Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and plan of operations together with and our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a developmental stage biopharmaceutical company developing novel therapeutics that address underserved conditions including PTSD, stress-induced anxiety disorders, fibromyalgia, and central nervous system (CNS) diseases. We are focused on developing novel therapies that include conventional drugs and psychedelic formulations. The Company's lead program, SPC-15, is an intranasal drug targeting PTSD and stress-induced anxiety disorders. SP-26 is a time-release ketamine-based loaded implant for fibromyalgia and chronic pain relief. Silo's two preclinical programs are SPC-14, an intranasal compound for the treatment of Alzheimer's disease, and SPU-16, a CNS-homing peptide targeting the central nervous system with initial research indication in multiple sclerosis (MS).

Therapeutics

We seek to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, ketamine, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. We are focused on developing traditional therapeutics and psychedelic medicine. The company concentrates on the development and commercialization of therapies for unmet needs from indications such as depression, post-traumatic stress disorder ("PTSD"), and other rare neurological disorders. Our mission is to identify assets to license and fund the research which we believe will be transformative to the well-being of patients and the health care industry.

Psilocybin is considered a serotonergic hallucinogen and is an active ingredient in some species of mushrooms. Recent industry studies using psychedelics, such as psilocybin, have been promising, and we believe there is a large unmet need with many people suffering from depression, mental health issues and neurological disorders. While classified as a Schedule I substance under the Controlled Substances Act ("CSA"), there is an accumulating body of evidence that psilocybin may have beneficial effects on depression and other mental health conditions. Therefore, the U.S. Food and Drug Administration ("FDA") and U.S. Drug Enforcement Agency ("DEA") have permitted the use of psilocybin in clinical studies for the treatment of a range of psychiatric conditions.

The potential of psilocybin therapy in mental health conditions has been demonstrated in a number of academic-sponsored studies over the last decade. In these early studies, it was observed that psilocybin therapy provided rapid reductions in depression symptoms after a single high dose, with antidepressant effects lasting for up to at least six months for a number of patients. These studies assessed symptoms related to depression and anxiety through a number of widely used and validated scales. The data generated by these studies suggest that psilocybin is generally well-tolerated and may have the potential to treat depression when administered with psychological support.

We have engaged in discussions with a number of world-renowned educational institutions and advisors regarding potential opportunities and have formed a scientific advisory board that is intended to help advise management regarding potential acquisition and development of products.

In addition, as more fully described below, we have entered into a license agreement with the University of Maryland, Baltimore, and developing a Ketamine polymer implant. In addition, we into a sponsored research agreement Columbia University for the study of ketamine in combination with other drugs for treatment of Alzheimer's and depression disorders and we have also entered into an exclusive license agreement with Columbia under which we have rights to certain patents and inventions relating to the treatment of Alzheimer's disease and stress-induced affective disorders using Ketamine in combination with certain other compounds.

We plan to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand our business to focus on this new line of business.

Product Candidates

We are currently focusing on four product candidates:

1.

SPC-15 for stress-indued psychiatric disorders, including PTSD and anxiety.

2.

SP-26 for treatments of fibromyalgia and chronic pain.

3.

SPC-14 for treatment of Alzheimer's disease.

4.

SPU-16 for CNS disorders, initially targeting multiple sclerosis.

SPC-15: Intranasal Treatment for PTSD and Anxiety Disorders

Our lead product candidate, SPC-15, is designed as a novel serotonin 4 (5-HT4) receptor agonist that utilizes biomarkers for treatment of stress-induced psychiatric disorders such as PTSD and anxiety disorders. This innovative treatment is administered via an intranasal formulation, potentially qualifying for the FDA's streamlined 505(b)(2) regulatory pathway, which could expedite its approval process. We are actively collaborating with Columbia University, holding exclusive global rights to develop and commercialize SPC-15, pursuant to and that certain exclusive license agreement entered into with Columbia on July 1, 2024. See "----License Agreements between the Company and Vendor-Exclusive License Agreement with Columbia University."

On November 15, 2023, we entered an exclusive license agreement with Medspray Pharma BV for its proprietary patented soft mist nasal spray technology, as the delivery mechanism for SPC-15, which agreement has an effective date of October 31, 2023. Preclinical and formulation studies were completed in the first half of 2024 and on June 4, 2024 the Company submitted a pre-Investigational New Drug (pre-IND) briefing package and meeting request to the U.S. Food and Drug Administration (FDA) for SPC-15, Silo's intranasal prophylactic treatment for post-traumatic stress disorder (PTSD) and stress-induced anxiety disorder. In September 2024, we had a pre-IND meeting with the FDA to align on the 505(b)(2) regulatory pathway for approval of SPC-15 and review our proposed plan to support opening an IND.

