sufficient), the Company shall not identify the Purchasers or its respective affiliates by name or by identifiable description on its website, in any marketing materials or investor presentations, on social media channels, or in any SEC Reports (in each case unless required by applicable law, including the rules and regulations of the Commission or a policy or other requirement of the Commission, which for the avoidance of doubt will allow the Company to include the Purchasers as selling stockholders in the registration statement contemplated to be filed pursuant to the Investors' Rights Agreement). In addition, effective upon the filing of such Current Report on Form 8-K, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate and be of no further force and effect. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company following the expiration of the trading restrictions set forth herein and in the Pre-Funded Warrant. Neither the Company nor any Purchaser shall issue any press release with respect to the transactions contemplated hereby nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law or a policy or other requirement of the Commission in connection with (i) any registration statement contemplated by the Investors' Rights Agreement and (ii) the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall, to the extent permitted by law provide the Purchasers with prior notice of such disclosure permitted under this clause (b). At or prior to 9:00 a.m. (New York City time) on the first (1st) Business Day immediately following the earlier of (i) the Closing and (ii) the date this Agreement is terminated, the Company shall publicly disclose (y) the occurrence of the Closing and the consummation of the transactions contemplated by this Agreement and any other undisclosed transaction(s) that may be consummated on or prior to such date or (z) disclosing that this Agreement has been terminated.

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Section 4.6 <u>Shareholder Rights Plan</u>. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an "<u>Acquiring Person</u>" under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents.

Section 4.7 <u>Non-Public Information</u>. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed by the Company pursuant to <u>Section</u><u> </u><u>4.5</u>, the Company covenants and agrees that, except in furtherance of the Purchaser's rights and Company's obligations set forth in <u>Section 4.22,</u> neither it, nor any other Person acting on its behalf will provide any Purchaser (other than Purchasers who are then directors or officers of the Company) or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented in writing (email being sufficient) to the receipt of such information and agreed with the Company in writing (email being sufficient) to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

Section 4.8 <u>Use of Proceeds</u>. The Company shall use the net proceeds from the sale of the Securities hereunder for general corporate purposes, including working capital and strategic initiatives, in compliance with applicable law, and to evaluate opportunities within emerging financial infrastructure and network-based markets. These opportunities may include select digital assets (including, without limitation, SKY) that the Company believes could enhance capital efficiency and long-term stockholder value.

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Section 4.9 <u>Indemnification of Purchasers</u>. Subject to the provisions of this <u>Section</u><u> </u><u>4.9</u>, the Company will indemnify and hold each Purchaser and its directors, officers, stockholders, members, partners, employees and agents, each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, stockholders, agents, members, partners or employees of such controlling persons (each, a "<u>Purchaser Party</u>" and together, the "<u>Purchaser Parties</u>") harmless, to the fullest extent permitted by applicable law, from and against any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees, expenses and costs of investigation as incurred arising from, or that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, (b) any action instituted against the Purchaser Parties in any capacity (including a Purchaser Party's status as an investor), or any of them or their respective Affiliates, by the Company or any stockholder of the Company who is not an Affiliate of such Purchaser Party, arising out of or relating to any of the transactions contemplated by the Transaction Documents, or (c) in connection with the registration statement or any registration statement of the Company providing for the resale by the Purchasers of the Securities issued and issuable upon exercise of the Pre-Funded Warrants, or arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in such registration statement, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder in connection therewith. For the avoidance of doubt, the indemnification provided herein is intended to, and shall also cover, direct claims brought by the Company against the Purchaser Parties; provided, however, that no indemnification in this <u>Section</u><u> </u><u>4.9</u> shall cover any loss, claim, damage or liability to the extent it is finally judicially determined to be solely attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in any Transaction Document, any Purchaser Party's violation of state or federal securities law, or any conduct by a Purchaser Party that is finally judicially determined to constitute fraud, gross negligence or willful misconduct. If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and, except with respect to direct claims brought by the Company, the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel to the applicable Purchaser Party (which may be internal counsel), a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company may not settle, compromise or consent to the entry of any judgment in any pending or threatened action in which indemnification may be sought by any Purchaser Party hereunder (whether or not any Purchaser Party is an actual or potential party thereto) without the prior written consent of each such Purchaser Party, unless such settlement, compromise or consent provides for an unconditional and irrevocable release of such Purchaser Party from any and all liability arising out of such claim. The indemnification required by this <u>Section</u><u> </u><u>4.9</u> shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred and such documentation is shared with the Company; provided that, if any Purchaser Party is judicially determined not to be entitled to indemnification or payment under this <u>Section</u><u> </u><u>4.9</u>, such Purchaser Party shall promptly reimburse the Company for any payments that are advanced under this sentence. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

Section 4.10 <u>Listing of Shares.</u> The Company shall in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering the Shares and take all steps necessary to cause such Shares to be approved for listing or quotation on such Trading Market as soon as possible thereafter. The Company agrees use commercially reasonable efforts to continue the listing and trading of its Common Stock on a Trading Market and will use commercially reasonable efforts to comply with the Company's reporting, filing, and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.

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Section 4.11 <u>Reservation of Common Stock</u>. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to any exercise of the Pre-Funded Warrants.

Section 4.12 <u>Equal Treatment of Purchasers</u>. The Company has not entered into any subscription agreement, side letter or other agreement with any other Person in connection with such Person's direct or indirect investment in the offering contemplated hereby, other than this Agreement, the Investors' Rights Agreement, the Pre-Funded Warrants or related auxiliary agreements that have been shared with all parties hereto. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

Section 4.13 <u>Certain Transactions and Confidentiality</u>. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company's securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in <u>Section</u><u> </u><u>4.5</u>. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are first publicly disclosed by the Company pursuant to the Form 8-K as described in <u>Section</u><u> </u><u>4.5</u>, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the Form 8-K as described in <u>Section</u><u> </u><u>4.5</u> or otherwise and (ii) no Purchaser that is not a director, officer or employee of the Company shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company or its Subsidiaries after the issuance of the Form 8-K as described in <u>Section</u><u> </u><u>4.5</u>.

Section 4.14 <u>Lock-Up</u>. Each Purchaser that is an Existing Holder, severally and not jointly with the other Purchasers, agrees that it will not, and will cause its Affiliates not to, offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, or enter into any derivative or other transaction that has the economic effect of disposing of, any of its Existing Holder Securities until the date that is six (6) months after the Closing Date (the "<u>Lock-Up</u>"). Following the Lock-Up period, any transfer of such securities shall be subject to the other applicable provisions of this Agreement, including Section 4.15, and applicable securities laws.

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Section 4.15 <u>Post-Unlock Trading Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) From and after the time any tranche of a Purchaser's Shares becomes eligible for sale following the issuance of such Shares upon exercise of the Purchaser's Pre-Funded Warrant, in accordance with the tiered exercise schedule set forth therein, each Purchaser covenants and agrees that its, and its Affiliates', aggregate sales of Shares (and any other shares of Common Stock issued in respect thereof) and, in the case of Existing Holders, any Existing Holder Securities on any Trading Day shall not exceed ten percent (10%) of the 30-Day ADV. For the avoidance of doubt, no other limitations on purchases or sales of the Company's securities by any Purchaser shall apply following the Closing other than this <u>Section 4.15(a)</u> and pursuant to applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Company shall be entitled to seek specific performance and injunctive relief for any breach or threatened breach of this <u>Section 4.15</u> in addition to any other rights or remedies available at law or in equity, without the necessity of proving actual damages.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Nothing in this <u>Section 4.15</u> shall require any Purchaser to violate applicable law, regulation or the rules of any Trading Market; provided that the limitations herein shall apply to the fullest extent permitted by such law, regulation or rules.

Section 4.16 <u>Form D; Blue Sky Filings</u>. If required, the Company shall timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser. Each Purchaser acknowledges and agrees to promptly provide to the Company or its representatives any such information as may be reasonably requested so as to allow the Company to comply with the provisions of this <u>Section</u><u> </u><u>4.16</u>.

