# EDGAR Filing Document

**Accession Number:** 0001389545
**File Stem:** 0001437749-26-001459
**Filing Date:** 2026-1
**Character Count:** 381830
**Document Hash:** 4865e1baa7a42d620564ab0a1bf4241c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001437749-26-001459.hdr.sgml**: 20260116

**ACCESSION NUMBER**: 0001437749-26-001459

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 17

**CONFORMED PERIOD OF REPORT**: 20260116

**ITEM INFORMATION**: Entry into a Material Definitive Agreement

**ITEM INFORMATION**: Unregistered Sales of Equity Securities

**ITEM INFORMATION**: Other Events

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20260116

**DATE AS OF CHANGE**: 20260116

**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:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-33678
- **FILM NUMBER:** 26540485

**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'? nby20260116_8k.htm

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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d)**

**of the Securities Exchange Act of 1934**

**Date of Report (Date of earliest event reported): January 16, 2026**

**NovaBay Pharmaceuticals, Inc.**

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

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-33678** | **68-0454536** |
| **(State or other jurisdiction**<br> **of incorporation)** | **(Commission**<br> **File Number)** | **(IRS Employer**<br> **Identification No.)** |

---

**2000 Powell Street, Suite 1150, Emeryville, CA 94608**

**(Address of principal executive offices and zip code)**

**(510) 899-8800**

**(Registrant**'**s telephone number, including area code)**

**Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):**

☐ **Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)**

☐ **Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)**

☐ **Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))**

☐ **Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))**

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.01 per share | NBY | NYSE American |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth 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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**Item 1.01. Entry Into a Material Definitive Agreement.**

*Securities Purchase Agreement and Pre-Funded Warrants*

On January 16, 2026, NovaBay Pharmaceuticals, Inc. (the "Company"), entered into a Securities Purchase Agreement (the "SPA") 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 SPA, the Company issued and sold pre-funded warrants (the "Pre-Funded Warrants") to purchase an aggregate of 837,696,130 shares of the Company's common stock, par value $0.01 per share (the "Common Stock") for aggregate gross proceeds of approximately $134 million. The purchase price was $0.17 per Pre-Funded Warrant, and the Pre-Funded Warrants are exercisable for shares of Common Stock at an exercise price of $0.01 per underlying share of Common Stock, on a tiered basis, with 20% of the Pre-Funded Warrants becoming exercisable 6 months after execution of the SPA, 30% of the Pre-Funded Warrants becoming exercisable 9 months after execution of the SPA and the remaining 50% of the Pre-Funded Warrants becoming exercisable 12 months after execution of the SPA, each subject to receipt of stockholder approval.

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 Pre-Funded Warrants and/or shares of Common Stock as originally purchased by such Purchaser pursuant to the SPA.

The 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 foregoing summary of the terms of the SPA, the Pre-Funded Warrants does not purport to be complete and is qualified in its entirety by reference to the SPA and the form of Pre-Funded Warrant, which are filed herewith as Exhibits 10.1 and 4.1, respectively, and are incorporated by reference into Item 1.01 of this Current Report on Form 8-K.

*Investors*' *Rights Agreement*

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 (i) R01 Fund LP ("R01") and Framework Ventures IV L.P. ("Framework") customary demand rights for their shares of Common Stock underlying the Pre-Funded Warrants, (ii) customary piggyback registration rights for all of the Purchasers and (iii) certain nomination rights for R01 and Framework.

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.

The foregoing description of the IRA does not purport to be complete and is qualified in its entirety by reference to the text of the IRA, which is filed herewith as Exhibit 10.2 and incorporated by reference into Item 1.01 of this Current Report on Form 8-K.

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**Item 3.02. Unregistered Sale of Equity Securities.**

The information disclosed in Item 1.01 of this Current Report on Form 8-K regarding the issuance and sale of the Pre-Funded Warrants pursuant to the SPA is incorporated herein by reference.

**Item 8.01. Other Events.**

The disclosure attached to this 8-K as Exhibit 99.1 provides supplemental information regarding the Company's business, risks relating thereto, assets following the transactions disclosed herein and related party considerations of the transactions disclosed herein.

**Item 9.01. Financial Statements and Exhibits.**

(d) Exhibits

---

| | |
|:---|:---|
| **Exhibit** <br> **No.** | **Description** |
| 4.1 | [Form of Pre-Funded Warrant](ex_908513.htm) |
| 10.1 | [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_908522.htm) |
| 10.2 | [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](ex_908523.htm) |
| 99.1 | [Supplemental Disclosure.](ex_908922.htm) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

------

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | | |
|:---|:---|:---|:---|
| Date: January 16, 2026 | **NovaBay Pharmaceuticals, Inc.** | **NovaBay Pharmaceuticals, Inc.** | **NovaBay Pharmaceuticals, Inc.** |
|  | By: | /s/ Tommy Law | /s/ Tommy Law |
|  |  | Name: | Tommy Law |
|  |  | Title: | Chief Financial Officer |

---

## Exhibit 4.1

**Exhibit 4.1**

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE 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"), OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED 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. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT. THIS SECURITY IS SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH HEREIN, AS AMENDED FROM TIME TO TIME, COPIES OF WHICH ARE AVAILABLE WITH THE SECRETARY OF THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF 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.

**PRE-FUNDED COMMON STOCK PURCHASE WARRANT**

**NOVABAY PHARMACEUTICALS, INC.**

Warrant Shares: [●] Issue Date: [●] <br> Warrant Number: [●]

THIS PRE-FUNDED COMMON STOCK PURCHASE WARRANT (the "<u>Warrant</u>") certifies that, for a purchase price per Warrant Share (as defined below) equal to $0.17 (the "<u>Purchase Price</u>"), the Purchase Price of which has been received, [●] or its assigns (the "<u>Holder</u>") is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, and solely to the extent of the Exercisable Portion (as defined herein) that has become exercisable at each respective Permitted Exercise Date (as defined in <u>Section 2(f)</u>), and until this Warrant is exercised in full (the "<u>Termination Date</u>"), to subscribe for and purchase from NovaBay Pharmaceuticals, Inc., a Delaware corporation (the "<u>Company</u>"), up to [●] shares (as subject to adjustment hereunder, the "<u>Warrant Shares</u>") of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in <u>Section 2(b)</u>.

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<u>Definitions</u>. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this <u>Section 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>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.

"Alternate Consideration" has the meaning set forth in <u>Section 3(g)</u>.

"<u>Bid Price</u>" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. ("<u>Bloomberg</u>") (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Common Stock is then listed or quoted on a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

"<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>provided</u>, <u>however</u>, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to "stay at home", "shelter-in-place", "non-essential employee" or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.

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

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

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"<u>Common Stock Equivalents</u>" means any securities of the Company 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>Common Stock Deemed Outstanding</u>" means, at any given time, the number of shares of Common Stock actually outstanding at such time, excluding any shares owned or held by or for the account of the Company or any of its wholly owned subsidiaries. For the avoidance of doubt, Common Stock Deemed Outstanding shall not give effect to any shares issuable upon exercise of options, warrants or other rights or upon conversion or exchange of any securities, except as expressly provided in <u>Section 3(e)</u>.

"<u>Company</u><u>"</u><u> </u>has the meaning set forth in the Preamble.

"<u>Convertible Securities</u>" means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

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

"<u>Excluded Issuances</u>" means any issuance or sale (or deemed issuance or sale in accordance with <u>Section 3(e)</u>) by the Company after the Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant or any warrant outstanding as of the date hereof; (b) shares issued directly or upon the exercise of equity awards to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company, or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to an equity incentive plan that the Board may authorize; (c) shares of Common Stock issued upon the conversion or exercise of options or other convertible securities outstanding as of the Original Issue Date, provided such securities are not amended after the Original Issue Date to increase the number of shares issuable thereunder or to lower the exercise, conversion or exchange price thereof; (d) issuances approved by the Board in connection with joint ventures, strategic alliances, acquisitions or underwritten public offerings for cash for the Company's account; and (e) any issuance made pursuant to arrangements described in <u>Schedule 3.1(g)</u> to that certain Securities Purchase Agreement.

"<u>Exercisable Portion</u>" has the meaning set forth in <u>Section 2(f)</u>.

"<u>Fundamental Transaction</u>" has the meaning set forth in <u>Section 3(g)</u>.

"<u>Holder</u>" has the meaning set forth in the Preamble.

"<u>Options</u>" means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

"<u>Original Issue Date</u>" means the date of original issuance of this Warrant pursuant to the Securities Purchase Agreement.

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"<u>Permitted Exercise Date</u>" has the meaning set forth in <u>Section 2(f)</u>.

"<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>Purchase Price</u>" has the meaning set forth in the Preamble.