Currently, we are conducting GLP-compliant pharmacokinetic and pharmacodynamic studies and in March 2025 we completed first dosing in an IND-enabling GLP-compliant toxicology and toxicokinetics, and we are aiming for an IND submission in 2026. The preclinical data suggests additional applications for eating disorders and anorexia, as well as enhanced efficacy when combined with an NMDA receptor antagonist for major depressive disorder and other severe stress-related conditions.

We believe our patented intranasal nose-to-brain drug dispersion technology provides a competitive advantage by increasing brain drug concentration, ensuring a faster onset of therapeutic effects with optimized safety.

SP-26: Ketamine Implant for Fibromyalgia

SP-26 represents a novel approach to treating chronic pain and fibromyalgia through a ketamine-based injectable dissolvable polymer implant. Designed for subcutaneous insertion, SP-26 focuses on regulating dosage and time release to provide sustained relief from chronic pain, offering a potentially safer alternative to opioids. Presently, our SP-26 product is in preclinical research. Initial animal studies, which began in early 2025, are evaluating the implant's dosage, time release, and absorption.

In March 2023, we filed a provisional patent application with the USPTO to use SP-26 for treatment of chronic pain, including fibromyalgia We intend to develop SP-26 following the Section 505(b)(2) regulatory pathway of the FDA rules. Section 505(b)(2) of the FDCA was enacted to enable sponsors to seek NDA approval for novel repurposed drugs without the need for such sponsors to undertake time consuming and expensive pre-clinical safety studies and Phase 1 safety studies. Proceeding under this regulatory pathway, we will be able to rely upon publicly available data with respect to our active ingredient in our NDA submission to the FDA for marketing approval.

Fibromyalgia affects approximately 4 million U.S. adults (2% of the population). We believe SP-26's implant design provides a compelling non-opioid alternative to traditional pain management, improving dosage control compared to intravenous delivery.

SPC-14: Treatment for Alzheimer's Disease

SPC-14 targets glutamate receptor NDMAR and serotonin 5-HT4 to address cognitive and neuropsychiatric symptoms in Alzheimer's disease. Given the global Alzheimer's therapeutics market is projected to exceed $30.8 billion by 2033, SPC-14 presents a promising opportunity. SPC-14 was developed under a sponsored research agreement with Columbia University See "Investigator-Sponsored Study Agreements between the Company and Vendors---Sponsored Research Agreement with Columbia University for the Study of Ketamine in Combination with Other Drugs for Treatment of Alzheimer's and Depression Disorders," and we have exclusive global rights to develop and commercialize SPC-14, pursuant to and that certain exclusive license agreement entered into with Columbia on July 1, 2024. See "----License Agreements between the Company and Vendor-Exclusive License Agreement with Columbia University.". On October 13, 2022, we extended the term of the sponsored research agreement with Columbia to conduct further research studies into the mechanism of action of SPC-14 in the treatment of Alzheimer's disease. In addition, we have been granted an option to license certain assets currently under development, including SPC-14 for the treatment of Alzheimer's disease.

We believe our SPC-14 product has shown efficacy against luteinizing hormone (LH) in attenuating learned helplessness, preservative behavior and hyponeophagia (a measure of anxiety).

SPU-16: Treatment for CNS Disorders, Initial Indication for Multiple Sclerosis

SPU-16 is a promising candidate targeting central nervous system (CNS) disorders, with an initial indication for multiple sclerosis. On February 12, 2021, we entered into a Master License Agreement (the "UMB License Agreement") with the University of Maryland, Baltimore ("UMB") pursuant to which UMB granted us an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, sell, offer to sell, and import certain licensed products and (ii) to use the invention titled "Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology," or SPU-16. See "License Agreements between the Company and Vendors--Vendor License Agreement with the University of Maryland, Baltimore for CNS Homing Peptide" for additional details.

On April 11, 2023 certain intellectual property under the UMB License Agreement described above were issued a patent from the U.S. Patent & Trademark Office (USPTO) for "Peptide-Targeted Liposomal Delivery For Treatment, Diagnosis, and Imaging of Diseases and Disorders" (US 11,766,403, B2).