Section 4.17 <u>Proxy</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) During the Voting Support Period, each Purchaser, severally and not jointly with any other Purchaser, covenants and agrees that it shall, to the extent such Purchaser holds Shares or other voting securities of the Company, appear in person or by proxy at each meeting of the Company's stockholders (and any adjournment or postponement thereof) or otherwise cause the Subject Securities to be counted as present for purposes of establishing a quorum and shall vote all of its Subject Securities in accordance with the Board Recommendation with respect to all Covered Matters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Nothing in this <u>Section 4.17</u> shall (i) obligate any Purchaser to vote in favor of any Excluded Matter; (ii) require any Purchaser to violate applicable law, the rules of any Trading Market, or the fiduciary or other duties applicable to any Purchaser or its Affiliates; or (iii) limit or restrict any Purchaser's right to vote its Subject Securities in its sole discretion on any matter that is not a Covered Matter. For the avoidance of doubt, the parties acknowledge and agree that compliance with this <u>Section 4.17</u> shall not be deemed to create, and the parties disclaim the existence of, any "group" within the meaning of Section 13(d) of the Exchange Act among the Purchasers or between the Purchasers and the Company, and shall not otherwise modify or limit the provisions of <u>Section 4.13</u>.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event of any breach or threatened breach of this <u>Section 4.17</u>. Accordingly, the Company shall be entitled to seek specific performance and injunctive relief to enforce compliance with the terms of this <u>Section 4.17</u> in addition to any other rights or remedies available at law or in equity, without the necessity of proving actual damages or posting a bond or other security.

Section 4.18 <u>Subsequent Equity Sales</u>. From the date hereof until thirty (30) days after the Effective Date, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, except for (u) the filing of the registration statement or any registration statement, amendment or supplement thereto as required to be filed pursuant to the Investors' Rights Agreement, (w) the filing of a registration statement on Form S-8 in connection with any employee benefit plan, (x) the execution of a new at-the market offering sales agreement or similar agreement that the Company may seek to execute in the future (the "<u>New Sales Agreement</u>") and/or any subsequent amendment or modification of any such New Sales Agreement, (y) the issuance, announcement or proposed issuance of any shares of Common Stock pursuant to the New Sales Agreement or such subsequent amendment or modification thereto, or (z) the filing of a registration statement, or any amendment or prospectus supplement related to any New Sales Agreement.

Section 4.19 <u>Acknowledgment of Dilution</u>. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

Section 4.20 <u>Exercise Procedures</u>. The form of Notice of Exercise included in the Pre-Funded Warrants set forth the totality of the procedures required of the Purchasers in order to exercise the Pre-Funded Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Pre-Funded Warrants. Without limiting the preceding sentences, unless required by the Company's Transfer Agent, no ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required in order to exercise the Pre-Funded Warrants. The Company shall honor exercises of the Pre-Funded Warrants and shall deliver Pre-Funded Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

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Section 4.21 <u>Designated Wallet</u>. The Company shall, no later than 30 days following the date hereof, terminate its relationship with Coinbase Custody Trust Company, LLC (or any affiliate thereof) as custodian of the Company's digital assets, and will not thereafter maintain accounts with or use the services of Coinbase Custody Trust Company, LLC (or any affiliate thereof). The Company shall provide written confirmation to the Purchasers (email being sufficient) promptly following completion of such termination.

Section 4.22 <u>Consent Right</u>. For a period of twenty-four (24) months following the Closing Date, for so long as a Purchaser holds at least fifty percent (50%) of the aggregate number of Pre-Funded Warrants and/or Shares as originally purchased by such Purchaser pursuant to this Agreement (as such number may be adjusted pursuant to the terms of the Pre-Funded Warrant), such Purchaser shall have a consent right (the "<u>Consent Right</u>") over any material amendment, modification or addition to, or revocation of the Company's Digital Asset Strategy (or any similar or successor strategy) as approved by the Digital Asset Strategy Advisory Committee (in each case as defined in the Form 8-K relating to this Agreement) or the Board of Directors. The Company must provide prior written notice (email being sufficient) of any such proposed change to each Purchaser then holding the Consent Right. Each such Purchaser will then have two (2) Business Days to provide written notice of its consent to or rejection of such change in the Company's Digital Asset Strategy. A Purchaser's failure to respond will be deemed consent.

**ARTICLE V**<br> **MISCELLANEOUS**

Section 5.1 <u>Termination</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement may be terminated by any Purchaser, as to such Purchaser's obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; <u>provided</u>, <u>however</u>, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) This agreement may be terminated by the Company or any Purchaser, upon written notice to the other parties, if the Stockholder Approval has not been obtained on or prior to the date that is one hundred twenty (120) days following the date of this Agreement (the "<u>Outside Date</u>"); provided, that no party shall be entitled to terminate pursuant to this <u>Section</u><u> </u><u>5.1(b)</u> if such party's willful breach of this Agreement was the primary cause of the failure to obtain the Stockholder Approval by the Outside Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Upon any termination pursuant to <u>Section</u><u> </u><u>5.1(b)</u>, the Company shall promptly after such termination (but not later than two (2) Business Days thereafter) return the previously wired or transferred amount to each applicable Purchaser by wire transfer of United States dollars in immediately available funds or SKY, USDS and/or USDT, in each case in the same form of consideration received from such Purchaser (cash, SKY, USDS and/or USDT), to the account or digital wallet specified by such Purchaser, and any book entries for the Shares or Pre-Funded Warrants contemplated to be issued to such Purchaser shall be deemed cancelled.

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Section 5.2 <u>Fees and Expenses.</u> Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided, that the Company shall reimburse the Purchasers for the fees and expenses of one counsel acting on behalf of the investors in an aggregate amount not to exceed $50,000. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

Section 5.3 <u>Entire Agreement</u>. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

Section 5.4 <u>Notices</u>. Any and all notices or other communications or deliveries required or permitted to be provided hereunder to the Company shall be provided in writing (email shall suffice) to NovaBay Pharmaceuticals, Inc., 2000 Powell Street, Suite 1150, Emeryville, CA 94608, Attention: Tommy Law, Chief Financial Officer (Email: tlaw@novabay.com) with a copy to Ropes & Gray LLP, 1211 Avenue of the Americas, New York, NY 10036, Attention: Rachel Phillips (Email: Rachel.Phillips@ropesgray.com). Such notice shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email at the email address as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2<sup>nd</sup>) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

Section 5.5 <u>Amendments; Waivers</u>. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers who are not Affiliates of the Company holding at least a majority in interest of the aggregate Shares (or, prior to the Closing, the Company and each Purchaser) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, <u>provided</u> that (i) if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or multiple Purchasers), the consent of such Purchaser (or a majority in interest of such disproportionately impacted Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this <u>Section</u><u> </u><u>5.5</u> shall be binding upon each Purchaser and holder of Securities and the Company.

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Section 5.6 <u>Headings</u>. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

Section 5.7 <u>Successors and Assigns</u>. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the "Purchasers."

Section 5.8 <u>No Third-Party Beneficiaries</u>. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in <u>Section</u><u> </u><u>4.9</u> and this <u>Section</u><u> </u><u>5.8</u>.

Section 5.9 <u>Governing Law</u>. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof that would result in the application of the substantive laws of any other jurisdiction. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, stockholders, partners, members, employees or agents) shall be referred to and finally resolved by arbitration in New York, New York. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. The arbitration shall be conducted before a single arbitrator. The arbitrator shall have the authority to grant any remedy or relief that a court of competent jurisdiction could grant, including, without limitation, equitable relief and specific performance. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party hereto shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under <u>Section</u><u> </u><u>4.9</u>, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding.

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Section 5.10 <u>Survival</u>. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

Section 5.11 <u>Execution</u>. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method, such signature shall be deemed to have been duly and validly delivered and shall create a legal, valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such ".pdf" signature page were an original thereof.

Section 5.12 <u>Consent to Electronic Notice</u>. Each Purchaser consents to the delivery of any stockholder notice pursuant to Section 232 of the Delaware General Corporation Law, as amended or superseded from time to time, at the e-mail address set forth below the Purchaser name on the signature page, as updated from time to time by notice to the Company. To the extent that any notice given by means of electronic mail is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected e-mail address has been provided, and such attempted electronic notice shall be ineffective and deemed to not have been given. Each party agrees to promptly notify the other parties of any change in its e-mail address, and that failure to do so shall not affect the foregoing.