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

"<u>Securities Purchase Agreement</u>" means the Securities Purchase Agreement, dated as of January 16, 2026, between the Company and the certain purchasers party thereto.

"<u>Shareholder Approval</u>" means all such approvals of the Company as may be required by the applicable rules and regulations of the NYSE American (or any successor entity) or under applicable law from the stockholders of the Company with respect to the exercise of Warrants, including the Beneficial Ownership Limitation (as defined below).

"<u>Successor Entity</u>" has the meaning set forth in <u>Section 3(g)</u>.

"<u>Termination Date</u>" has the meaning set forth in the Preamble.

"<u>Trading Day</u>" means a day on which the Common Stock is traded on a Trading Market.

"<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>Transfer Agent</u>" means Equiniti Trust Company, LLC, the current transfer agent of the Company, with a mailing address of 1110 Centre Pointe Curve, Suite 101, Mendota Heights, MN 55120-4101, and any successor transfer agent of the Company.

"<u>VWAP</u>" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

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"<u>Warrant Shares</u>" has the meaning set forth in the Preamble.

"<u>Warrants</u>" means this Warrant and other Pre-Funded Common Stock purchase warrants issued by the Company on or about the date hereof.

<u>Exercise</u>.

<u>Exercise of Warrant</u>. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, from time to time solely to the extent of the then-applicable Exercisable Portion, at any time or times on or after the applicable Permitted Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form attached hereto as <u>Exhibit A</u> (the "<u>Notice of Exercise</u>"). Within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in <u>Section 2(d)(i)</u> herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer pursuant to wire instructions provided by the Company or cashier's check drawn on a United States bank, unless the cashless exercise procedure specified in <u>Section 2(c)</u> below is specified in the applicable Notice of Exercise. 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 be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice. **The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.**

<u>Exercise Price</u>. The aggregate exercise price of this Warrant, except for a nominal exercise price of $0.01 per Warrant Share, was pre-funded to the Company on or prior to the applicable Permitted Exercise Date and, consequently, no additional consideration (other than the nominal exercise price of $0.01 per Warrant Share) shall be required to be paid by the Holder to any Person to effect any exercise of this Warrant. The remaining unpaid exercise price per share of Common Stock under this Warrant shall be $0.01, subject to adjustment hereunder (the "<u>Exercise Price</u>").

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<u>Cashless Exercise</u>. This Warrant may also be exercised, in whole or in part, at such time by means of a "cashless exercise" in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to <u>Section 2(a)</u> hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to <u>Section 2(a)</u> hereof on a Trading Day prior to the opening of "regular trading hours" (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg as of the time of the Holder's execution of the applicable Notice of Exercise if such Notice of Exercise is executed during "regular trading hours" on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of "regular trading hours" on a Trading Day) pursuant to <u>Section 2(a)</u> hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to <u>Section 2(a)</u> hereof after the close of "regular trading hours" on such Trading Day;

&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 Exercise Price of this Warrant, as adjusted hereunder; 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;(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised and any holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this <u>Section 2(c)</u>.

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<u>Mechanics of Exercise</u>.

<u>Delivery of Warrant Shares Upon Exercise</u>. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder's or its designee's balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system ("<u>DWAC</u>") if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner of sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrant), and otherwise by physical delivery of a certificate, registered in the Company's share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earlier of (i) one (1) Trading Day after the delivery to the Company of the Notice of Exercise and (ii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the "<u>Warrant Share Delivery Date</u>"). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, "<u>Standard Settlement Period</u>" means the standard settlement period, expressed in a number of Trading Days, on the Company's primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the applicable Permitted Exercise Date, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on such Permitted Exercise Date and such Permitted Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date.

<u>Delivery of New Warrants Upon Exercise</u>. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

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<u>Rescission Rights</u>. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to <u>Section 2(d)(i)</u> by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise by delivering written notice to the Company.

<u>Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise</u>. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of <u>Section 2(d)(i)</u> above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder's brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a "<u>Buy-In</u>"), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder (up to the number of shares of Common Stock required to be purchased by the Holder or its broker for the Buy-In) in connection with a valid exercise, and (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrants with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

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<u>No Fractional Shares or Scrip</u>. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

<u>Charges, Taxes and Expenses</u>. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder in the Notice of Exercise; <u>provided</u>, <u>however</u>, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto as <u>Exhibit B</u> duly executed by the Holder and the Company shall have the right to require, as a condition thereto, the prior or contemporaneous payment of a sum sufficient to reimburse it for any transfer tax incidental. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares, in each case, to the extent available.

<u>Closing of Books</u>. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

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<u>Holder</u><u>'</u><u>s Exercise Limitations</u>. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to <u>Section 2</u> unless and to the extent permitted pursuant to <u>Section 2(f)</u> and, in any event, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with (i) the Holder's Affiliates, (ii) any other Persons acting as a group together with the Holder or any of the Holder's Affiliates and (iii) any other Persons whose beneficial ownership of the shares of Common Stock would or could be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act (such Persons, "<u>Attribution Parties</u>")), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this <u>Section 2(e)</u>, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. For the avoidance of doubt, prior to receiving Shareholder Approval, the Company shall not issue, and the Holder shall not be entitled to receive upon exercise of this Warrant, any shares of Common Stock to the extent such issuance, when aggregated with all underlying shares of Common Stock issued pursuant to all of the Warrants in this series, would exceed 19.99% of the number of shares of Common Stock outstanding immediately prior to the signing of the Securities Purchase Agreement. To the extent that the limitation contained in the first sentence of this <u>Section 2(e)</u> applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable up to the Beneficial Ownership Limitation shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder's good faith determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined by the Holder in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are not in compliance with the Beneficial Ownership Limitation (other than as a result of a Holder's reliance on the number of issued and outstanding shares of Common Stock pursuant to this <u>Section 2(e)</u>). For purposes of this <u>Section 2(e)</u>, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company's most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The "<u>Beneficial Ownership Limitation</u>" shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of Common Stock outstanding immediately before giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this <u>Section 2(e)</u>, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this <u>Section 2(e)</u> shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61<sup>st</sup> day after such notice is delivered to the Company. In the event that the issuance of Common Stock to the Holder upon exercise of this Warrant results in the Holder, together with the Attribution Parties, collectively being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation, the number of shares so issued by which the aggregate Beneficial Ownership of the Holder and its Attribution Parties exceeds such limitation (the "<u>Excess Shares</u>") shall be deemed null and void and shall be cancelled ab initio, and the Holder and/or the Attribution Parties shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares and the Holder shall return the Excess Shares to the Company. The provisions of this paragraph shall not be construed and implemented in a manner otherwise than in strict conformity with the terms of this <u>Section 2(e)</u> to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

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<u>Time-based Exercisability; Tranches</u>. Notwithstanding anything to the contrary herein, this Warrant shall be exercisable only in accordance with the following schedule (the "<u>Exercisable Portion</u>"), in each case measured from the Original Issue Date: (i) beginning on the date that is six (6) months after the Original Issue Date, up to twenty percent (20%) of the Warrant Shares (as such number may be adjusted pursuant to <u>Section 3</u>) shall become exercisable; (ii) beginning on the date that is nine (9) months after the Original Issue Date, an additional thirty percent (30%) of the Warrant Shares (as such number may be adjusted pursuant to <u>Section 3</u>) shall become exercisable; and (iii) beginning on the date that is twelve (12) months after the Original Issue Date, the remaining fifty percent (50%) of the Warrant Shares (as such number may be adjusted pursuant to <u>Section 3</u>) shall become exercisable (each such date calculated in clauses (i) through (iii) above, a "<u>Permitted Exercise Date</u>"). For the avoidance of doubt, prior to each respective Permitted Exercise Date, the Warrant Shares underlying such tranche shall not be exercisable. Any Warrant Shares that become exercisable pursuant to this <u>Section 2(f)</u> and that are not exercised shall remain exercisable thereafter until the Termination Date, in each case subject to the Beneficial Ownership Limitation and receipt of the Required Approvals, as defined in the Securities Purchase Agreement.

<u>Certain Adjustments</u>. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this <u>Section 3</u> (in each case, after taking into consideration any prior adjustments pursuant to this <u>Section 3</u>).

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<u>Adjustment to Number of Warrant Shares Upon Issuance of Common Stock</u>. Except as provided in <u>Section 3(c)</u> and except in the case of an event described in <u>Section 3(g)</u> or <u>Section 3(h)</u>, if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with <u>Section 3(e)</u> is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Purchase Price, then immediately upon such issuance or sale (or deemed issuance or sale), the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such issuance or sale (or deemed issuance or sale) shall be increased to a number of Warrant Shares as is computed using the following formula:

X = A × (B ÷ (C + D))

Where:

X = the increased aggregate number of Warrant Shares;

A = the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such issuance or sale (or deemed issuance or sale);

B = the number of shares of Common Stock Deemed Outstanding immediately after such issuance or sale (or deemed issuance or sale);

C = the number of shares of Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale); and

D = the aggregate number of shares of Common Stock which the aggregate amount of consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale) would purchase at the Purchase Price.

