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Note 2 - Summary of Significant Accounting Policies | 3 Months Ended
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Mar. 31, 2026
Notes to Financial Statements |
Significant Accounting Policies [Text Block] | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and are expressed in U.S. dollars. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes as of and for the year ended December 31, 2025, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”). The unaudited condensed consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements as of that date, but does not include all disclosures required by GAAP. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for their fair presentation. There have been no changes to the Company’s significant accounting policies described in the Form 10-K that have had a material impact on the unaudited condensed consolidated financial statements. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole. Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the fair value measurement of digital assets, warrant liabilities (including the determination of the principal market for digital assets and the reference price used to measure warrant liabilities), stock-based compensation, income taxes and other contingencies. These estimates are based on management’s best estimates and judgment. Actual results may differ from these estimates. Estimates, judgments, and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions, judgments and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Cash, Cash Equivalents, and Highly Liquid Restricted Cash The Company considers all highly-liquid instruments with a stated maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates fair value. As of March 31, 2026 and December 31, 2025, the Company’s cash and cash equivalents were held in a major financial institution in the United States. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash reported in the unaudited condensed consolidated balance sheets (in thousands):
|  | March 31, |  |  | December 31, |
|  | 2026 |  |  | 2025 |
Cash and cash equivalents |  | $ | 18,405 |  |  | $ | 7,958 |
Restricted cash included in other assets |  |  | 435 |  |  |  | 267 |
Total cash, cash equivalents, and restricted cash in the unaudited condensed consolidated statements of cash flows |  | $ | 18,840 |  |  | $ | 8,225 |
The restricted cash amount included in other assets on the unaudited condensed consolidated balance sheets represents amounts held as certificates of deposit for long-term financing and lease arrangements as contractually required by our financial institution and landlord. Concentrations of Credit Risk and Major Partners Financial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains deposits of cash, cash equivalents and restricted cash with a major financial institution in the United States. The Company maintains cash balances at multiple financial institutions. Certain of these accounts utilize deposit sweep programs designed to allocate funds across a network of participating banks in amounts intended to maximize FDIC insurance coverage. However, the Company also maintains significant cash balances at other financial institutions that do not utilize such programs, and, as a result, a portion of the Company’s cash balances exceeds federally insured limit of $250,000. Any loss incurred or lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. The Company holds a significant position in SKY tokens, which represented approximately 89% of total assets and approximately 9% of the total supply of SKY available in the market as of March 31, 2026. This concentration exposes the Company to SKY token price volatility and to other risks associated with SKY tokens, including risks relating to liquidity, custody, and regulation. The size of the Company's position relative to total market supply may also limit its ability to dispose of SKY tokens without affecting the market price. Because SKY is issued and governed within a single blockchain ecosystem, the Company is also exposed to risks affecting the Sky Protocol ecosystem as a whole. These include reductions in protocol-generated revenue that funds staking rewards, adverse governance outcomes, competition from other stablecoin or decentralized finance platforms, operational or security incidents affecting the Ethereum blockchain or the Sky Protocol smart contracts, and concentration of SKY ownership among Sky Protocol core contributors and other ecosystem participants. See Note 5, "Digital Assets." Fair Value of Financial Assets and Liabilities The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts payable, accrued liabilities and warrant liabilities. The Company’s cash and cash equivalents, restricted cash, accounts payable, and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company follows Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. There are three levels of inputs that may be used to measure fair value: Level 1 – quoted prices in active markets for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable; and Level 3 – inputs that are unobservable (for example, cash flow modeling inputs based on assumptions). Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. See additional information in Note 3, “Fair Value Measurements.” Digital Assets The Company's digital assets currently consist only of SKY tokens. The Company accounts for its digital assets in accordance with ASC 350-60, Intangibles—Goodwill and Other-Crypto Assets. Digital assets purchased are initially recorded at cost, including capitalized exchange trading fees. Digital assets received as staking rewards are initially recorded at the fair value of the tokens when earned. Digital assets are subsequently measured at fair value at each reporting date, with changes in fair value recognized in earnings. Fair value is determined using the quoted price of the digital asset in its principal market (Coinbase Exchange for SKY tokens) as of midnight UTC on the reporting date. The Company uses the specific identification method to determine the cost basis of digital assets for purposes of calculating gains and losses upon disposition. Digital assets are classified as non-current assets on the Company's Unaudited Condensed Consolidated Balance Sheets, reflecting the Company's intent and ability to hold and stake SKY tokens on a long-term basis as part of its ongoing participation in the Sky Protocol. Impairment of Long-Lived Assets The Company recorded no long-lived asset impairment losses during the three months ended March 31, 2026. The Company recorded $589 thousand in long-lived assets impairment losses during the three months ended March 31, 2025, consisting of $30 thousand for fixed assets including leasehold improvements and $559 thousand for operating lease right-of-use assets. Common Stock Warrants The Company accounts for common stock purchase warrants issued in connection with its equity offerings in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any warrants that (i) require physical share settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement (physical share settlement or net-share settlement). The Company classifies as liabilities any warrants that (i) require net-cash settlement, (ii) give the counterparty a choice of net-cash physical settlement or net-share settlement. In accordance with ASC 815, the Company also classifies as liabilities any warrants for which the shares underlying the contract are subject to stockholder approval before the warrant can be exercised. The Company also classifies as liabilities any warrants that are not considered indexed to the Company's own stock, including warrants containing anti-dilution or similar adjustment provisions that do not qualify for the scope exception for standard down-round features. For warrants that are classified as liabilities, the Company records the fair value of the warrants upon issuance and at each balance sheet date with changes in the estimated fair value recorded as a non-cash gain or loss in the Unaudited Condensed Consolidated Statements of Operations. Warrants that contain nominal exercise prices are economically similar to common stock and do not require assumptions related to volatility, expected term, or other option-pricing inputs. Such warrants are measured based on intrinsic value, calculated as the excess of the Company's common stock price over the exercise price, multiplied by the number of warrant shares outstanding. The fair values of other liability-classified warrants, if any, are determined using appropriate valuation techniques such as the Black-Scholes option pricing model. These values are subject to a significant degree of management's judgment. See Note 10, “Common Stock Warrants and Warrant Liabilities.” Income Taxes The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or the entire deferred tax asset will not be recognized. The U.S. federal income tax treatment of rewards from staking digital assets such as SKY remains uncertain and is currently under the subject of debate and regulatory attention. Under current guidance by the Internal Revenue Service (“IRS”), staking rewards are generally treated as ordinary income upon receipt. 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. Uncertain Tax Positions The Company accounts for uncertainty in income taxes in accordance with ASC 740-10. The Company recognizes the financial statement effects of a tax position only when it is more likely than not, based on the technical merits of the position, that the position will be sustained upon examination by the relevant taxing authority. For tax positions meeting the more-likely-than-not threshold, the amount recognized is measured as the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement. The Company recognizes any interest and penalties related to uncertain tax positions as a component of income tax expense. Accrued interest and penalties are included in the related tax liability line in the unaudited condensed consolidated balance sheets. Net Income (Loss) per Share The Company computes net income (loss) per share by presenting both basic and diluted loss per share (“EPS”) as shown in the Company’s condensed consolidated statements of operations (unaudited). Basic EPS is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period, including stock options and warrants, using the treasury stock method. In computing diluted EPS, the average stock price for the period is used to determine the number of shares assumed to be purchased from the exercise of stock options or warrants. Potentially dilutive common share equivalents are excluded from the diluted EPS computation in net loss periods if their effect would be anti-dilutive. The following table provides a reconciliation of the numerator and denominator used for basic and diluted earnings (loss) per share (in thousands):