On July 8, 2025, we entered into July 2025 Termination and Option Agreement with UMB which terminates the UMB License Agreement, previously in effect between us and UMB, and provides us with an exclusive, non-transferable evaluation license, as well as an exclusive option to negotiate a new exclusive commercial license, with respect to certain intellectual property related to central nervous system-homing peptides (the "Invention" and related "Patent Rights") that were previously licensed under the UMB License Agreement.

Pursuant to the July 2025 Termination and Option Agreement, we were granted Option, exercisable during the term of the July 2025 Termination and Option Agreement, to negotiate and obtain an exclusive, sublicensable, royalty-bearing license to the Invention and Patent Rights for the therapeutic treatment of neuroinflammatory disease worldwide. The Option may be exercised by (i) providing written notice and submitting an acceptable commercialization plan to UMB, and (ii) paying a $1,000 option fee, which is creditable against certain future expenses if a commercial license is executed. The July 2025 Termination and Option Agreement was effective as of July 8, 2025, and will expire on March 31, 2026, unless earlier terminated or superseded by a new definitive license agreement upon exercise of the Option.

We believe SPU-16 provides a competitive advantage by using homing peptides to reduce toxicity while enhancing therapeutic payload delivery.

Stock Repurchase Plan

On January 26, 2023, the Company's Board of Directors authorized a stock repurchase plan to repurchase up to $1 million of the Company's issued and outstanding common stock, from time to time, with such plan to be in place until December 31, 2023. On January 9, 2024, the Board of Directors of the Company approved an extension of the previously announced stock repurchase program authorizing the purchase of up to $1 million of the Company's common stock until March 31, 2024 and on April 4, 2024, the Stock Repurchase Plan was extended to April 30. During the year ended December 31, 2023, the Company purchased 252,855 shares of common stock for a cost of $471,121, which is reflected in treasury stock on the accompanying consolidated balance sheet. During the year ended December 31, 2024, the Company purchased 102,855 shares of common stock for a cost of $173,113. In aggregate, during the years ended December 31, 2024 and 2023, the Company repurchased a total of 355,710 shares of its common stock for a total cost of $644,234 pursuant to its Stock Repurchase Program. During the year ended December 31, 2024, all 355,710 shares treasury shares with a cost of $644,234 were cancelled. As of December 31, 2025 and 2024, there were no treasury shares outstanding.

On February 20, 2026, the Company's Board of Directors approved a stock repurchase program authorizing the purchase of up to $1 million of the Company's issued and outstanding common stock, from time to time, with such plan to be in place until December 31, 2026. As of the date of this report, no shares have been repurchased under this plan.

Results of Operations

Comparison of Our Results of Operations for the Years Ended December 31, 2025 and 2024

The following table summarizes the results of operations for the years ending December 31, 2025 and 2024 and were based primarily on the comparative audited financial statements, footnotes and related information for the periods identified and should be read in conjunction with the consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this report.

		Years Ended December 31,
		2025				2024
Revenues		$	72,102			$	72,102
Cost of revenues			44,295				5,838
Gross profit			27,807				66,264
Operating expenses			4,308,469				4,771,958
Operating loss from continuing operations			(4,280,662	)			(4,705,694	)
Other income, net			52,964				312,814
Provision for income taxes			-				-
Net loss		$	(4,227,698	)		$	(4,392,880	)

Revenues

During the years ended December 31, 2025 and 2024, we generated minimal revenues from operations. For the years ended December 31, 2025 and 2024, revenues amounted to $72,102 and $72,102, respectively. Such revenues are related to the Aikido License and Sublicense Agreement and are recognized over the estimated 15-year term of the related UMB license agreement.

Cost of Revenues

During the years ended December 31, 2025 and 2024, cost of revenues amounted to $44,295 and $5,838, respectively. Cost of revenues consisted of license fees related to the UMB License and Sublicense Agreement, which are being amortized into cost of revenues. Effective July 8, 2025, the estimated useful lives of the unamortized license and sublicense fees were changed to reflect the termination of the Master License Agreement and the expiration of the subsequent Option Agreement on March 31, 2026, resulting in accelerated amortization expense during the year ended December 31, 2025.