For the avoidance of doubt, no adjustment shall increase the Exercise Price or decrease the number of Warrant Shares then issuable hereunder.

<u>Exceptions to Adjustment Upon Issuance of Common Stock</u>. Anything herein to the contrary notwithstanding, there shall be no adjustment to the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

<u>Effect of Certain Events on Adjustment to Number of Warrant Shares</u>. For purposes of determining adjustments under <u>Section 3(a)</u>:

<u>Issuance of Options</u>. If the Company, at any time or from time to time after the Original Issue Date, grants or sells any Options and the price per share for which Common Stock is issuable upon exercise of such Options or upon conversion or exchange of Convertible Securities issuable upon exercise of such Options is less than the Purchase Price, then the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon exercise of such Options shall be deemed to have been issued as of the date of grant or sale of such Options at a price per share equal to the quotient described in <u>Section 3(e)(i)</u> below, and shall thereafter be deemed outstanding for purposes of <u>Section 3(a)</u>. Except as provided in <u>Section 3(e)(iii)</u>, no further adjustment shall be made upon the actual issuance of Common Stock or Convertible Securities upon exercise of such Options or upon conversion or exchange of such Convertible Securities.

<u>Issuance of Convertible Securities</u>. If the Company, at any time or from time to time after the Original Issue Date, grants or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange of such Convertible Securities is less than the Purchase Price, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of grant or sale of such Convertible Securities at a price per share equal to the quotient described in <u>Section 3(e)(ii)</u> below, and shall thereafter be deemed outstanding for purposes of <u>Section 3(a)</u>. Except as provided in <u>Section 3(e)(iii)</u>, no further adjustment shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities.

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<u>Change in Terms of Options or Convertible Securities</u>. Upon any change in the consideration payable, conversion or exchange rate, or maximum number of shares issuable under any Options or Convertible Securities (in each case, other than in connection with an Excluded Issuance), the number of Warrant Shares then issuable upon exercise of this Warrant shall be adjusted retroactively to the number of Warrant Shares which would have been in effect had such changed terms been in effect at the time initially granted, issued or sold, but only if as a result the number of Warrant Shares is increased.

<u>Treatment of Expired or Terminated Options or Convertible Securities</u>. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which an adjustment was made, the number of Warrant Shares then issuable shall be readjusted as if such Option or Convertible Security had not been issued.

<u>Calculation of Consideration Received</u>. For cash issuances, the consideration shall be deemed the net amount received; for non-cash issuances, the fair value; for issuances for no specifically allocated consideration in an integrated transaction, the fair value attributable to the securities issued; and for issuances to owners of a non-surviving entity in a merger in which the Company is the survivor, the fair value of the attributable net assets and business. The net cash amount and fair value shall be determined in good faith by the Board and the Holder, subject to expert valuation if not agreed within ten (10) Business Days after delivery of notice pursuant to <u>Section 3(i)</u>.

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<u>Record Date</u>. If the Company takes a record of holders of Common Stock for dividends, distributions or subscription rights, such record date shall be deemed the date of the issuance or sale of the shares of Common Stock deemed issued upon declaration or grant, subject to abandonment rescission as applicable.

<u>Treasury Shares</u>. Shares owned or held by or for the account of the Company or its wholly owned subsidiaries shall be excluded from outstanding shares for purposes of this <u>Section 3</u>, and dispositions of such shares (other than cancellation, retirement or intra-group transfers) shall be treated as issuances or sales of Common Stock.

<u>Structural Anti</u><u>-</u><u>Dilution</u>.

<u>Dividends, Subdivisions and Combinations</u>. If the Company (x) pays a dividend or makes any other distribution payable in shares of Common Stock or in Options or Convertible Securities, or (y) subdivides its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares issuable immediately prior thereto shall be proportionately increased; and if the Company combines its outstanding shares into a smaller number of shares, such number of Warrant Shares shall be proportionately decreased. Any adjustment under this <u>Section 3(d)</u> shall become effective at the close of business on the date the dividend, distribution, subdivision or combination becomes effective.

<u>Reorganizations and Similar Transactions</u>. In the event of any capital reorganization, reclassification (other than par value changes or events covered by <u>Section 3(d)(i)</u>), consolidation or merger, sale of all or substantially all assets, or other similar transaction which entitles holders of Common Stock to receive stock, securities or assets, this Warrant shall remain outstanding and thereafter be exercisable for the kind and amount of securities or assets receivable by a holder of the number of shares of Common Stock for which this Warrant was exercisable immediately prior to such event, with appropriate adjustment to preserve the intent of this <u>Section 3</u>. Any successor entity shall assume the Company's obligations hereunder in writing.

<u>Fundamental Transactions</u>. The provisions of <u>Section 3(g)</u> (Fundamental Transaction) shall continue to apply, and nothing herein shall limit the Holder's rights thereunder.

<u>Deemed Issuances and Consideration</u>. For purposes of <u>Section 3(a)</u>:

For Options, the price per share shall equal the quotient of (A) the sum of (x) the total consideration, if any, received for the grant or sale of such Options, plus (y) the minimum aggregate additional consideration payable upon exercise of such Options, plus (z) the minimum aggregate additional consideration, if any, payable upon the issuance or sale and conversion or exchange of any related Convertible Securities, divided by (B) the total maximum number of shares of Common Stock issuable upon exercise of such Options or upon conversion or exchange of all related Convertible Securities.

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For Convertible Securities, the price per share shall equal the quotient of (A) the sum of (x) the total consideration, if any, received for the grant or sale of such Convertible Securities, plus (y) the minimum aggregate additional consideration, if any, payable upon conversion or exchange of such Convertible Securities, divided by (B) the total maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities.

No further adjustment shall be made upon actual issuance of Common Stock upon exercise, conversion or exchange of any Options or Convertible Securities previously adjusted, except as provided in <u>Section 3(c)(iii)</u>.

<u>Certain Events</u>. If any event of the type contemplated by this <u>Section 3</u> but not expressly provided for occurs (including the granting of stock appreciation rights, phantom stock or other equity-linked rights), then the Board shall make an appropriate adjustment in the number of Warrant Shares issuable so as to protect the Holder's rights in a manner consistent with the intent of this <u>Section 3</u>; provided, that no such adjustment shall decrease the number of Warrant Shares issuable as otherwise determined pursuant hereto.

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<u>Fundamental Transaction</u>. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock or greater than 50% of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock or greater than 50% of the voting power of the common equity of the Company (each a "<u>Fundamental Transaction</u>"), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in <u>Section 2(e)</u> on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the "<u>Alternate Consideration</u>") receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in <u>Section 2(e)</u> on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the "<u>Successor Entity</u>") to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this <u>Section 3(g)</u> pursuant to written agreements in form and substance reasonably satisfactory to and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for the Company (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the "Company" shall refer instead to the Successor Entity), and the Successor Entity may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein. For the avoidance of doubt, the Holder shall be entitled to the benefits of the provisions of this <u>Section 3(d)</u> regardless of (i) whether the Company has sufficient authorized shares of Common Stock for the issuance of Warrant Shares and/or (ii) whether a Fundamental Transaction occurs prior to any Permitted Exercise Date.

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<u>Calculations</u>. All calculations under this <u>Section 3</u> shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this <u>Section 3</u>, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

<u>Notice to Holder</u>.

<u>Adjustment to Number of Warrant Shares</u>. Whenever the number of Warrant Shares is adjusted pursuant to any provision of this <u>Section 3</u>, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the number of Warrant Shares issuable upon exercise of this Warrant after such adjustment and setting forth a brief statement of the facts requiring such adjustment and certifying the calculation thereof.

<u>Notice to Allow Exercise by Holder</u>. If during the term in which the Warrant may be exercised (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any Fundamental Transaction, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

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<u>Transfer of Warrant</u>.

<u>Transferability</u>. Subject to compliance with any applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant as provided herein, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an Assignment Form (in the form attached hereto as <u>Exhibit B</u>) to the Company assigning this Warrant. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

<u>New Warrants</u>. Subject to compliance with any applicable securities laws, this Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with <u>Section 4(a)</u>, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated as of the Issue Date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

<u>Warrant Register</u>. The Company shall register this Warrant, upon records to be maintained by the Company, in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

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<u>Miscellaneous</u>.