Section 5.13 <u>Severability</u>. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

Section 5.14 <u>Rescission and Withdrawal Right</u>. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of an exercise of a Pre-Funded Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for such shares and the restoration of such Purchaser's right to acquire such shares pursuant to such Purchaser's Pre-Funded Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

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Section 5.15 <u>Replacement of Securities</u>. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

Section 5.16 <u>Remedies</u>. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

Section 5.17 <u>Payment Set Aside</u>. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

Section 5.18 <u>Independent Nature of Purchasers</u><u>'</u> <u>Obligations and Rights</u>. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

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Section 5.19 <u>Liquidated Damages</u>. The Company's obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid, provided that such amounts are finally determined and not subject to dispute, notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

Section 5.20 <u>Saturdays, Sundays, Holidays, etc.</u> If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

Section 5.21 <u>Construction</u>. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

Section 5.22 <u>WAIVER OF JURY TRIAL</u>. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

*(Signature Pages Follow)*

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

**NOVABAY PHARMACEUTICALS, INC.**

By: /s/ Michael Kazley

Name: Michael Kazley

Title: Chief Executive Officer

<u>Address for Notice</u>:

NovaBay Pharmaceuticals, Inc.

2000 Powell Street, Suite1150

Emeryville, CA 94608

Email: tlaw@novabay.com Attention: Tommy Law, Chief Financial Officer

<u>With copies to (which shall not constitute notice)</u>:

Ropes & Gray LLP

1211 Avenue of the Americas

New York, NY 10036-8704

Email: Rachel.Phillips@ropesgray.com

Attention: Rachel Phillips

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASERS FOLLOWS]

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[PURCHASER SIGNATURE PAGES TO NOVABAY PHARMACEUTICALS, INC. SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: R01 Fund LP

By: Michael Kazley

*Signature of Authorized Signatory of Purchaser*: /s/ Michael Kazley

Name of Authorized Signatory: Michael Kazley

Title of Authorized Signatory: Principal

Email Address of Authorized Signatory:

Address for Notice to Purchaser: c/o R01 Fund LP

1111 Lincoln Road, Suite 500

Miami Beach, FL 33139

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: $__________________(in USD)

$42,943,979.03 (in SKY)

$__________________(in USDS)

Shares:

Pre-Funded Warrants: 268,399,868 Beneficial Ownership Blocker ☒ 4.99% or ☐ 9.99%

EIN Number:<u> </u>

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[PURCHASER SIGNATURE PAGES TO NOVABAY PHARMACEUTICALS, INC. SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Tether Investments, S.A. de C.V.

By: Giancarlo Devasini

*Signature of Authorized Signatory of Purchaser*: /s/ Giancarlo Devasini

Name of Authorized Signatory: Giancarlo Devasini

Title of Authorized Signatory: Sole Administrator

Email Address of Authorized Signatory:

Address for Notice to Purchaser: Final Avenida de La Revolución, Corporativo Presidente Plaza, Nivel 12, Oficina 2, Municipio de San Salvador Centro, Republica de El Salvador

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: 35,000,000 (in USDT)

$________0_________(in SKY)

$________0_________(in USDS)

Shares:

Pre-Funded Warrants: 218,750,000 Beneficial Ownership Blocker ☐ 4.99% or ☒ 9.99%

EIN Number:<u> </u>

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PURCHASER SIGNATURE PAGES TO NOVABAY PHARMACEUTICALS, INC. SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Framework Ventures IV L.P.

By: Michael Anderson

*Signature of Authorized Signatory of Purchaser*: /s/ Michael Anderson

Name of Authorized Signatory: Michael Ernest Anderson

Title of Authorized Signatory: CEO

Email Address of Authorized Signatory:

Address for Notice to Purchaser: c/o Framework Ventures IV L.P

600 Montgomery Street, Floor 42

San Francisco, CA 94111

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: $25,000,000.00 (in USD)

245,323,607 SKY tokens

$________________(in USDS)

Shares:

Pre-Funded Warrants: 250,546,262 Beneficial Ownership Blocker ☒ 4.99% or ☐ 9.99%

EIN Number:<u> </u>

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[PURCHASER SIGNATURE PAGES TO NOVABAY PHARMACEUTICALS, INC.<br> SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Sky Frontier Foundation

By: David Garcia

*Signature of Authorized Signatory of Purchaser*: /s/ David Garcia

Name of Authorized Signatory: David Garcia

Title of Authorized Signatory: Director

Email Address of Authorized Signatory:

Address for Notice to Purchaser:

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: $__________________(in USD)

$__________________(in SKY)

$16,000,000.00 (in USDS)

Shares:

Pre-Funded Warrants: 100,000,000 Beneficial Ownership Blocker ☐ 4.99% or ☒ 9.99%

EIN Number:<u> </u>

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**Exhibit A**

**Form of Pre-Funded Warrant**

[*Attached*.]

------

**Exhibit B**

**Form of Accredited Investor Questionnaire<u> </u>**

[*Attached*.]

------

**SCHEDULE 3.1(a)**

***Subsidiaries***

**[***Attached*.]

------

**SCHEDULE 3.1(d)**

***Conflicts***

**[***Attached*.]

------

**<u>SCHEDULE 3.1(g)</u>**

***Capitalization***

**[***Attached*.]

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**SCHEDULE 3.1(j)**

***Litigation***

[*Attached*.]

------

**SCHEDULE 3.1(l)**

***Certain Fees***

[*Attached.*]

## Exhibit 10.48

**Exhibit 10.48**

![nvblogo.jpg](nvblogo.jpg)

**CONSULTING AGREEMENT**

This Consulting Agreement ("Agreement") is entered into as of October 16, 2025 ("Effective Date"), by and between Henry Blynn, an individual with principal place of residence at x xxxxx xxxxxx xxxxx, xxx xxx ("Consultant"), and **NovaBay Pharmaceuticals, Inc.** ("Company"), a Delaware corporation whose address 2000 Powell St. Suite 1150, Emeryville, CA 94608, each separately referred as a "Party" and collectively the "Parties."

Company desires to retain Consultant to provide consulting services to Company, and Consultant is willing to provide such services to Company, on the terms and conditions set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Consulting Services** 

**1.1 Statement of Work.** Company wishes Consultant to undertake the Services set forth in the Statement of Work attached to this Agreement as <u>Exhibit A</u>. Company may from time to time offer Consultant other projects that will be described and set forth in a Statement of Work in the form of <u>Exhibit A</u> (each a "Statement of Work"). Each Statement of Work will, upon execution by both Parties, form a part of this Agreement and be subject to these terms and conditions, except to the extent, if any, otherwise expressly set forth in the applicable Statement of Work.

**1.2 Performance of Services.** Consultant will use commercially reasonable efforts to perform the services set forth in each Statement of Work (the "Services"), in a timely and professional manner consistent with applicable industry standards and terms set forth in the applicable Statement of Work. The manner and means by which Consultant chooses to complete the Services are in Consultant's sole discretion and control. In performing the Services, Consultant agrees to provide his own equipment, tools and other materials at his own expense. Under certain circumstances agreed to in advance by Company, Company will make its facilities available to Consultant as is reasonably necessary for the provision of the Services. Consultant may not subcontract or otherwise delegate his obligations under this Agreement or hire any employees to fulfill any of the Services without Company's prior written consent. For any work performed on the premises of Company, Consultant will comply with Company's security, confidentiality, safety and health policies.

**1.3 No Conflict of Interest.** Consultant represents and warrants that entering into this Agreement or the performance of the Services under this Agreement do not conflict with or violate any duties or any agreement of which Consultant is a Party or third Party beneficiary. Consultant agrees during the term of any Statement of Work not to accept work, enter into any agreement, or accept any obligation that is inconsistent or incompatible with his obligations under this Agreement, or the scope of Services rendered to Company under any applicable Statement of Work.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **Compensation** 

**2.1 Compensation for Services.** As full compensation for Services performed by Consultant, Company will pay Consultant a fee for Services rendered as set forth in the applicable Statement of Work. Unless other terms are set forth in the applicable Statement of Work, Company will pay Consultant for Services within thirty (30) calendar days of the date of Consultant's invoice. Consultant shall submit invoices for services rendered on a monthly basis. Invoices shall be submitted to Company via email to *tlaw@novabay.com*. Except as may be agreed to in a Statement of Work regarding reimbursed expenses, Consultant will be responsible for all expenses incurred in performing Services under this Agreement. Upon termination of this Agreement (other than for Consultant's material breach), Consultant will be paid fees on a proportional basis for Services performed, up to and including the effective date of such termination.