|  | Three Months Ended March 31, |
|  | 2026 |  |  | 2025* |
Numerator for basic and diluted income (loss) per share: |  |  |  |  |  |  |  |
Net income (loss) from continuing operations attributable to common stockholders |  | $ | 552,403 |  |  | $ | (3,330 | )
Net income from discontinued operations |  |  | — |  |  |  | 11,000 |
Net income |  | $ | 552,403 |  |  | $ | 7,670 |
Denominator for income (loss) per share: |  |  |  |  |  |  |  |
Weighted average shares outstanding – basic (diluted for net loss) |  |  | 26,015 |  |  |  | 1,062 |
Effect of dilutive January 2026 Pre-Funded Warrants |  |  | 139,616 |  |  |  | — |
Effect of dilutive in-the-money warrants and RSUs |  |  | 78 |  |  |  | 21 |
Weighted average shares outstanding – diluted for net income |  |  | 165,709 |  |  |  | 1,083 |
The following outstanding preferred stock, stock options and stock warrants were excluded from the diluted EPS computation as their effect would have been anti-dilutive (in thousands):
|  | As of March 31, |
|  | 2026 |  |  | 2025* |
Common stock equivalent of Series B Non-Voting Convertible Preferred Stock (the “Series B Preferred Stock”) |  |  | — |  |  |  | 3 |
October 2025 Pre-funded Warrants |  |  | 22,664 |  |  |  | — |
Stock options |  |  | — |  |  |  | 1 |
Stock warrants |  |  | 4 |  |  |  | 951 |
|  |  | 22,668 |  |  |  | 955 |
* | After giving retroactive effect to a 1-for-5 reverse stock split that became effective February 20, 2026.
Revenue Recognition The Company's revenue consists of rewards earned through participation in the Sky Protocol's staking program. The Company has applied the principles underlying ASC 606, Revenue from Contracts with Customers (“ASC 606”) by analogy in determining the presentation, timing, and measurement of staking revenue by following the five steps: (i) identify the contract, (ii) identify the performance obligation, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligation and (v) determine when to recognize revenue. Revenue is recognized upon transfer of control of promised products or services (i.e., performance obligations) to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. Staking rewards are earned and recognized as revenue at the time the Sky Protocol's staking smart contract allocates rewards to the Company's staking position, and are measured at the fair value of the SKY tokens when earned. Rewards accrue and are allocated to the Company's staking position by the protocol's smart contract on a per-Ethereum-block basis (approximately every 12 seconds), based on the quantity of SKY tokens staked and the reward rate established through Sky Protocol governance. Fair value is determined using the quoted spot price on Coinbase Exchange, which the Company has determined to be the principal market for SKY tokens. Recent Accounting Pronouncements In December 2025, the FASB issued Accounting Standards Update (“ASU”) No. 2025-12, Codification Improvements (“ASU 2025-12”). ASU 2025-12 addresses 33 issues across a range of topics intended to clarify, correct, or improve U.S. GAAP. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted on an issue-by-issue basis. Aside from Issue 4 (which requires retrospective application), entities may elect to apply the amendments either prospectively or retrospectively to the beginning of the earliest period presented, on an issue-by-issue basis. The amendments to Topic 260, Earnings Per Share, regarding the calculation of diluted earnings per share when a loss from continuing operations exists are required to be applied retrospectively. The Company is currently evaluating the effect that the adoption of ASU 2025-12 will have on its Unaudited Condensed Consolidated Financial Statements and related disclosures, including the potential effect on diluted earnings per share for prior periods presented. In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the scope, form and content, and disclosure requirements applicable to interim financial statements prepared in accordance with U.S. GAAP, including by codifying the interim disclosures required across the Codification and adding a principle requiring disclosure of events and changes since the last annual reporting period that have a material effect on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 for public business entities. Early adoption is permitted. The Company is currently evaluating the effect that the adoption of ASU 2025-11 will have on its Unaudited Condensed Consolidated Financial Statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 is intended to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the statements of operations. ASU 2024-03 does not change the requirements for the presentation of expenses on the face of the statements of operations. Under ASU 2024-03, entities are required to disaggregate, in tabular format, expenses presented on the face of the statements of operations if they include any of the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the effect that the adoption of ASU 2024-03 will have on its Unaudited Condensed Consolidated Financial Statements and related disclosures.

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