<u>No Rights as Stockholder Until Exercise; No Settlement in Cash</u>. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in <u>Section 2(d)(i)</u>, except as expressly set forth in <u>Section 3</u>. Without limiting any rights of a Holder to receive Warrant Shares on a "cashless exercise" pursuant to <u>Section 2(c)</u> or to receive cash payments pursuant to <u>Section 2(d)(i)</u> and <u>Section 2(d)(iv)</u> herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.

<u>Loss, Theft, Destruction or Mutilation of Warrant</u>. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

<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.

<u>Authorized Shares</u>.

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Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will, so long as any of the Warrants are outstanding, (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

<u>Jurisdiction</u>. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

<u>Restrictions</u>. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

<u>Nonwaiver and Expenses</u>. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

<u>Notices</u>. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed to the Company, at 2000 Powell Street, Suite 1150, Emeryville, CA 94608, Attention: Chief Financial Officer, or such other information as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

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<u>Limitation of Liability</u>. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

<u>Remedies</u>. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

<u>Successors and Assigns</u>. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

<u>Amendment</u>. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

<u>Severability</u>. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

<u>Headings</u>. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

*(Signature Page Follows)*

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

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| | |
|:---|:---|
| **NOVABAY PHARMACEUTICALS, INC.**  | **NOVABAY PHARMACEUTICALS, INC.**  |
| By:  |  |
|  | Name: Michael Kazley  |
|  | Title: Chief Executive Officer  |

---

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**EXHIBIT A**

**NOTICE OF EXERCISE**

TO: NOVABAY PHARMACEUTICALS, INC.

&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) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

&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) Payment shall take the form (check applicable box):

[ ] in lawful money of the United States; or

[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following DWAC Account Number:

Broker Name: _______________________________

Broker DTC DWAC #: _______________________________

Broker Contact: _______________________________

Account #: _______________________________

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

*Signature of Authorized Signatory of Investing Entity*: _________________________________________________

Name of Authorized Signatory: ___________________________________________________________________

Title of Authorized Signatory: ____________________________________________________________________

Date: ________________________________________________________________________________________

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**EXHIBIT B**

**ASSIGNMENT FORM**

*(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)*

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

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| | |
|:---|:---|
| Name: | ______________________________________ |
|  | (Please Print)<br>|
| Address: | ______________________________________ |
| <br> Phone Number:<br>Email Address: | (Please Print)<br> ______________________________________<br>______________________________________ |
| Dated: _______________ __, ______ |  |
| Holder's Signature:<u> </u> |  |
| Holder's Address:<u> </u> |  |

---

## Exhibit 10.1

**Exhibit 10.1**

***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.

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"<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>.

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"<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).

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"<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>.

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

(i) this Agreement duly executed by the Company;

(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;

(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);

(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.

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

(i) this Agreement duly executed by such Purchaser;

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

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

(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:

(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);

(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

(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.

(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:

(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);

(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;

(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;

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

(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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(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;

(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

(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:

(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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(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>").

(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>").

(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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(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>").

(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.

(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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(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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(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.

(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.

(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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(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.

(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.

(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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(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.

(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.

(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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(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.

(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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(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.

(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.

(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.

(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.

(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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(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.

(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.

(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.

(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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(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.

(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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(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.

(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>").

(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.

(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.

(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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(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.

(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.

(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.

(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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(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.

(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.

(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.

(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.

(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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(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.

(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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(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.

(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):

(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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(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.

(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.

(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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(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.

(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.

(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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(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.

(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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(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.

(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.

(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>.

(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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(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."

(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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(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>.

(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>.

(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.

(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.

(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>.

(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.

(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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(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>.

(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).

(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.

(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<br> SIGNATURE PAGE FOR PURCHASERS FOLLOWS]

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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: 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)

$__________________(in USDT)

Shares:

Pre-Funded Warrants: 268,399,868 Beneficial Ownership Blocker ☒ 4.99% or ☐ 9.99%

EIN Number:

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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: 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: $__________________(in USD)

$__________________(in SKY)

$__________________(in USDS)

$35,000,000 (in USDT)

Shares:

Pre-Funded Warrants: 268,399,868 Beneficial Ownership Blocker ☐ 4.99% or ☒ 9.99%

EIN Number:<u> </u><u> </u><u> </u><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: Framework Ventures IV L.P.

By: Michael Ernest Anderson

*Signature of Authorized Signatory of Purchaser*: /s/ Michael Ernest 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)

$__________________(in USDT)

Shares:

Pre-Funded Warrants: 268,399,868 Beneficial Ownership Blocker ☒ 4.99% or ☐ 9.99%

EIN Number:

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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:

*Signature of Authorized Signatory of Purchaser*:

Name of Authorized Signatory:

Title of Authorized Signatory:

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 (in USDS)

$__________________(in USDT)

Shares:

Pre-Funded Warrants: 100,000,000 Beneficial Ownership Blocker ☒ 4.99% or ☐ 9.99%

EIN Number:<u> </u><u> </u><u> </u><u> </u>

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**Exhibit A**

**Form of Pre-Funded Warrant**

[*Attached*.]

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**Exhibit B**

**Form of Accredited Investor Questionnaire<u> </u>**

[*Attached*.]

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**SCHEDULE 3.1(a)**

***Subsidiaries***

**[***Attached*.]

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**SCHEDULE 3.1(d)**

***Conflicts***

**[***Attached*.]

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**<u>SCHEDULE 3.1(g)</u>**

***Capitalization***

**[***Attached*.]

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**SCHEDULE 3.1(j)**

***Litigation***

[*Attached*.]

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**SCHEDULE 3.1(l)**

***Certain Fees***

[*Attached.*]

## Exhibit 10.2

**Exhibit 10.2**

**INVESTORS**' **RIGHTS AGREEMENT**

**THIS INVESTORS**' **RIGHTS AGREEMENT** (this "**Agreement**"), dated as of January 16, 2026, is entered into by and among NovaBay Pharmaceuticals, Inc., a Delaware corporation (the "**Company**"), and the several investors signatory hereto (individually as an "**Investor**" and collectively together with their respective permitted assigns, the "**Investors**"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement by and among the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "**Purchase Agreement**").

**WHEREAS:**

A. Upon the terms and subject to the conditions of the Purchase Agreement, the Company has agreed to issue to the Investors, and the Investors have agreed to purchase, severally and not jointly, an aggregate of up to $134,031,381 of pre-funded warrants (the "**Pre-Funded Warrants**") to purchase 837,696,130 shares of the Company's common stock, par value $0.01 per share (the "**Common Stock**"), pursuant to the Purchase Agreement. The Common Stock issuable upon exercise of the Pre-Funded Warrants, without giving effect to any limitations on exercise of the pre-funded warrants, and assuming all of the Pre-Funded Warrants are exercised for cash, are collectively referred to herein as the "**Shares**."

B. To induce the Investors to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "**Securities Act**"), and applicable state securities laws.

**NOW, THEREFORE,** in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investors hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **DEFINITIONS.** 

For purposes of this Agreement, the following terms shall have the following meanings:

(a) "**Board of Directors**" means the board of directors of the Company.

(b) "**Holders**" means the Investors who then hold Registrable Securities under this Agreement.

(c) "**Person**" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or any other entity or organization.

(d) "**Register**," "**Registered**," and "**Registration**" refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and providing for offering securities on a continuous basis, and the declaration or ordering of effectiveness of such registration statement(s) by the U.S. Securities and Exchange Commission (the "**SEC**").

(e) "**Registrable Securities**" means the Shares and any Common Stock issued or issuable with respect to the Shares as a result of any stock split or subdivision, stock dividend, recapitalization, exchange or similar event. Registrable Securities shall cease to be Registrable Securities upon the date on which the Investors shall have resold all the Registrable Securities covered by the Registration Statement.

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(f) "**Registration Expenses**" means all fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement, which shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company's counsel and independent registered public accountants (including the expenses of any special audit and comfort letters required by or incident to such performance or compliance)) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (D) if not previously paid by the Company with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities with FINRA pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any Selling Expenses.

(g) "**Registration Statement**" means any registration statement of the Company filed with, or to be filed with, the SEC under the Securities Act, that Registers Registrable Securities, including the related prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement as may be necessary to comply with applicable securities laws.

(h) "**Rule 415**" means Rule 415 promulgated by the SEC 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 SEC having substantially the same purpose and effect as such Rule.

(i) "**SEC Guidance**" means (i) any publicly-available written or oral guidance of the SEC staff, or any comments, requirements or requests of the SEC staff and (ii) the Securities Act.

(j) "**Securities Purchase Agreement**" means that certain Securities Purchase Agreement, dated as of January 16, 2026, between the Company and the Investors.

(k) "**Selling Expenses**" means all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and all similar fees and commissions relating to the Investors' disposition of the Registrable Securities.

Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Securities Purchase Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **NOMINATION RIGHTS.** 

Each of the R01 Fund LP, Framework Ventures IV L.P. and Sky Frontier Foundation (each, a "**Nominating Investor**") shall have the right to nominate one (1) individual for election to the Board of Directors (each, a "**Director Nominee**"). The Company shall include each Director Nominee in the slate of nominees recommended by the Board of Directors for election at any meeting of stockholders at which directors are to be elected and shall use its reasonable best efforts to cause the election of each such Director Nominee. Notwithstanding the foregoing, the rights of a Nominating Investor under this Section 2 shall terminate and be of no further force or effect at such time as such Nominating Investor, together with its affiliates, ceases to beneficially own Common Stock, together with securities convertible into or exchangeable for Common Stock, comprising at least five percent (5%) of the outstanding shares of Common Stock without regard to any exercise restriction therein. In the event that a Director Nominee resigns, is removed, dies, or is otherwise unable to serve, the Nominating Investor that nominated such Director Nominee (as applicable) shall have the right to nominate a replacement, and the Company shall use its reasonable best efforts to cause the Board of Directors to appoint such replacement. Each Nominating Investor shall have the right at any time to request the removal of its Director Nominee and nominate a replacement therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **REGISTRATION.** 

(a) <u>Demand Registration</u>. At any time after the Closing Date, any of the Investors may request registration for resale under the Securities Act of all or any portion of their Registrable Securities by delivering a written notice to the Company (a "**Demand Notice**"). Each Demand Notice shall specify the number of Registrable Securities to be registered. The Company shall not be obligated to effect more than two (2) Registrations requested pursuant to a Demand Notice from each Investor; provided, however, if less than all of the Registrable Securities requested to be Registered pursuant to such a Demand Notice are not Registered, neither such a Demand Notice nor this Section 3.1(a) shall be satisfied, and such Demand Notice shall not count towards any Investors' two (2) allotted Demand Notices. Upon receipt of a Demand Notice, the Company shall, as promptly as reasonably practicable, but in no event later than 30 days after receipt of the Demand Notice, file a Registration Statement covering the resale of the Registrable Securities specified in the Demand Notice and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the SEC as promptly as practicable thereafter. Subject to clause (b) below, the Company shall keep such Registration Statement effective until all Registrable Securities covered thereby have been sold or may be sold without restriction under Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Investors and any restrictive legend is removed to permit the delivery of the securities via the facilities of DTC.

(b) <u>Registration Limitations</u>. Notwithstanding the registration obligations set forth in Section 3(a), if the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Investors and use its reasonable best efforts to file amendments to the relevant Registration Statement as required by the SEC, covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 3(e) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with the SEC Guidance.

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(c) <u>Cut Back</u>. Notwithstanding any other provision of this Agreement, if the SEC or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used commercially reasonable efforts to advocate with the SEC for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by an Investor as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows: (i) first, the Company shall reduce or eliminate any securities to be included other than Registrable Securities; (i) second, the Company shall reduce Registrable Securities on a pro rata basis based on the total number of unregistered Shares held by such Investors.

In the event of a cutback hereunder (such shares cutback pursuant to this Section 3(c), the "**Cut Back Shares**"), the Company shall give the Investors at least five (5) days prior written notice along with the calculations as to such Investor's allotment. No liquidated damages shall accrue as to any such Cut Back Shares until such date as the Company is able to effect the registration of such Cut Back Shares in accordance with any SEC Guidance applicable to such Cut Back Shares (such date, the "**Restriction Termination Date**"). From and after the Restriction Termination Date applicable to any Cut Back Shares, all of the provisions of this Section 3 (including the Company's obligations with respect to the filing of a Registration Statement and its obligations to use reasonable efforts to have such Registration Statement declared effective within the time periods set forth herein and the liquidated damages provisions relating thereto) shall again be applicable to such Cut Back Shares.

(d) <u>Shelf Registration.</u>

(i) <u>Request for Shelf Registration</u>. Prior to each of the dates that are six (6) months, nine (9) months and twelve (12) months after the date of this Agreement, the Company shall file and cause to become effective with the SEC a shelf Registration Statement pursuant to Rule 415 under the Securities Act ("**Shelf Registration Statement**") relating to the offer and sale of Registrable Securities by any Holders thereof from time to time in accordance with the methods of distribution elected by such Holders, and the Company shall use its reasonable best efforts to cause such Shelf Registration Statement to promptly become effective under the Securities Act. Any such Registration pursuant to a Shelf Registration Request shall hereinafter be referred to as a "**Shelf Registration**."

(ii) <u>Continued Effectiveness</u>. The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act in order to permit the Prospectus forming part of the Shelf Registration Statement to be usable by Holders until the earlier of: (i) the date as of which all Registrable Securities have been sold pursuant to the Shelf Registration Statement or another Registration Statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder); and (ii) the date as of which no Holder holds Registrable Securities (such period of effectiveness, the "**Shelf Period**"). Subject to Clause 3(f), the Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Holders of the Registrable Securities covered thereby not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is required by applicable law.

(e) <u>Piggyback Registration</u>. If the Company at any time proposes to register any of its securities under the Securities Act for its own account or for the account of other securityholders (other than a registration on Form S-4 or S-8 or any successor form), it shall give prompt written notice to all Investors of its intention to do so. Upon the written request of any Investor received within 15 days after the delivery of the Company's notice, the Company shall use its reasonable best efforts to include in such registration all Registrable Securities specified in such Investor's request (a "**Piggyback Registration**"). If a Piggyback Registration is an underwritten offering, and the managing underwriter advises the Company that the number of securities requested to be included exceeds the number that can be sold without adversely affecting the offering, the Company shall include securities in the following order of priority: (i) first, the Registrable Securities requested to be included in such registration; (ii) second, the securities the Company proposes to sell for its own account; (ii)and (iii) third, any other securities requested to be included in such registration.

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(f) <u>Allowable Delays</u>. On no more than two occasions and for not more than 30 consecutive days or for a total of not more than 60 days in any 12 month period, the Company may delay the filing or effectiveness of any Registration Statement, or suspend the use of any prospectus included therein, if the Company determines in good faith that such delay or suspension is necessary to (A) delay the disclosure of material non-public information, the disclosure of which would be materially adverse to the Company or (B) amend or supplement the Registration Statement or prospectus to ensure it does not contain a material misstatement or omission (an "**Allowed Delay**"); provided, that the Company shall promptly (a) notify each Investor in writing of the commencement and termination of an Allowed Delay, but shall not disclose the nature of the matter giving rise to the delay, and (b) advise the Investors to cease all sales under the Registration Statement until the end of the Allowed Delay.

(g) <u>No Underwriters</u>. Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Investor or Affiliate of a Holder as an underwriter without the prior written consent of such Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **RELATED COMPANY OBLIGATIONS.** 

With respect to any Registration Statement in which Registrable Securities are to be Registered pursuant to <u>Section 3</u>, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

(a) <u>Notifications</u>. The Company will promptly notify the Investors of receipt of any Demand Notice, in which case each Investor shall be permitted to participate in such Registration by submitting its own Demand Notice within 5 business days. The Company will also promptly notify the Investors of the time when any amendment to the Registration Statement, other than documents incorporated by reference, has been filed with the SEC and/or has become effective or where a receipt has been issued therefor or any subsequent supplement to a prospectus has been filed and of any request by the SEC for any amendment or supplement to the Registration Statement or any prospectus or for additional information.

(b) <u>Amendments.</u> The Company will prepare and file with the SEC any amendments, post-effective amendments or supplements to the Registration Statement or any related prospectus, as applicable, that, (a) as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act and the Exchange Act with respect to the secondary sale of all of the Registrable Securities covered thereby, or (b) in the reasonable opinion of the Investors and the Company, as may be necessary or advisable in connection with any acquisition or sale of Registrable Securities by the Investors.

(c) <u>Investor Review</u>. The Company will not file any Registration Statement, or any amendment or supplement to any Registration Statement or any prospectus, other than documents incorporated by reference, unless (A) the Investors and their counsel shall have been advised and afforded the opportunity to review and comment thereon at least three (3) Business Days prior to filing with the SEC and (B) the Company shall have given reasonable due consideration to any comments thereon received from the Investors or their counsel.

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(d) <u>Copies Available</u>. The Company will furnish to any Investor whose Registrable Securities are included in any Registration Statement and its counsel copies of such Registration Statement and the prospectus thereunder (including all documents incorporated by reference therein) and all amendments thereto that are filed with the SEC (including all documents filed with or furnished to the SEC during such period that are deemed to be incorporated by reference therein), each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion thereof which contains information for which the Company has sought confidential treatment) and such other documents as Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by Investor that are covered by such Registration Statement, in each case as soon as reasonably practicable upon such Investor's request and in such quantities as such Investor may from time to time reasonably request; provided, however, that the Company shall not be required to furnish any document to the Investor to the extent such document is available on EDGAR.