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**2.2 Invoice Disputes.** In the event that Company disputes any invoice, Company will pay the undisputed portions in accordance with the terms of this Section. The Parties will work in good faith to resolve any disputed invoices within thirty (30) calendar days of notice to Consultant of the disputed invoices by Company.

**2.3 Travel Expenses.** Unless otherwise agreed in the Statement of Work, travel expenses are not reimbursable except for pre-approved and reasonable travel expenses incurred by Consultant for travels requested by the Company, and solely and exclusively for the purpose of carrying on the Company's business at such travels. However, in no case shall travel time be reimbursed. Air fares shall be economy class.

**2.4 Other Expenses.** The Company shall not pay or reimburse the Consultant for expenses incurred by the Consultant in connection with the performance of the Services and related to the business of the Company, unless prior approval has been provided by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **Independent Contractor** 

**3.1 Relationship**. Consultant's relationship with Company will be that of an independent contractor and nothing in this Agreement should be construed to create a partnership, joint venture, fiduciary, agency or employer-employee relationship between the Parties. Consultant is not the agent of Company and is not authorized and will not have any authority to make any representation, contract or commitment on behalf of Company. Further, nothing in this Agreement will be construed to confer upon any third Party other than the Parties hereto a right of action under this Agreement or in any manner whatsoever. Consultant understands and agrees that Consultant will not be entitled to any of the employee benefits which Company may make available to its employees. Consultant will not represent or promise to any subcontractor or employee Consultant hires or employs, with Company's consent as required by Section 1.2, to assist him/her in the performance of the Services that they will be entitled to any of the employee benefits which Company may make available to its employees.

**3.2 Taxes**. Consultant will be solely responsible for all taxes and the filing of tax returns, social security, disability and other contributions with respect to Consultant's income from the payments made by Company under this Agreement. Company will not withhold or make payments for social security, unemployment insurance or disability insurance contributions, or obtain worker's compensation insurance for Consultant or any of his employees or agents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **Intellectual Property** 

**4.1 Prior Work**. Company understands that Consultant has experience and knowledge in the field of the Services, and acknowledges that such prior experience is one of the factors for Company's choice of Consultant for the Services. Company agrees that all creations (including, without limitation, any technology, inventions, discoveries, works of authorship or other prior creations) that were conceived, created or reduced to practice by or for Consultant (alone or with others) prior to commencement of Consultant's professional services work for Company (collectively, "**Prior Work**") are owned by Consultant and not assigned to Company under this Agreement.

**4.2 Developments.** Consultant agrees that all worldwide rights, title and interest in any ideas, techniques, inventions, systems, feedback, formulae, business or marketing plans, projections or analyses, discoveries, technical information, programs, prototypes, improvements or creations that are related to the Company's business or products and that Consultant creates, conceives, discovers, reduces to practice or makes, alone or with others, in the course of performing the Services (collectively "Developments") will belong exclusively to Company or its affiliates. In accordance with these obligations:

(i) Consultant hereby assigns in perpetuity to Company or its affiliates all rights, title and interest in any invention, improvement or discovery conceived of, or first reduced to practice, by Consultant or its employees or assistants in the course of performing the Services.

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(ii) Consultant hereby assigns in perpetuity to Company or its affiliates all rights, title and interest in the copyright to any copyrightable Development that is a work of authorship, whether in human readable or machine readable form, first created or composed by Consultant in the course of performing the Services, including without limitation any and all literary works, musical works, dramatic works, pictorial works, graphic works, audiovisual works and sound recordings. Consultant agrees to waive any moral rights it may have or acquire in the Developments, and to the extent any such moral rights cannot be waived, Consultant hereby grants Company an exclusive, irrevocable, royalty free license to reproduce, distribute, sell, modify, make derivative works of, translate, publish, dispose of, and use any such moral rights and to authorize others to exercise the foregoing rights.

(iii) Consultant represents and warrants that if Consultant furnishes to Company any patented or patentable inventions or any copyrighted or copyrightable material that were not first conceived of, reduced to practice, discovered, created or composed by Consultant in performing the Services, Consultant (1) will identify in writing such inventions or material before or at the time of delivering the Developments to Company and (2) hereby grants Company or its affiliates a royalty-free, nonexclusive, and irrevocable license to reproduce, distribute, sell, modify, make derivative works of, translate, publish, use and dispose of these inventions and material and to sub-licenses all of the foregoing rights. Notwithstanding the foregoing, Consultant will not incorporate pre-existing material owned by any third Party into any Development without Company's prior written knowledge and consent.

(iv) Consultant agrees to execute (or have executed) all documents and to take all other action reasonably requested by Company to enable the Company or its affiliates to secure, perfect, record or preserve the ownership, assignment and license rights in the Developments as set forth in this Section 4 anywhere in the world.

(v) Consultant agrees to take all legally necessary action to ensure that all associates and employees engaged by Consultant in the performance of this Agreement will be bound by the terms of this Section 4. Consultant represents and warrants that it has or will have with its associates and employees written agreements sufficient to ensure that all rights, including moral rights, in the Developments will be assigned and licensed to Company or its affiliates as set forth under this Section 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **CONFIDENTIAL INFORMATION AND HIPAA.** 

**5.1 Confidential Information.** Consultant agrees and acknowledges that during the performance of the Services, Consultant may receive and have access to confidential, proprietary, and trade secret information about Company and/or its clients ("Confidential Information"). For purposes of this Agreement, "***Confidential Information***" means and will include, but not limited to,: (i) any information, materials or knowledge regarding Company and its business, financial condition, products, programming techniques, customers, suppliers, technology or research and development that is disclosed to Consultant or to which Consultant has access in connection with performing Services; (ii) the Developments; and (iii) the existence and terms and conditions of this Agreement. Regardless of whether so marked or identified, however, any information that the Recipient knew or should have known, under the circumstances, was considered confidential or proprietary by the Discloser, will be considered Confidential Information of the Discloser.

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**5.2 Protection of Confidential Information.** Consultant agrees to hold all Confidential Information in strict confidence, not to use it in any way, commercially or otherwise, except in performing the Services, and not to disclose it to others. Consultant further agrees to take all action reasonably necessary to protect the confidentiality of all Confidential Information including, without limitation, implementing and enforcing procedures to minimize the possibility of unauthorized use or disclosure of Confidential Information. Consultant will ensure that each of his subcontractors or employees (if any) who will have access to the Confidential Information executes an agreement, the form of which may be subject to the approval of NovaBay in its sole discretion (the "Confidentiality Agreement"), obligating the subcontractor or employee to keep all Confidential Information confidential and not to use the Confidential Information in any way, commercially or otherwise, except in performing the Services.

**5.3 Exceptions: Confidential Information** excludes information that Consultant can establish through written records, (i) is readily accessible to the public in a written publication prior to the date of this Agreement; (ii) becomes generally known, previously disclosed or available to the public through no improper action by Consultant; (iii) was independently developed by the Consultant without use or reference to Company's Confidential Information; or (iv) becomes known to the Consultant, without restriction, from a third Party not bound by an obligation of confidentiality covering the Confidential Information, v) as required by law or any regulatory or government authority, provided that Consultant shall provide prompt prior written notice thereof to the Company to enable Company to seek a protective order or otherwise prevent the disclosure.

**5.4 HIPAA**. In performing the services hereunder, Consultant may receive from NovaBay, or create or receive on behalf of NovaBay, patient healthcare, billing, or other confidential patient information, "***Patient Information***". Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 Code of Federal Register 164.501. Consultant shall use Patient Information only as necessary to provide the services to NovaBay as set forth in this Agreement. Consultant shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996, Title XIII of the American Recovery and Reinvestment Act of 2009 (Public Law 111-005) "***HIPAA***" and the rules, guidance and regulations promulgated thereunder, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **Term and Termination** 

**6.1 Term**. The term of this Agreement shall be one (1) year from Effective Date, unless terminated sooner as provided hereunder. The term may be modified or extended only by mutual written agreement of Parties.

**6.2 Termination**. Either Party reserves the right forthwith to terminate this Agreement at any time by providing the other Party with fifteen (15) days prior written notice.