Operating Expenses

For the years ended December 31, 2025 and 2024, total operating expenses consisted of the following:

		For the Years Ended December 31,
		2025				2024
Compensation expense		$	830,322			$	906,773
Professional fees			1,058,609				1,198,745
Research and development			2,160,829				2,368,156
Other selling, general and administrative expenses			258,709				298,284
Total		$	4,308,469			$	4,771,958

	●	Compensation Expense:
		For the years ended December 31, 2025 and 2024, compensation expense was $830,322 and $906,773, respectively, a decrease of $76,451, or 8.4%. This decrease primarily resulted from a decrease in executive bonus of $225,000, offset by an increase in stock-based compensation of $117,021 related to the accretion of stock option expense, and an increase in employee benefit expenses of $31,528.

	●	Professional Fees:
		For the years ended December 31, 2025 and 2024, professional fees were $1,058,609 and $1,198,745, respectively, a decrease of $140,136, or 11.7%. The decrease was primarily attributable to a decrease in consulting fees of $32,757, and a decrease in investor relation fees of $131,571, offset by an increase in legal fees of $4,200 and an increase in accounting and auditing fees of $19,992.

	●	Research and Development:
		For the year ended December 31, 2025 and 2024, we incurred research and development expense of $2,160,829 and $2,368,156, respectively, a decrease of $207,327, or 8.7%. This decrease was attributable to a decrease research and development expense associated with our various studies of $456,009 and a decrease in research related consulting fees of $269,568, offset by an increase in acquired software applications of $518,250. On July 29, 2025, we entered into an asset purchase agreement (the "Agreement") with MAVS Holdings LLC (the "Seller"). Pursuant to the Agreement, the Seller agreed to sell, and we agreed to purchase, certain software of the web-based application currently marketed as "r2crypto.com" and the domain names socialscan.info, coinfeel.net, and r2crypto.com (the "Purchased Assets"). In consideration for the Purchased Assets, we issued to the Seller 750,000 shares of our common stock, which were valued at $518,250 or $0.69 per share, based on the quoted closing stock price on July 29, 2025. Due to the nature of the Purchased Assets and their lack of an established alternative future use, the fair value of the common stock issued was recorded as research and development expense of $518,250 during the year ended December 31, 2025. We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

*

fees related to in-licensed products and technology;

*

expenses incurred under agreements with CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our pre-clinical activities;

*

the cost of acquiring and manufacturing clinical trial materials; and

*

costs associated with non-clinical activities and regulatory approvals.

●

Other Selling, General and Administrative Expenses:

Other selling, general and administrative expenses include advertising and promotion, insurance expenses, patent related expenses, public company expenses, custodian fees, bank service charges, travel, and other office expenses.

For the years ended December 31, 2025 and 2024, selling, general and administrative expenses were $258,709 and $298,284, respectively, a decrease of $39,575, or 13.3%. The decrease was primarily attributed to a decrease in proxy meeting fees of $18,377, a decrease in transfer agent fees of $13,395, and a decrease in other selling, general and administrative fees of $7,803.

Loss from Operations

For the years ended December 31, 2025 and 2024, loss from operations amounted to $4,280,662 and $4,705,694 respectively, a decrease of $425,032 or 9.0%. The decrease was primarily a result of the changes in operating expenses discussed above.

Other Income (Expenses), net

For the year ended December 31, 2025 and 2024, other income, net amounted to $52,964 and $312,814, respectively, a decrease of $259,850, or 83.1%. The decrease in other income, net was primarily due to a decrease in interest and dividend income of $139,253, an increase in unrealized loss on crypto assets of $64,608, increase in impairment loss on crypto assets of $39,916, and an increase in interest expense of $32,218, offset by a decrease in foreign currency transaction loss of $14,242 and an increase in other income of $5,143.

Net Loss

For the year ended December 31, 2025, net loss amounted to $4,227,698, or $0.50 per common share (basic and diluted), as compared to net loss amounted to $4,392,880 or $1.19 per common share (basic and diluted) for the year ended December 31, 2024, a decrease of $165,182, or 3.8%. The change was primarily a result of the changes discussed above.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had working capital of $6,737,542, short-term investments of $2,110,065, crypto assets, at fair value of $221,817, crypto assets, at cost of $98,584, and $4,748,700 in cash and cash equivalents as of December 31, 2025. We had a working capital of $5,455,483, $3,174,724 in short-term investments, and $3,905,799 in cash and cash equivalents as of December 31, 2024.