(e) <u>Notification of Stop Orders; Material Changes</u>. The Company shall use its best efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any such order as soon as practicable. The Company shall advise the Investors promptly (but in no event later than 24 hours) and shall confirm such advice in writing, in each case: (i) of the Company's receipt of notice of any request by the SEC or any other federal or state governmental authority for amendment of or a supplement to the Registration Statement or any prospectus or for any additional information; (ii) of the Company's receipt of notice of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or prohibiting or suspending the use of any prospectus or prospectus supplement, or of the Company's receipt of any notification of the suspension of qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or contemplated initiation of any proceeding for such purpose; and (iii) of the Company becoming aware of the happening of any event, which makes any statement of a material fact made in any Registration Statement or any prospectus untrue or which requires the making of any additions to or changes to the statements then made in any Registration Statement or any prospectus in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of any prospectus, in light of the circumstances under which they were made) not misleading, or of the necessity to amend any Registration Statement or any prospectus to comply with the Securities Act or any other law (each, a "**Suspension Event**"). If at any time the SEC, or any other federal or state governmental authority shall issue any stop order suspending the effectiveness of any Registration Statement or prohibiting or suspending the use of any prospectus or prospectus supplement, the Company shall use its best efforts to obtain the withdrawal of such order at the earliest practicable time. The Company shall furnish to the Investors, without charge, a copy of any correspondence from the SEC or the staff of the SEC, or any other federal or state governmental authority to the Company or its representatives relating to any Registration Statement or any prospectus, or prospectus supplement as the case may be. In the event of a Suspension Event set forth in clause (iii) of the first sentence of this <u>Section 4(e)</u>, the Company will use its best efforts to publicly disclose such event as soon as reasonably practicable, or otherwise resolve the matter such that sales under Registration Statements may resume; provided, however, upon the Company's good faith assessment of any adverse consequences to the Company and its shareholders of the premature disclosure of such information, the Company determines it has a bona fide business purpose for not making such information public, the Company may suspend the use of all Registration Statements for up to 30 consecutive calendar days; provided, further, that the Company may not suspend the use of all Registration Statements more than twice, or for more than 60 total calendar days, in each case during any twelve-month period.

(f) <u>Confirmation of Effectiveness</u>. If reasonably requested by an Investor at any time, the Company shall deliver to such Investor a written confirmation from Company's counsel of whether or not the effectiveness of any Registration Statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not such Registration Statement is currently effective and available to the Company for sale of Registrable Securities.

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(g) <u>Listing</u>. The Company shall use best efforts to cause all Registrable Securities covered by a Registration Statement to be listed on the New York Stock Exchange.

(h) <u>Compliance</u>. The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Investor in writing if, at any time, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investor is required to deliver a prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder, and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least 12 months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, including Rule 158 promulgated thereunder (for the purpose of this <u>subsection 4(h)</u>, "**Availability Date**" means the 45<sup>th</sup> day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "**Availability Date**" means the 90<sup>th</sup> day after the end of such fourth fiscal quarter).

(i) <u>Blue-Sky</u>. The Company shall register or qualify the Registrable Securities for the offer and sale under the securities or blue sky laws of such jurisdictions reasonably requested by the Investor; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this <u>Section 4(i)</u>, (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject but for this <u>Section 4(i)</u>, or (iii) file a general consent to service of process in any such jurisdiction.

(j) <u>Rule 144</u>. With a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to: (i) make and keep adequate current public information available, as those terms are understood and defined in Rule 144, until such date as there are no longer Registrable Securities; and (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; (iii) furnish electronically to each Investor upon request, as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the Exchange Act, (B) a copy of or electronic access to the Company's most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration.

(k) <u>Cooperation.</u> The Company shall cooperate with the holders of the Registrable Securities to facilitate the timely preparation and delivery of certificates or uncertificated shares representing the Registrable Securities to be sold pursuant to such Registration Statement or Rule 144 free of any restrictive legends and representing such number of shares of Common Stock and registered in such names as the holders of the Registrable Securities may reasonably request to the extent permitted by such Registration Statement or Rule 144 to effect sales of Registrable Securities; for the avoidance of doubt, the Company may satisfy its obligations hereunder without issuing physical stock certificates through the use of The Depository Trust Company's Direct Registration System.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **OBLIGATIONS OF THE INVESTORS.** 

(a) <u>Investor Information</u>. Each Investor shall provide a completed Investor Questionnaire in the form of Exhibit A in connection with the registration of the Registrable Securities. If the Company has not received such completed Questionnaire from an Investor within ten business days of the Company's request, the Company may file any Registration Statement without including such Investor's Registrable Securities.

(b) <u>Suspension of Sales</u>. Each Investor, severally and not jointly with any other Investor, agrees that, upon receipt of any notice from the Company of the existence of Suspension Event as set forth in <u>Section 4(e)</u>, the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities until the Investor's receipt of a notice from the Company confirming the resolution of such Suspension Event and that such dispositions may again be made.

(c) <u>Investor Cooperation</u>. Each Investor, severally and not jointly with any other Investor, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any amendments and supplements to any Registration Statement, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **EXPENSES OF REGISTRATION.** 

All Registration Expenses incurred in connection with registrations pursuant to this Agreement shall be borne by the Company. All Selling Expenses relating to securities registered on behalf of the Investors shall be borne by the Investors pro rata on the basis of the number of Registrable Securities so registered.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **INDEMNIFICATION.** 

(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investors, each Person, if any, who controls the Investors, the members, the directors, officers, partners, employees, members, managers, agents, representatives and advisors of the Investors and each Person, if any, who controls the Investors within the meaning of the Securities Act or the Exchange Act (each, an "**Indemnified Person**"), against any losses, obligation, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs and costs of preparation), reasonable and documented attorneys' fees, amounts paid in settlement or reasonable and documented expenses, (collectively, "**Claims**") reasonably incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency or body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("**Indemnified Damages**"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary prospectus or final prospectus, or any amendment or supplement thereof, or (ii) any violation or alleged violation by the Company or any of its Subsidiaries of the Securities Act, Exchange Act or any other state securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered or any rule or regulation promulgated thereunder applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration of the Registrable Securities (the matters in the foregoing clauses (i) and (ii) being, collectively, "**Violations**"). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable out-of-pocket legal fees or other reasonable and documented expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this <u>Section 7(a)</u>: (A) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by the Investors or such Indemnified Person specifically for use in such Registration Statement or prospectus and was reviewed and approved in writing by such Investor or such Indemnified Person expressly for use in connection with the preparation of any Registration Statement, any prospectus or any such amendment thereof or supplement thereto, if such in each case if the foregoing was timely made available by the Company; (B) with respect to any superseded prospectus, shall not inure to the benefit of any such Person from whom the Person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any other Indemnified Person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, and the Indemnified Person was promptly advised in writing not to use the outdated, defective or incorrect prospectus prior to the use giving rise to a violation; (C) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to <u>Section 9</u>.

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(b) In connection with any Registration Statement or any prospectus, the Investors, severally and not jointly, agree to indemnify, hold harmless and defend, the Company, each of its directors, each of its officers who signed the Initial Registration Statement or signs any New Registration Statement, each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each, an "**Indemnified Party**"), against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with information about an Investor furnished in writing by such Investor to the Company and reviewed and approved in writing by such Investor or such Indemnified Person expressly for use in connection with the preparation of any Registration Statement, any prospectus or any such amendment thereof or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor in connection with any claim relating to this <u>Section 7</u> and the amount of any damages such Investor has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in such Registration Statement giving rise to such indemnification obligation. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by any Investor pursuant to <u>Section 9</u>.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this <u>Section 7</u> of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this <u>Section 7</u>, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party (together with all other Indemnified Persons and Indemnified Parties that may be represented without conflict by one counsel) shall have the right to retain its own counsel with the reasonable fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise unless such judgment or settlement (i) imposes no liability or obligation on, (ii) includes as an unconditional term thereof the giving of a complete, explicit and unconditional release from the party bringing such indemnified claims of all liability of the Indemnified Party or Indemnified Person in respect to or arising out of such claim or litigation in favor of, and (iii) does not include any admission of fault, culpability, wrongdoing, or wrongdoing or malfeasance by or on behalf of, the Indemnified Party or Indemnified Person, as the case may be. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this <u>Section 7</u>, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

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(d) The indemnification required by this <u>Section 7</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 Indemnified Damages are incurred. Any Person receiving a payment pursuant to this <u>Section 7</u> which person is later determined to not be entitled to such payment shall return such payment (including reimbursement of expenses) to the person making it.