**6.3 Effect of Termination.** Upon the effective date of any termination of this Agreement, Consultant will immediately cease performing Services under this Agreement. Unless this Agreement has been terminated by Company for material breach by Consultant, Company agrees to pay Consultant compensation due for Services actually rendered, in accordance with Section 2, and such amounts will be in full satisfaction of any obligation or liability of Company to Consultant for payments due to Consultant under this Agreement. Sections 3, 4, 5, 6, 7, 8, and 9 will survive the expiration or termination of this Agreement. Termination of this Agreement by either Party will not act as a waiver of any breach of this Agreement and will not act as a release of either Party from any liability for breach of such Party's obligations under this Agreement. Neither Party will be liable to the other for damages of any kind solely as a result of terminating this Agreement in accordance with its terms, and termination of this Agreement by a Party will be without prejudice to any other right or remedy of such Party under this Agreement or applicable law.

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**Delivery of Materials.** Upon any termination of this Agreement or at any time upon Company's request, Consultant will promptly return to Company any and all Information of Company. Upon any termination and receipt of payment therefore, Consultant will also promptly deliver all work product, including Developments then in progress for deliverables under a Statement of Work.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Indemnification** 

The Parties shall mutually indemnify, defend and hold harmless each other from and against any and all losses incurred by the other (the "Indemnified Party") which arise out of or result from misrepresentation, or breach or non- fulfillment of any covenant contained in this Agreement. Notwithstanding the foregoing, the Indemnifying Party shall not be responsible for any liability, loss or damage resulting from (i) the negligence, intentional misconduct or willful malfeasance by the Indemnified Party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Limitation Of Liabilities** 

IN NO EVENT WILL NOVABAY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, EVEN IF NOVABAY HAS BEEN INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **General Provisions.** 

**9.1 Arbitration**. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration in San Francisco, California in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Consultant agrees that Company's damages arising from any breach of this Agreement by Consultant would be difficult, if not impossible, and inadequate to measure and calculate.

**9.2 Governing Law; Venue.** This Agreement and the rights and obligations of both Parties shall be governed and construed in accordance with the laws of the State of California, without giving effect to its choice of law or conflict of laws rules Any legal action or proceeding arising under this Agreement will be brought exclusively in the federal or state courts located in the Northern District of California and the Parties hereby irrevocably consent to the personal jurisdiction and venue therein.

**9.3 Equitable Remedies.** Due to the personal and unique nature of the Services and Consultant's access to Confidential Information of Company, Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief without prejudice to any other rights and remedies that Company may have for a breach of this Agreement. Consultant further agrees that no bond or other security shall be required in obtaining such equitable relief.

**9.4 Severability.** If any provision of this Agreement is determined to be invalid, illegal or unenforceable, that provision of the Agreement will be enforced to the maximum extent permissible so as to affect the intent of the Parties and the validity or enforceability of the other provisions will not be affected.

**9.5 Waiver**. The waiver of any breach of any provision of this Agreement will not constitute a waiver of any subsequent breach of the same other provisions hereof.

**9.6 Assignment.** Consultant will not and will not have the right to assign, transfer, delegate or otherwise dispose of, this Agreement or any of Consultant's rights or obligations under this Agreement without the prior written consent of Company. Subject to the foregoing, this Agreement will be binding upon and will inure to the benefit of the Parties and their respective successors and permitted assigns.

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**9.7 Notices.** Any notice, request, demand, or other communication required or permitted hereunder will be in writing, will reference this Agreement and will be deemed to be properly given: (a) when delivered personally; (b) when sent by facsimile, with written confirmation of receipt by the sending facsimile machine;

(c) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) two (2) business days after deposit with a private industry overnight courier, with written confirmation of receipt. All notices will be sent to the address set forth on the signature page of this Agreement and to the notice of the person executing this Agreement (or to such other address or person as may be designated by a Party by giving written notice to the other Party pursuant to this Section).

**9.8 Entire Agreement; Amendment**. This Agreement (including the Exhibits attached hereto, which are incorporated herein by reference) are the final, complete and exclusive agreement of the Parties with respect to the subject matter hereof and supersedes and merges all prior or contemporaneous representations, discussions, proposals, negotiations, conditions, communications and agreements, whether written or oral, between the Parties relating to the subject matter hereof and all past courses of dealing or industry custom. No modification of or amendment to this Agreement will be effective unless in writing and signed by each of the Parties.

**9.9 Counterparts.** This Agreement may be executed (including, without limitation, by facsimile signature) in multiple counterparts, with the same effect as if the Parties had signed the same document. Each counterpart so executed will be deemed to be an original, and all such counterparts will be construed together and will constitute one Agreement.

**IN WITNESS WHEREOF** the Parties hereto have caused this Agreement to be duly executed as of the date first written above.

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| | |
|:---|:---|
| **NOVABAY PHARMACEUTICALS, INC.** | **CONSULTANT** |
| By: <u>/s/ Michael Kazley</u> |  |
| Name: Michael Kazley | By: <u>/s/ Henry Blynn</u><br> Name: Henry Blynn |
| Title: CEO and Chairman | Title: N/A |

---

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**EXHIBIT A** –**STATEMENT OF WORK**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. **Services:** The Services provided by Consultant to NovaBay shall include, but shall not be limited to, general corporate counseling.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. **Compensation and Billing:** NovaBay shall pay Consultant at a semi-monthly rate of $<u>8,766.49</u>. Consultant shall submit invoices semi-monthly. Invoices will itemize Services provided by date, number of hours and a brief description of the Services performed. Consultant will be solely responsible for expenses incurred in the performance of the Services unless NovaBay has approved the expense for reimbursement in advance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. **Term**: This Agreement will commence on the Effective Date and continue for twelve (12) months.

Except to the extent, if any, otherwise expressly set forth in this Statement of Work, this Statement of Work is governed by the terms of the Consulting Agreement, dated October 16, 2025 in effect between NovaBay and Consultant.

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| | |
|:---|:---|
| **NOVABAY PHARMACEUTICALS, INC.** | **CONSULTANT** |
| By: <u>/s/ Michael Kazley</u> |  |
| Name: Michael Kazley | By: <u>/s/ Henry Blynn</u><br> Name: Henry Blynn |
| Title: CEO and Chairman | Title: N/A |

---

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<u>EXHIBIT B</u>

<u>TRAVEL & EXPENSE POLICY</u>

## Exhibit 10.49

**Exhibit 10.49**

**FIRST AMENDMENT TO CONSULTING AGREEMENT**

This First Amendment to Consulting Agreement (this "**Amendment**") is entered into as of **February 3, 2026**, by and between **NovaBay Pharmaceuticals, Inc.**, a Delaware corporation (the "**Company**"), and **Henry Blynn** (the "**Consultant**").

**Recitals**

WHEREAS, the Company and Consultant entered into that certain Consulting Agreement dated **October 16, 2025** (the "**Agreement**"); and

WHEREAS, the Parties desire to amend the Agreement solely to revise the Consultant's compensation.

**Amendment**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. **Amendment to Compensation.** 

Effective **February 3, 2026**, the Compensation and Billing section of **Exhibit A** – **Statement of Work** to the Agreement is hereby amended and restated to read as follows:

**"Compensation and Billing:** NovaBay shall pay Consultant at a semi-monthly rate of

**$12,500.00**. Consultant shall submit invoices on a semi-monthly basis in accordance with the Agreement."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. **No Other Amendments.** 

Except as expressly amended hereby, all other terms and conditions of the Agreement remain unchanged and in full force and effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. **Governing Law.** 

This Amendment shall be governed by and construed in accordance with the laws of the State of California, consistent with the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. **Counterparts.** 

This Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

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**Signatures**

**NOVABAY PHARMACEUTICALS, INC.**

By: <u>/s/ Michael Kazley</u>

Name: Michael Kazley Title:

CEO and Chairman

**CONSULTANT**

By: <u>/s/ Henry Blynn</u>

Name: Henry Blynn

## Ex-19

**Exhibit 19**

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** **PURPOSE** 

Under the federal securities laws, it is illegal to trade in the Company's securities while in the possession of material nonpublic information about the Company. It is also illegal to disclose or give material nonpublic information to others who may trade on the basis of that information or to advise others how to trade while in possession of material nonpublic information. Any person who possesses material nonpublic information about the Company is deemed to be an "insider." The category of insiders is NOT limited to officers and directors.