		December 31, 2025				December 31, 2024				Working Capital Change				Percentage Change
Working capital:
Total current assets		$	7,387,725			$	7,111,480			$	276,245				4	%
Total current liabilities			(650,183	)			(1,655,997	)			1,005,814				61	%
Working capital		$	6,737,542			$	5,455,483			$	1,282,059				24	%

The increase in working capital of $1,282,059 was primarily attributable to an increase in current assets of $276,425 primarily due to an increase in cash and cash equivalents of approximately $842,901, an increase in crypto assets, at fair value of $221,817, an increase in crypto assets, at cost of $98,584, an increase in prepaid expenses and other current assets of $177,602, and a decrease in accounts payable and accrued expenses of $1,005,814, offset by a decrease in short-term investments of approximately $1,064,659.

Cash Flows

A summary of cash flow activities is summarized as follows:

		Year Ended December 31,
		2025				2024
Net cash used in operating activities		$	(4,661,339	)		$	(3,833,914	)
Net cash provided by (used in) investing activities			644,021				973,777
Net cash provided by (used in) financing activities			4,860,219				3,241,628
Net increase (decrease) in cash and cash equivalents		$	842,901			$	381,491

Net Cash Used in Operating Activities

Net cash used in operating activities for the years ended December 31, 2025 and 2024 were $4,661,339 and $3,833,914, respectively, an increase of $827,425, or 21.6%.

●

Net cash used in operating activities for the year ended December 31, 2025 primarily reflected a net loss of $4,227,698, adjusted for the add-back of non-cash items such as amortization expense of $11,440, net realized gain on short-term investments of $3,911, unrealized loss on short-term investments of $3,240, staking income on crypto assets of $207, unrealized loss on crypto assets of $64,608, impairment loss on crypto assets of $39,916, stock-based compensation of $117,021 and non-cash in process research and development expense of $518,225, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $118,457, a decrease in accounts payable and accrued expenses of $993,414, and a decrease in deferred revenue of $72,102.

●

Net cash used in operating activities for the year ended December 31, 2024 primarily reflected a net loss of $4,392,880, adjusted for the add-back of non-cash items such as amortization expense of $6,185 and net realized loss on short-term investments of $1,025, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $9,149, an increase in accounts payable and accrued expenses of $633,007, and a decrease in deferred revenue of $72,102.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the years ended December 31, 2025 and 2024 were $644,021 and $973,777, respectively, a decrease of $329,756, or 33.9%.

●

Net cash provided by investing activities for the year ended December 31, 2025 was $644,021 which consisted of proceeds from the sale of short-term investments of $1,315,653, offset by aggregate payments for the purchase of short-term investments of $246,914 and the purchase of crypto assets of $424,718.

●

Net cash provided by investing activities for the year ended December 31, 2024 was $973,777 which consisted of proceeds from the sale of short-term investments of $1,149,320, offset by aggregate payments for the purchase of short-term investments of $175,543.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities for the years ended December 31, 2025 and 2024 were $4,860,219 and $3,241,628, respectively, an increase of $1,618,591, or 49.9%.

●

Net cash provided by financing activities for the year ended December 31, 2025 was $4,860,219 which consisted of net proceeds from sale of common stock and pre-funded warrants of $3,725,236 and proceeds from the exercise of warrants and pre-funded warrants of $1,134,983.

●

Net cash provided by financing activities for the year ended December 31, 2024 was $3,241,628 which consisted of net proceeds from sale of common stock and pre-funded warrants of $1,673,216, net proceeds from sale of common stock and warrants of $1,741,522 and proceeds from the exercise of pre-funded warrants of $3, offset by the purchase of treasury stock of $173,113.

Cash Requirements

We believe that our current cash and cash equivalent amount and short-term investment amount will provide sufficient cash required to meet our obligations for a minimum of twelve months from the date of this filing.

Other than cash requirements pursuant to research and development agreements, we currently have no other material commitments for any capital expenditures.

Liquidity

As reflected in the accompanying consolidated financial statements, we generated a net loss of $4,227,698 and used cash in operations of $4,661,339 during the year ended December 31, 2025. Additionally, we have an accumulated deficit of $19,492,389 on December 31, 2025. As of December 31, 2025, we had working capital of $6,737,542.

On September 29, 2025, pursuant to the October 2025 Offering, we received net proceeds of $2,146,000, net of placement agent fees and offering costs of $303,450 and legal and other fees of $50,550.