(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **CONTRIBUTION.** 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under <u>Section 7</u> to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **ASSIGNMENT OF REGISTRATION RIGHTS.** 

The Company shall not assign this Agreement or any rights or obligations hereunder (whether by operation of law or otherwise) without the prior written consent of each Investor holding Registrable Securities; provided, however, that in any transaction, whether by merger, reorganization, restructuring, consolidation, financing or otherwise, whereby the Company is a party and in which the Registrable Securities are converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term "Company" shall be deemed to refer to such Person and the term "Registrable Securities" shall be deemed to include the securities received by the Investor in connection with such transaction.

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An Investor may (i) transfer or assign its rights hereunder to any person controlling, controlled by or under common control with, or (ii) in whole or from time to time in part, to one or more Persons, in the case of this clause (ii), in connection with the transfer of Registrable Securities constituting 5.0% or more of the outstanding Common Stock (including Registrable Securities issuable upon exercise of Warrants) by such Investor to such Person, provided that such Investor complies with all laws applicable thereto, and the provisions of the Purchase Agreement, and provides written notice of assignment to the Company promptly after such assignment is effected, and such Person agrees in writing to be bound by all of the provisions contained herein.

The provisions of this Agreement shall be binding upon and inure to the benefit of the Investor and its successors and permitted assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **AMENDMENTS AND WAIVERS.** 

The provisions of this Agreement, including the provisions of this sentence, may be amended, modified or supplemented, or waived only by a written instrument executed by (i) the Company and (ii) each Investor, provided that any party may give a waiver as to itself and provided further that any amendment, modification, supplement or waiver that disproportionately and adversely affects the rights and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such adversely affected Investor or each Investor, as applicable. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of one or more Investors and that does not adversely directly or indirectly affect the rights of other Investors may be given by Investors holding all of the Registrable Securities to which such waiver or consent relates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **MISCELLANEOUS.** 

(a) <u>Notices</u>. Any notices or other communications required or permitted to be given hereunder shall be in writing and shall be deemed to be given (a) when delivered if personally delivered to the party for whom it is intended, (b) when delivered, if sent by electronic mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient's next business day or (c) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt:

i. If to the Company, addressed as follows:

NovaBay Pharmaceuticals, Inc.

2000 Powell Street, Suite 1150, Emeryville, California 94608<br> Attention: Tommy Law

Email: <u>tlaw@novabay.com</u>

with a copy (which shall not constitute notice):

Ropes & Gray LLP<br> 1211 Avenue of the Americas, New York, NY 10036

Attention : Rachel Phillips<br> Email : <u>Rachel.Phillips@ropesgray.com</u>

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ii. If to any Investor, at its e-mail address or address set forth on its signature page to the Purchase Agreement or to such e-mail address, or address as subsequently modified by written notice given in accordance with this <u>Section 11</u>.

Any Person may change the address to which notices and communications to it are to be addressed by notification as provided for herein.

(b) <u>Consent to Electronic Notice</u>. Each Investor consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the "**DGCL**"), as amended or superseded from time to time, by electronic mail pursuant to Section 232 of the DGCL (or any successor thereto) at the e-mail address set forth below the Investor's 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.

(c) <u>Waiver.</u> No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or be construed as, a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement.

(d) <u>Governing Law</u>. The provisions of <u>Section 5.9</u> of the Purchase Agreement are incorporated by reference herein *mutatis mutandis*.

(e) <u>Headings</u>. The titles, subtitles and headings in this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

(f) <u>Counterparts</u>. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile or pdf signature including any electronic signatures complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or pdf (or other electronic reproduction of a) signature.

(g) <u>Further Assurances</u>. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(h) <u>Contract Interpretation</u>. This Agreement is the joint product of each Investor and the Company and each provision hereof has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against any party hereto.

(i) <u>No Third Party Beneficiaries</u>. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties to this Agreement any rights, remedies, claims, benefits, obligations or liabilities under or by reason of this Agreement, and no Person that is not a party to this Agreement (including, without limitation, any partner, member, shareholder, director, officer, employee or other beneficial owner of any party to this Agreement, in its own capacity as such or in bringing a derivative action on behalf of a party to this Agreement) shall have any standing as a third party beneficiary with respect to this Agreement or the transactions contemplated hereby.

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(j) <u>Severability</u>. If any part or provision of this Agreement is held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties hereto.

(k) <u>Non-Recourse</u>. Notwithstanding anything that may be expressed or implied in this Agreement, the Company covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any current or future director, officer, employee, stockholder, general or limited partner or member of the Investors or of any affiliates or assignees thereof, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future director, officer, employee, stockholder, general or limited partner or member of the Investors or of any affiliates or assignees thereof, as such for any obligation of the Investors under this Agreement or any documents or instruments delivered in connection with this Agreement for any claim based on, in respect of or by reason of such obligations or their creation.

(l) <u>Specific Performance.</u> In addition to any and all other remedies that may be available at law in the event of any breach of this Agreement, each Investor shall be entitled to specific performance of the agreements and obligations of the Company hereunder and to such other injunction or other equitable relief as may be granted by a court of competent jurisdiction.

(m) <u>Cumulative Remedies</u>. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

*[Signature Page Follows]*

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**IN WITNESS WHEREOF,** the parties have caused this Registration Rights Agreement to be duly executed as of date first written above.

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| | |
|:---|:---|
| **COMPANY:**<br>NOVABAY PHARMACEUTICALS, INC.  | **COMPANY:**<br>NOVABAY PHARMACEUTICALS, INC.  |
| By:  | /s/ Tommy Law |
|  | Name: Tommy Law  |
|  | Title: Chief Financial Officer  |

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**IN WITNESS WHEREOF,** the parties have caused this Investors' Rights Agreement to be duly executed as of date first written above.

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| | |
|:---|:---|
| **INVESTOR:**<br>**R01 FUND LP** | **INVESTOR:**<br>**R01 FUND LP** |
| By:  | /s/ Michael Kazley |
|  | Name: Michael Kazley  |
|  | Title: Principal  |

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**IN WITNESS WHEREOF,** the parties have caused this Investors' Rights Agreement to be duly executed as of date first written above.

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| | |
|:---|:---|
| **INVESTOR:**<br>**FRAMEWORK VENTURES IV, L.P.** | **INVESTOR:**<br>**FRAMEWORK VENTURES IV, L.P.** |
| By:  | /s/ Michael Ernest Anderson |
|  | Name: Michael Ernest Anderson  |
|  | Title: Principal  |

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**IN WITNESS WHEREOF,** the parties have caused this Investors' Rights Agreement to be duly executed as of date first written above.

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| | |
|:---|:---|
| **INVESTOR:**<br>**TETHER INVESTMENTS, S.A. DE C.V.** | **INVESTOR:**<br>**TETHER INVESTMENTS, S.A. DE C.V.** |
| By:  | /s/ Giancarlo Devasini |
|  | Name: Giancarlo Devasini  |
|  | Title: Sole Administrator  |

---

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**IN WITNESS WHEREOF,** the parties have caused this Investors' Rights Agreement to be duly executed as of date first written above.

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| | |
|:---|:---|
| **INVESTOR:**<br>**SKY FRONTIER FOUNDATION** | **INVESTOR:**<br>**SKY FRONTIER FOUNDATION** |
| By:  | /s/  |
|  | Name:  |
|  | Title:  |

---

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EXHIBIT A

**Selling Shareholder Notice and Questionnaire**

[*Attached*.]

## Exhibit 99.1

**Exhibit 99.1**

**Business Overview**

**Overview**

In early 2026, we completed a comprehensive realignment of our business. In addition to our legacy business in the wound care space, 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 837,696,130 shares of common stock of the Company, par value $0.01 per share (the "Common Stock") in exchange for $25,000,000 of cash and an aggregate of $109,031,380.86 million in SKY tokens and stablecoins (the "Private Placement"). We intend to use the proceeds of the private placement and any future cash raise 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 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.

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

**Initial Holdings - SKY**

Our Digital Asset Strategy Committee has set primary strategic objective to use all available cash to strategically acquire SKY, the protocol token of the decentralized Sky network. As of the closing of the Private Placement, we held an aggregate of 943,599,688.812 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 with 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.

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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**

We custody substantially all of our SKY with one or more qualified custodians, currently including a U.S.-based institutional-grade custodian that maintains information security programs aligned to recognized frameworks and that are able to demonstrate robust internal control environments, including through independent audit reporting. Our custodial arrangements generally provide for:

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

● Cold-storage or secure private key management, including vault-based custody, 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.

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.

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" 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 potential long-term appreciation and 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.

**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.

**Other Recent Developments**

Effective January 1, 2026, we adopted Accounting Standards Update ("ASU") No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which requires measurement of eligible crypto assets at fair value, with changes in fair value recognized in net income.