Insider trading violations are pursued vigorously by the Securities and Exchange Commission (the "***SEC***") and the U.S. Attorneys and such violations are punished severely. While the regulatory authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws also impose potential liability on companies and other controlling persons if they fail to take reasonable steps to prevent insider trading by Company personnel. Both the SEC, the New York Stock Exchange and other stock exchanges which the Company's securities may be traded are very effective at detecting and pursuing insider trading cases. The SEC has successfully prosecuted cases against employees trading through foreign accounts, trading by family members and friends, and trading involving only a small number of shares.

The Company has adopted this **Insider Trading Policy** both to satisfy the Company's obligation to prevent insider trading and to help Company personnel avoid the severe consequences associated with violations of the insider trading laws. This Policy Statement is also intended to prevent even the appearance of improper conduct on the part of anyone employed by or associated with the Company (not just the officers or directors of the Company).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**II.** **THE PENALTIES** 

The consequences of an insider trading violation can be extremely serious and severe:

***<u>Traders and Tippers</u>.*** Company personnel (or their tippees) who trade on inside information (or tip inside information to others) are subject to the following penalties, among other things:

● A civil penalty of up to three times the profit gained or loss avoided;

● A criminal fine of up to $5,000,000 (no matter how small the profit from the trade); and

● A jail term of up to twenty years.

A person who tips information to a person who then trades is subject to the same penalties as the tippee, even if the person did not trade and did not profit from the tippee's trading.

***<u>Control Persons</u>***. The Company and its supervisory personnel, if they fail to take appropriate steps to prevent illegal insider trading, can be subject to the following penalties:

● A civil penalty of up to $1,000,000 or, if greater, three times the profit gained or loss avoided as a result of the employee's violation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● A criminal penalty of up to $25,000,000.

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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***<u>Company-Imposed Sanctions</u>*.** Compliance with the policies of the Company is a condition of continued employment or service with the Company of each employee, officer and director. An employee's failure to comply with the Company's insider trading policy will subject the employee to Company-imposed sanctions, which may include dismissal for cause, whether or not the employee's failure to comply results in a violation of law. The Company reserves the right to determine, in its own discretion and on the basis of the information available to it, whether this Policy Statement has been violated. The Company may also determine that specific conduct violates this Policy Statement whether or not the conduct also violates the law. It is not necessary for the Company to wait for the filing or conclusion of a civil or criminal action against the alleged violator before taking disciplinary action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**III.** **STATEMENT OF POLICY** 

It is the policy of the Company that no director, officer or other employee of the Company who is aware of material nonpublic information relating to the Company may, directly or through family members or other persons or entities, (a) buy or sell securities of the Company (other than pursuant to a pre-approved trading plan that complies with SEC Rule 10b5-1), or engage in any other action to take personal advantage of that information, or (b) pass that information on to others outside the Company, including family, friends and acquaintances. In addition, it is the policy of the Company that no director, officer or other employee of the Company who, in the course of working for the Company, learns of material nonpublic information about a company with which the Company does business, including a customer or supplier of the Company, may trade in that company's securities until the information becomes public or is no longer material.

***<u>No Exception for Emergencies</u>.*** Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an emergency expenditure) are not excepted from the policy. If the employee, officer or director has material, nonpublic information, the prohibition still applies. The securities laws do not recognize such mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company's reputation for adhering to high standards of conduct.

***<u>Disclosure of Information to Others</u>*.** The Company is required under Regulation FD of the federal securities laws to avoid the selective disclosure of material nonpublic information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad public dissemination of the information immediately upon its release. You may not disclose such information to anyone outside the Company, including family members and friends, other than in accordance with those procedures. You may not pass on to others any inside information about the Company or recommend the purchase or sale of the Company's securities while in the possession of material nonpublic information (even if that information itself is not disclosed). You also may not discuss the Company or its business in an Internet 'chat room' or similar Internet-based forum.

***<u>Contract Personnel (Non-Employees)</u>*.** The Company sometimes utilizes the services of contract personnel who are not employees of the Company. As such, non-employee personnel may have access to material nonpublic information about the Company. The Company expects all such contract personnel to comply with its policies on the trading of its securities to the same extent as employees are required to comply with such policies. The Company will take appropriate action against any such personnel and the organizations for which they are employed if there is a failure to comply with the policies of the Company.

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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***<u>Material Information</u>*.** Material information is any information that a reasonable investor would consider important in making a decision to buy, hold or sell securities. Any information that could be expected to affect the Company's stock price, whether it is positive or negative, should be considered material. Some examples of information that ordinarily would be regarded as material are set forth below but this list is not exhaustive - other information may be deemed material based upon the circumstances:

● Financial information, including, but not limited to, revenue results, operating income or loss, or net income or loss;

● Earnings that are inconsistent with the consensus expectations of the investment community or other earnings guidance, projections or budgets;

● News about a significant contract or cancellation of an existing significant contract;

● News about significant new services or lines of business;

● The gain or loss of a significant supplier or information provider;

● A pending or proposed merger, acquisition, joint venture or tender offer;

● A pending or proposed acquisition or disposition of a significant asset(s);

● A change in the Company's dividend policy or the declaration of a stock split,

● The implementation, change in or results of a Company stock buy-back;

● A public or private offering of additional securities, borrowings, credit facilities or other financing transactions;

● A change in the Board of Directors, senior management or any other major personnel changes;

● Significant legal exposure due to actual, pending or threatened litigation;

● Impending bankruptcy or the existence of financial or liquidity problems;

● Significant change in the progress or results of an ongoing clinical trial; or

● Status of or significant advance in research regarding the Company's pharmaceutical compounds.

***<u>Twenty-Twenty Hindsight</u>*.** Remember, anyone scrutinizing your transactions will be doing so after the fact, with the benefit of 20/20 hindsight. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight.

***<u>When Information is</u>*** <u>"</u>***<u>Public.</u>***" If you are aware of material nonpublic information, you may not trade until the information has been disclosed broadly to the marketplace (such as by press release or an SEC filing) and the investing public has had time to absorb the information fully. To avoid the appearance of impropriety, as a general rule, **information should not be considered fully absorbed by the marketplace until after the second business day after the information is released**. If, for example, the Company were to make an announcement on a Monday, you should not trade in the Company's securities until Thursday. If an announcement was made on a Friday, Wednesday generally would be the first eligible trading day after the announcement.

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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***<u>Transactions by Family Members</u>***. The insider trading policy also applies to your family members who reside with you, anyone else who lives in your household, and any family members who do not live in your household but whose transactions in Company securities are directed by you or are subject to your influence or control (such as parents or children who consult with you before they trade in Company securities). You are responsible for the transactions of these other persons, and therefore should make them aware of the need to confer with you before they trade in the Company's securities.

***<u>Stock Option Exercises</u>*.** The Company's insider trading policy does not apply to the exercise of an employee stock option, or to the exercise of a tax withholding right pursuant to which you elect to have the Company withhold shares subject to an option to satisfy tax withholding requirements. The policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.

***<u>Additional Prohibited Transactions</u>.*** The Company considers it improper and inappropriate for any director, officer or other employee of the Company to engage in short-term or speculative transactions in the Company's securities. **It therefore is the Company**'**s policy that directors, officers and other employees may NOT engage in any of the following transactions:**

a)  ***<u>Short Sales</u>* .** Short sales of the Company's securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller's incentive to improve the Company's performance. For these reasons, short sales of the Company's securities are prohibited by this Policy Statement. In addition, Section 16(c) of the Exchange Act prohibits officers and directors from engaging in short sales.

b)  ***<u>Publicly-Traded Options</u>* .** A transaction in options is, in effect, a bet on the short-term movement of the Company's stock, and therefore creates the appearance that the director, officer or employee is trading based on inside information. Transactions in options also may focus the director's, officer's or employee's attention on short-term performance at the expense of the Company's long-term objectives. Accordingly, transactions in puts, calls or other derivative securities involving the Company, on an exchange or in any other organized market, are prohibited by this Policy Statement. (Option positions arising from certain types of hedging transactions are governed by the section below captioned "  ***Hedging Transactions*** ").