The positive working capital serves to mitigate the conditions that historically raised substantial doubt about our ability to continue as a going concern. We believe that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates

Crypto Assets

The Company's crypto assets primarily include Bitcoin (BTC), Ethereum (ETH) and Solana (SOL), and liquid staked tokens consisting of Liquid Staked ETH (LsETH) and Marinade Solana (mSOL), tokens received when ETH and SOL was staked through a third-party protocol. The Company has ownership of and control over its crypto assets which are held through custodial arrangements with qualified third-party custodians. These custodians provide secure storage and safeguarding of the Company's crypto assets.

The Company distinguishes between crypto assets which fall within the scope of ASC 350-60, Accounting for and Disclosure of Crypto Assets, and those which do not. The Company refers to crypto assets which fall within the scope of ASC 350-60 (BTC, ETH, USDC, SOL, XRP and RSC) as "crypto assets, at fair value." Crypto assets which do not fall within the scope of ASC 350-60 (LsETH and mSOL) are referred to as "crypto assets, at cost."

Crypto Assets, at Fair Value

Crypto assets that fall within the scope of ASC 350-60, such as BTC, ETH, SOL, native staked SOL, RSC and XRP, which are actively traded on public exchanges, are initially recorded at cost, which represents the cash, cash equivalents, or other financial assets paid to acquire the asset, including transaction fees.

Crypto assets are subsequently measured in accordance with ASC 350-60, at fair value in the statement of operations with unrealized gains and losses resulting from changes in fair value recognized in net income or loss. The Company determines and records at each reporting period the fair value of its crypto assets in accordance with ASC 820, Fair Value Measurement, based on quoted (unadjusted) prices on the coinmarketcap.com or Coinbase exchange, the active exchange that the Company has determined is its principal market (Level 1 inputs). Changes in the fair value are recognized in net income (loss) within "Unrealized gain (loss) on crypto assets", while realized gains and losses from the derecognition of crypto assets are included in "Realized gain (loss) on crypto assets, net" in the Company's consolidated statements of operations. The Company applies a weighted average cost methodology to assign costs for purposes of determining crypto assets held and realized gains and losses.

Purchases and sales of crypto assets are reflected as cash flows from investing activities in the consolidated statements of cash flows. Contributions of crypto assets received in connection with deposits of ETH and SOL into a liquid staking protocol are presented as non-cash investing and financing activities.

Crypto Assets, at Cost

Crypto assets, at cost are recognized at fair value on the date received, which becomes their cost basis. Crypto assets at cost, such as LsETH and mSOL, do not fall in the scope of ASC 350-60 for subsequent measurement. LsETH and mSOL represent receipt tokens, which in general and by design, grants the holder an enforceable right to redeem ETH or SOL for which it was exchanged. Therefore, it fails the 'other goods and services criterion' in ASC 350-60-15-1(b) and is outside the scope of ASC 350-60. Crypto assets, at cost are therefore subsequently measured at cost, net of any impairment losses incurred since acquisition, in accordance with ASC 350-30, Intangibles-Goodwill and Other-General Intangibles Other Than Goodwill.

The Company performs an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices in the Company's principal market, indicate that it is more likely than not that any of the assets are impaired. The quoted (unadjusted) prices on the coinmarketcap.com or the Coinbase exchange, the active exchange that the Company has determined as its principal market, are used in the analysis. If the carrying value of LsETH and mSOL exceeds that end of period quoted price, an impairment loss has occurred in the amount equal to the difference between its carrying value and such period end closing price. Impairment losses are recognized in the period in which the impairment occurs and are reflected within "Impairment loss on crypto assets, at cost" in the Company's consolidated statements of operations. The impaired crypto assets are written down to their fair value at the time of impairment and this becomes the new cost basis for those assets. The cost basis of LsETH or mSOL will not be adjusted upward for any subsequent increase in fair value.

Staking Activities

The Company participates in both native and liquid staking of its digital assets to generate yield. The Company's role is that of a Delegator (a staker who does not run a validation node).