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**Risk Factors**

**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.

***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.

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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. We account for our SKY as crypto assets and measure them at fair value in accordance with ASU No. 2023-08, *Accounting for and Disclosure of Crypto Assets*.

We use a third-party digital asset accounting platform to maintain detailed records of our SKY holdings, including transaction history, quantities held, and cost basis by lot. Fair value is determined using quoted (unadjusted) prices obtained from active exchanges with sufficient trading volume for SKY, as aggregated and applied consistently by the platform. These quoted prices represent Level 1 inputs under the fair value hierarchy.

Our SKY holdings are remeasured to fair value at each reporting date, and changes in fair value are recognized in earnings during the period in which they occur. As a result, both unrealized gains and unrealized losses arising from changes in the fair value of SKY are reflected in our consolidated statements of operations.

Upon disposition of SKY, we recognize a realized gain or loss equal to the difference between the proceeds received and the carrying value of the specific SKY units sold immediately prior to sale, as determined using the platform's lot-level tracking. We have established controls to ensure the completeness and accuracy of digital asset balances and related fair value measurements recorded in our financial statements.

SKY is presented as a separate line item within digital assets on our consolidated balance sheets. Gains and losses related to changes in fair value and dispositions of SKY are presented within other income (expense), unless otherwise indicated.

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As a result, any decrease in the fair value of SKY below our carrying value for such assets at any time since their acquisition requires us to incur an impairment charge, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings and decrease the carrying value of our blockchain-based assets, which in turn could have a material adverse effect on the market price of our common stock.

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 also will need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our blockchain-based assets are impaired.

***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 Blockchain-based 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.

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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.

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.

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***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. 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 in our reported earnings. Under current U.S. generally accepted accounting principles ("GAAP") and the recently adopted ASU No. 2023-08, certain crypto assets must be measured at fair value with changes in fair value recognized in net income. This accounting treatment may cause significant volatility in our financial results from period to period, even if we do not sell any blockchain-based assets.

Additionally, SKY or other blockchain-based assets that we may purchase may not qualify for fair value measurement and instead be accounted for as indefinite-lived intangible assets, subject only to impairment losses with no recognition of subsequent increases in fair value until sold. 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. The valuation of blockchain-based assets requires significant judgment and the use of third-party pricing sources, which may be subject to error or dispute.

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.

***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 million in blockchain-based assets from customers. A successful security breach or cyberattack could result in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· harm to our reputation and brand;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· improper disclosure of data and violations of applicable data privacy and other laws; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure,

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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 and Israel conflicts, or other future 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.

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 bitcoin, or create or expose additional counterparty risks.

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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.

***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.

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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.

***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." While their proponents believe that they may have certain advantages, the "proof-of-stake" consensus mechanisms and governance systems underlying many newer blockchain protocols, including SKY, and their associated blockchain-based assets - including the SKY held by the Company - 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. 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.

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***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. More recently, in 2025, SKY rose to $0.09965 in July before falling to $0.03683 in October, a decline of approximately 63%. 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.

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;

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● 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.

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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.

***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.

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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.

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 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.

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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.

**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 Sale 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;

● actual or anticipated variations in our expenses; and

● any unanticipated contingent liabilities or litigation that may arise.

***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 net asset value ("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.

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**Balance Sheet**

The unaudited pro forma consolidated balance sheet as of September 30, 2025 present our financial position after giving pro forma effect to the receipt of $25.0 million of cash proceeds and $109.0 million of crypto assets in the private placement:

The unaudited pro forma consolidated balance sheet is derived from and should be read in conjunction with the unaudited interim condensed consolidated financial statements of NovaBay Pharmaceuticals, Inc. (the "Company") for the three months ended September 30, 2025 and the audited balance sheet of the Company as of December 31, 2024.

The unaudited pro forma balance sheet is included for informational purposes only. The unaudited pro forma consolidated balance sheet does not project our results of operations or financial position for any future period or date. The unaudited pro forma consolidated statement of operations and balance sheet should be read in conjunction with the "Risk Factors," included in this disclosure and the Risk Factors and audited and unaudited financial information of the Company in the Company's periodic reports for fiscal 2025.

**(in thousands, except par value amounts)**

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| | | | |
|:---|:---|:---|:---|
|  | **December 31,**<br> **2024** | **September 30,** <br> **2025** | **Pro Forma** |
| **ASSETS** |  |  |  |
| Current assets: |  |  |  |
| Cash and cash equivalents | $430 | $2309 | $27309 |
| Accounts receivable, net |  | 368 | 368 |
| Prepaid expenses and other current assets | 272 | 221 | 221 |
| Current assets, discontinued operations | 1233 |  |  |
| Total current assets | 1935 | 2898 | 2898 |
| Operating lease right-of-use assets | 955 | 189 | 189 |
| Crypto assets (including stablecoins) |  |  | 109032 |
| Property and equipment, net | 44 | 6 | 6 |
| Other assets | 480 | 394 | 394 |
| Other assets, discontinued operations | 9 |  |  |
| TOTAL ASSETS | 3423 | 3487 | 137519 |
| **LIABILITIES AND STOCKHOLDERS**' **EQUITY** |  |  |  |
| Liabilities |  |  |  |
| Current liabilities: |  |  |  |
| Accounts payable | $109 | $76 | $76 |
| Accrued liabilities | 581 | 807 | 807 |
| Bridge Loan | 500 |  |  |
| Unsecured Convertible Notes, net | 65 | 149 | 149 |
| Operating lease liabilities | 398 | 416 | 416 |
| Current liabilities, discontinued operations | 1190 |  |  |
| Total current liabilities | 2843 | 1448 | 1448 |
| Warrant liabilities |  |  | 129996 |
| Operating lease liabilities-non-current | 709 | 405 | 405 |
| Total liabilities | 3552 | 1853 | 131853 |
| Mezzanine (temporary) equity: |  |  |  |
| Series F Preferred Stock; 1,987 and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively |  | 525 | 525 |
| Stockholders' equity: |  |  |  |
| Preferred stock, $0.01 par value; 5,000 shares authorized; |  |  |  |
| Series B preferred stock; 1 issued and outstanding at September 30, 2025 | 6 | 6 | 6 |
| Series D preferred stock; 481 issued and outstanding at September 30, 2025 |  | 3786 | 3786 |
| Common stock, $0.01 par value; 150,000 shares authorized, 6,011 shares issued and outstanding at November 30, 2025 | 49 | 60 | 60 |
| Additional paid-in capital | 183273 | 181074 | 185110 |
| Accumulated deficit | (183457) | (183817) | (183817) |
| Total stockholders' equity | (129) | 1109 | 5109 |
| **TOTAL LIABILITIES AND STOCKHOLDERS**' **EQUITY** | $3423 | $3487 | $137519 |

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**Related Party Transactions**

The following is a description of certain recent related party transactions, to which the Company has been a party, in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the Company's total assets at year end for the last two completed fiscal years, and in which any of the Company's directors, executive officers, holders of more than five percent of any class of the Company's voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

**Private Placement of Pre-Funded Warrant Issuance**

In connection with the Private Placement announced on January 16, 2026, R01 Fund LP ("R01") and Framework Ventures IV L.P. ("Framework") purchased pre-funded warrants to purchase a total of 268,399,868 and 250,546,261, respectively, shares of Common Stock at a purchase price per warrant of $0.17 per share (the "January Pre-Funded Warrants"). Once the January Pre-Funded Warrants become fully exercisable, we expect that R01 and Framework 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 manager member of R01 Capital Manager. R01 Capital Manager is the investment manager for R01 Capital. R01 Capital is the general partner of R01. The terms of the securities sold to R01 and Framework were the same as those offered to other investors participating in the Private Placement. The January 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.

On October 16, 2025, the Company issued and sold pre-funded warrants (the "October Pre-Funded Warrants") to purchase an aggregate of 5,405,406 shares of the Company's Common Stock to R01 and Framework in two transactions for aggregate gross proceeds of approximately $6,000,000. The purchase price was $1.10 per October Pre-Funded Warrant, representing 110% of the closing price of the common stock on the day before the issuance, less the $0.01 exercise price for each such October Pre-Funded Warrant. The October Pre-Funded Warrants became exercisable for shares of common stock at any time after January 1, 2026, subject to receipt of stockholder approval. 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.

**Investors**' **Rights** 

In connection with the Private Placement, the company entered into an Investors' Rights Agreement pursuant to which it granted certain demand registration rights and nomination rights to R01 and Framework.

**Review and Approval of Related Party Transactions**

The foregoing transactions were reviewed and approved by the Company's Audit Committee in accordance with the Company's related party transactions policy. The Audit Committee determined that the terms of such transactions were no less favorable to the Company than those that could be obtained from unaffiliated third parties.