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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c)  ***<u>Margin Accounts and Pledges</u>* .** Securities held in a margin account may be sold by the broker without the customer's consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company securities, directors, officers and other employees are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan. An exception to this prohibition exists where a person wishes to pledge Company securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities.

d)  ***<u>Hedging Transactions</u>* .** Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow a director, officer or employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the director, officer or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the same objectives as the Company's other stockholders. Therefore, the Company discourages you from engaging in such transactions. Any person wishing to enter into such an arrangement must first pre-clear the proposed transaction with the Board of Directors. Any request for pre-clearance of a hedging or similar arrangement must be submitted to the Chief Financial Officer for approval at least one week prior to the proposed execution of documents evidencing the proposed transaction and must set forth a justification for the proposed transaction.

e)  ***<u>Post-Termination Transactions</u>*** . The Policy Statement continues to apply to your transactions in Company securities even after you have terminated service as an employee, officer or director of the Company. If you are in possession of material nonpublic information when your service terminates, you may not trade in Company securities until that information has become public or is no longer material.

***<u>Quarterly Blackouts; Event Specific Individual and Companywide Blackouts; Cancellation of Existing Orders</u>****.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. ***<u>Quarterly Blackout Periods</u>*.** The Company's announcement of its quarterly financial results almost always has the potential to have a material effect on the market for the Company's securities. Therefore, because of the possibility that directors, officers and employees of the Company may be aware of the Company's quarterly financial results prior to public release and of the necessity to avoid even the appearance of trading while aware of material nonpublic information, no director, officer or employee of the Company will be permitted to trade in the Company's securities during the period beginning on the fifteenth calendar day of the last month of each fiscal quarter and ending after the second full business day following the Company's issuance of its quarterly earnings release. The Company's directors, officers and employees are strictly prohibited from trading in the Company's securities during these quarterly blackout periods unless granted a hardship exception from the Company's Audit Committee.

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|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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b. ***<u>Event Specific Companywide Blackouts</u>.*** The Company may, on occasion, engage in a major transaction or experience a significant event which would constitute material inside information. The Company reserves the right to enforce a companywide trading blackout, and, in its sole discretion, may prohibit you from trading in Company stock during such transaction or event. As such, the Company may require you to cancel existing orders (including good until cancelled orders) and also may instruct your broker to cancel any such orders. Do not assume that the Company will notify you when it believes you are in possession of inside information. The law states that you may not trade while in the possession of inside information. **Ultimately, the responsibility for adhering to this Policy Statement and avoiding unlawful transactions rests with the individual employee, officer or director.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. ***<u>Event Specific Individual Blackouts</u>*.** From time to time, an event may occur that is material to the Company and is known by only a few directors or employees. So long as the event remains material and nonpublic, directors, officers and such other persons as are designated by the Chief Financial Officer may not trade in the Company's securities. The existence of an event specific individual blackout will not be announced, other than to those who are aware of the event giving rise to the blackout. Any person made aware of the existence of an event-specific individual blackout should not disclose the existence of the blackout to any other person. **The failure of the Chief Financial Officer to designate a person as being subject to an event-specific individual blackout will not relieve that person of the obligation not to trade while aware of material nonpublic information.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. ***<u>Hardship Exceptions During Quarterly Blackout Periods</u>*.** A director or employee who has an unexpected and urgent need to sell Company stock during a quarterly blackout period in order to generate cash may, in appropriate and very limited rare circumstances, be permitted to sell Company stock even during the quarterly blackout period. A hardship exception may be granted only by the Audit Committee, at its sole discretion, and such exception must be requested at least two business days in advance of the proposed trade. A hardship exception may be granted only if the Audit Committee concludes that the Company's earnings information for the applicable quarter does not constitute material nonpublic information or if the Company does not have sufficient insight as to the Company's earnings information as of that time. It is highly unlikely that a hardship exception will be granted, and under no circumstance will a hardship exception be granted during an event-specific companywide blackout period or an event-specific individual blackout period.

***<u>Company Assistance</u>***. Any person who has a question about this Policy Statement or its application to any proposed transaction may obtain additional guidance from the Company's Chief Financial Officer. In addition, if you have any doubt as to whether you are in possession of material, nonpublic information or whether a trade may otherwise violate this Policy Statement, you should contact the foregoing person before trading any securities of the Company.

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| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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***<u>Other Procedures</u>****.* The Company may change these procedures or adopt such other procedures in the future as the Company considers appropriate or advisable in order to carry out the purposes of this Policy Statement or to comply with the federal securities laws.

***<u>No Third Party Rights</u>***. This Policy Statement is not intended to create any rights in third parties with respect to any violation of its terms and is also not intended to create any legal liability for the Company or any employee, officer or director beyond those for which they are already responsible under applicable securities laws.

***<u>Certifications</u>***. Please return an executed copy of the attached certification immediately. Additionally, all directors, officers and employees may be requested to annually certify to the Company, in a form as may be requested by Company, their understanding of, and intent to comply with, this Policy Statement. Directors, executive officers and certain key employees are also subject to additional restrictions on their transactions in Company securities, which are described in a separate Addendum to this Policy Statement. Directors, executive officers and such key employees subject to the Addendum should sign the certification attached to that Addendum instead of the one attached hereto.

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| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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**CERTIFICATION**

I hereby certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have read and understand Insider Trading Policy (the "***Policy***"). I understand that the Chief Financial Officer of NovaBay Pharmaceuticals, Inc. (the "***Company***") is available to answer any questions I have regarding the Policy Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. I agree that I will comply with the Insider Trading Policy for as long as I am subject to the Insider Trading Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. I agree that the Company may at any time and in its sole discretion issue a prohibition on trading in Company securities and that the Company shall have full power and authority to cancel any outstanding orders, including "good until cancelled" orders, that I may place, but that the sole responsibility for compliance with the Insider Trading Policy rests with me. I further agree and represent that I will never trade in Company securities during a quarterly blackout period unless granted a hardship exception from the Audit Committee or any time while I am in possession of material nonpublic information regarding the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. This certification constitutes consent for the Company to issue any necessary stop-transfer orders to the Company's transfer agent to enforce compliance with this Insider Trading Policy.

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| Signature: |
| Name: |
| Title/Position: |
| Date: |

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| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**IV.** **PURPOSE** 

As you know, the Company has adopted an Insider Trading Policy (the "***Policy***"). The Company has also adopted procedures governing transactions in the Company's securities by directors and executive officers. Certain of these procedures also apply to non-executive employees who regularly become aware of earnings information or other material nonpublic information about the Company. This Addendum supplements the Policy and describes these procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**V.** **PRE-CLEARANCE PROCEDURES** 

To help prevent inadvertent violations of the federal securities laws and to avoid even the appearance of trading on inside information, directors and executive officers of the Company and any other persons designated by the Chief Financial Officer as being subject to the Company's pre-clearance procedures, together with their family members, may not engage in any transaction involving the Company's securities (including a stock plan transaction such as an option exercise, gift, loan or pledge or hedge, contribution to a trust, or any other transfer) without first obtaining pre-clearance of the transaction from the Chief Financial Officer. **A request for pre-clearance should be submitted to the Chief Financial Officer at least two business days in advance of the proposed transaction, unless earlier notice is otherwise required by the Policy Statement (*e.g.*, one week for hedging transactions)**. The Chief Financial Officer is under no obligation to approve a trade submitted for pre-clearance, and may in his sole discretion, determine not to permit the trade.

Any person subject to the pre-clearance requirements who wishes to implement a trading plan under SEC Rule 10b5-1 must first pre-clear the plan with the Chief Financial Officer. As required by Rule 10b5-1, you may enter into a trading plan only when you are not in possession of material nonpublic information. In addition, you may not enter into a trading plan during a blackout period or within six months after the cancellation of any existing 10b5-1 plan. Transactions effected pursuant to a pre-cleared trading plan will not require further pre-clearance at the time of the transaction if the plan specifies the dates, prices and amounts of the contemplated trades, or establishes a formula for determining the dates, prices and amounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VI.** **OUR BROKER INTERFACE PROCEDURES** 

The accelerated reporting obligations for Section 16 reports require tight interface with brokers handling transactions for our executives. We require that you provide a copy of this Addendum to your broker and such broker must agree that he or she:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Will not enter any orders for you (except for orders under pre-approved Rule 10b5-1 plans) without first:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) verifying with the Company that your transaction was pre-cleared; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) complying with the brokerage firm's compliance procedures (e.g., Rule 144).