Native Staking

The Company participates in native staking exclusively as a delegator through third-party validators. The Company delegates SOL to validators, either directly or through third party asset managers, who operate nodes on the Solana network to validate transactions and add blocks to the blockchain. In return for delegating SOL to validators, the Company is entitled to a portion of the protocol-level rewards, comprising both consensus- and execution layer components received by the validators, in the form of SOL tokens, calculated based on the Company's proportion of the total SOL staked. When the Company stakes SOL natively, the SOL does not remain in the Company's custodial wallet, but is instead deposited into Solana's staking deposit smart contract, which is required for participation in SOL staking as a delegator. Native staked SOL are not derecognized because their deposit into the smart contract does not give any other entity the right or ability to direct their use (for example, sell, lend, pledge or otherwise use those SOL) and the staked SOL may be withdrawn at any time by the delegator through the use of private withdrawal keys, subject only to protocol-defined withdrawal and exit queue mechanics. The withdrawal credentials in the smart contract are designated to the Company's custodian who holds the Company's SOL solely for the Company's benefit and does not obtain control of the Company's SOL via their custodial services. Native staked SOL are therefore not derecognized.

Rewards from native staking activities fall outside the scope of ASC 606, Revenue from Contracts as these activities do not represent an output of the Company's ordinary activities. Therefore, we reflect any such rewards received as other income on the accompanying consolidated statements.. In this case the Company's performance obligation is the provision of our validation rights to the validators, from which we earn variable consideration, in the form of SOL, which is non-cash consideration, measured at the fair value of SOL as of contract inception based on the quoted (unadjusted) prices on coinmarketcap.com or the Coinbase exchange, the active exchange that the Company has determined is its principal market. Revenue is recognized at the point in time when the Solana network confirms that the validation is complete. As a delegator, the Company has concluded it is not the principal to the block validation service provided to the Solana Network; it is the validators that control the service. Instead, the Company's service is one of providing the use of its SOL by the validators to increase their validation opportunities. Consequently, the Company records staking revenue on a net basis, reflecting only the portion of protocol rewards to which it is entitled after validator commissions are paid to the custodians. During the year ended December 31, 2025, staking income from native staking activities amounted to $207, which has been reflected as other income.

Liquid Staking

The Company also participates in liquid staking through a liquid staking protocol. One key difference and intended benefit of liquid staking versus native staking is that it allows the Company to earn staking rewards, like native staking, but provides liquidity and the ability to enter into other transactions through the use of receipt token. Instead of directly locking ETH or SOL into the respective staking deposit contract, the Company deposits ETH or SOL through its custodian into the liquid staking protocol's smart contract. The liquid staking protocol then controls the ETH or SOL for deposit into the respective staking deposit contract and further delegation to its chosen validators. In exchange for staking its ETH or SOL, the Company receives LsETH or mSOL, freely transferable liquid staking receipt tokens, which enables participation in decentralized finance (DeFi) and other crypto markets while the underlying ETH or SOL remains staked on Ethereum or SOL. Upon staking ETH or SOL through the liquid staking protocol, the ETH or SOL is derecognized because the liquid staking protocol obtains the ability to deploy and direct its use, and the LsETH token or mSOL token received concurrently is then recognized. Any gain or loss on the derecognition of ETH or SOL and the recognition of the LsETH or mSOL is recognized in accordance with ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets ("ASC 610-20") based on the difference between the carrying amount of the ETH or SOL staked and the fair value of the LsETH received or mSOL; and shall be included in "Realized gain or loss on crypto assets" in the Company's consolidated statements of operations.

Staking rewards in the form of ETH or SOL are only received upon redemption of LsETH or mSOL. During the year ended December 31, 2025, no liquid staking rewards were received.

Since LsETH and mSOL are accounted for under ASC 350-30, any increases in LsETH and mSOL fair value while the Company remains staked with the liquid staking protocols, are not recognized. There is no ongoing performance obligation following the staking of ETH or SOL through the liquid staking protocol. Additionally, LsETH and mSOL are non-rebasing tokens, meaning its quantity remains fixed over time. Staking rewards are not continuously reflected in token balances but are instead realized separately. Staking rewards are therefore recognized only when the LsETH or mSOL is redeemed, measured at the fair value of ETH or SOL at contract inception, which is when the ETH or SOL were staked. Staking rewards on LsETH or mSOL shall be included in "Staking income on crypto assets" in the Company's consolidated statements of operations. Gain or loss resulting from the difference between the carrying amount of the LsETH or mSOL redeemed and the fair value of ETH or SOL received at redemption (i.e., excluding staking rewards), shall be included in "Realized gain or loss on crypto assets" in the Company's consolidated statements of operations.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company's consolidated financial statements.