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| **INSIDER TRADING POLICY** |

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(b) Report any transactions immediately to the Chief Financial Officer of the Company via:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) telephone; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) in writing via e-mail, describing the details of every transaction involving Company stock, including gifts, transfers, pledges, and all 10b5-1 transactions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VII.** **PRE-CLEARANCE DURING BLACKOUT PERIODS.** 

For certain periods surrounding the Company's quarterly earnings releases and from time to time because of the occurrence of an event that is material to the Company, the Company will impose a quarterly blackout period, an event specific companywide blackout period or an event specific individual blackout period on certain directors, officers and such other persons as are designated by the Chief Financial Officer. Furthermore, the existence of an event specific individual blackout will not be announced, other than to those who are aware of the event giving rise to the blackout.

Trades will not be pre-cleared during the existence of any blackout period, except to the extent that such person requests pre-clearance to trade during a quarterly blackout period and has been granted a hardship exception from the Audit Committee. Furthermore, if a person whose trades are subject to pre-clearance requests permission to trade in the Company's securities during an event-specific individual blackout, the Chief Financial Officer will inform the requester of the existence of a blackout period, without disclosing the reason for the blackout. Any person made aware of the existence of an event-specific individual blackout as a result of such a request for pre-clearance should not disclose the existence of the blackout to any other person.

The Company may on occasion issue interim earnings guidance (outside of a quarterly earnings release) or other potentially material information by means of a press release, a Form 8-K filed with the SEC or by other means designed to achieve widespread dissemination of the information. In the event that the Company has not imposed an event specific companywide blackout period or an event specific individual blackout period, you should anticipate that trades are unlikely to be pre-cleared while the Company is in the process of assembling the information to be released and until the information has been released and fully absorbed by the market.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VIII.** **POST-TERMINATION TRANSACTIONS** 

If you are aware of material nonpublic information when you terminate service as a director, officer or other employee of the Company, you may not trade in Company securities until that information has become public or is no longer material. In all other respects, the procedures set forth in this Addendum will cease to apply to your transactions in Company securities upon the expiration of any "blackout period" that is applicable to your transactions at the time of your termination of service.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**IX.** **GENERAL** 

a)  ***<u>Company Assistance</u>* .** Any person who has a question about the Policy Statement or this Addendum or their application to any proposed transaction may obtain additional guidance from the Company's Chief Financial Officer. In addition, if you have any doubt as to whether you are in possession of material, nonpublic information or whether a trade may otherwise violate the Policy Statement or this Addendum, you should contact the aforesaid person before trading any securities of the Company.

------

---

| |
|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

---

**Ultimately, however, the responsibility for adhering to the Policy Statement and this Addendum and avoiding unlawful transactions rests with the individual director, officer and employee.** 

b)  ***<u>Other Procedures</u>.*** The Company may change these procedures or adopt such other procedures in the future as the Company considers appropriate in order to carry out the purposes of the Policy Statement and this Addendum or to comply with the federal securities laws.

c)  ***<u>No Third Party Rights</u>* .** Neither the Policy Statement nor this Addendum is intended to create any rights in third parties with respect to any violation of its terms and neither is intended to create any legal liability for the Company or any employee, officer or director beyond those for which they are already responsible under applicable securities laws.

d)  ***<u>Certifications</u>*** . Please return an executed copy of the attached certification immediately. All directors, officers and other key employees subject to the procedures set forth in this Addendum may be requested to annually certify their understanding of, and intent to comply with, the Policy Statement and this Addendum.

------

---

| |
|:---|
| ![novalogosm.jpg](novalogosm.jpg) |
| **INSIDER TRADING POLICY** |

---

**CERTIFICATION**<br> **(For Executive Officers, Directors and Certain Key Employees)**

I hereby certify that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. I have read and understand the Insider Trading Policy of NovaBay Pharmaceuticals, Inc. (the "***Company***") and the Addendum to such Insider Trading Policy (collectively, the "***Insider Trading Policy***"). I understand that the Chief Financial Officer is available to answer any questions I have regarding the Insider Trading Policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. I agree that I will comply with the Insider Trading Policy for as long as I am subject to such policy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. **I understand that all of my trades must be preapproved by the Company**'**s Chief Financial Officer or such other person who the Company may designate from time to time.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. I agree that the Company may at any time and in its sole discretion issue a prohibition on trading in Company securities, and that the Company shall have full power and authority to cancel any outstanding orders, including good until cancelled orders, that I may place, but that I have the sole responsibility for compliance with the Insider Trading Policy. I further agree and represent that I will never trade in Company securities during a quarterly blackout period unless granted a hardship exception from the Audit Committee or at any time while I am in possession of material nonpublic information regarding the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. This certification constitutes consent for the Company to issue any necessary stop-transfer orders to the Company's transfer agent to enforce compliance with the Insider Trading Policy.

---

| |
|:---|
| Signature: |
| Name: |
| Title/Position: |
| Date: |

---

## Ex-21

**Exhibit 21**

**Subsidiaries of NovaBay Pharmaceuticals, Inc.**

NovaBay Pharmaceuticals, Inc. has no subsidiaries.

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statements on:

● Form S-1 (Nos. 333-234330, 333-238317, 333-261443, 333-262550, 333-268002, 333-268738, 333-269083, 333-272297, 333-272304, 333-280363 and 333-280423),

● Form S-3 (Nos. 333-211943, 333-211944, 333-230672, 333-232860, 333-233623, 333-248238, 333-254744 and 333-290712), and

● Form S-8 (Nos. 333-147334, 333-157041, 333-164469, 333-171981, 333-180461, 333-185998, 333-194383, 333-196764, 333-203109, 333-208985, 333-211754, 333-215680, 333-218469, 333-222625, 333-236328, 333-252155, 333-264953, 333-271053, 333-280388, and 333-291792)

of our report dated April 2, 2025, before the effects of the adjustments to retrospectively apply the discontinued operations reclassifications related to the dispositions 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, relating to the consolidated financial statements of NovaBay Pharmaceuticals, Inc. (the "Company") as of and for the year ended December 31, 2024, which included an explanatory paragraph related to the Company seeking approval from its stockholders for voluntary dissolution, included in this Annual Report on Form 10-K for the year ended December 31, 2025.

/s/ WithumSmith+Brown, PC

New York, New York

March 19, 2026

## Exhibit 23.2

**Exhibit 23.2**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the Registration Statements on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Form S-1 (File Nos. 333-234330, 333-238317, 333-261443, 333-262550, 333-268002, 333-268738, 333-269083, 333-272297, 333-272304, 333-280363 and 333-280423)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Form S-3 (File Nos. 333-211943, 333-211944, 333-230672, 333-232860, 333-233623, 333-248238, 333-254744, and 333-290712)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Form S-8 (File Nos. 333-147334, 333-157041, 333-164469, 333-171981, 333-180461, 333-185998, 333-194383, 333-196764, 333-203109, 333-208985, 333-211754, 333-215680, 333-218469, 333-222625, 333-236328, 333-252155, 333-264953, 333-271053, 333-280388 and 333-291792)

of our report dated March 19, 2026, with respect to the financial statements of NovaBay Pharmaceuticals, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 2025.

/s/ CBIZ CPAs P.C.

Philadelphia, PA

March 19, 2026

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO EXCHANGE ACT**

**RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Michael Kazley, certify that:

1. I have reviewed this Form 10-K of NovaBay Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 19, 2026

---

| |
|:---|
| /s/ Michael Kazley |
| Michael Kazley |
| Chief Executive Officer, Chairman of the Board *(principal executive officer)* |

---

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO EXCHANGE ACT**

**RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO**

**SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Tommy Law, certify that:

1. I have reviewed this Form 10-K of NovaBay Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 19, 2026

---

| |
|:---|
| /s/ Tommy Law |
| Tommy Law |
| Chief Financial Officer |
| *(principal financial officer)* |

---

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO 18 U.S.C.** §**1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the annual report of NovaBay Pharmaceuticals, Inc. (the Company) on Form 10-K for the fiscal year ended December 31, 2025 (the Report), I, Michael Kazley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 19, 2026

---

| |
|:---|
| /s/ Michael Kazley |
| Michael Kazley |
| Chief Executive Officer, Chairman of the Board |

---

This Certification is made solely for the purpose of 18 USC Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO 18 U.S.C.** §**1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the annual report of NovaBay Pharmaceuticals, Inc. (the Company) on Form 10-K for the fiscal year ended December 31, 2025 (the Report), I, Tommy Law, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 19, 2026

/s/ Tommy Law<br>

Tommy Law

Chief Financial Officer

This Certification is made solely for the purpose of 18 USC Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.