SkyAI, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and notes included in this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and “our” refer to SkyAI, Inc. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements . Overview Since our inception in 2017 and through 2022, we devoted substantially all of our resources to the research and development of our safety syringe products. Commencing in 2022,` we started building inventory of syringe products. We commenced generating syringe revenues in 2025. In October 2025, we discontinued R&D and the manufacture of syringe products, and inventory marketed from that date was sourced from third-party manufacturers. In August 2025, we adopted a digital commodity treasury strategy focused on accumulating Solana (“SOL”), the native digital commodity of the Solana blockchain. The Company earns staking rewards by delegating our digital commodities to third-party validators on proof-of-stake blockchain networks. For the three and six months ended June 30, 2026, we reported a net loss of approximately $23.3 million and $109.5 million, primarily resulting from unrealized and realized losses on our Solana holdings of approximately $84.3 million and $14.7 million, respectively. Our Medical Device segment has net revenues, cost of goods sold and gross margin/loss. We also have staking revenue from our Digital Commodities segment. Operating expenses include transaction expenses relating to digital commodity activities, research and development for our software under development and selling, general and administrative expenses related to both of our segments and our corporate office. Substantially all of our research and development expenses to date have been incurred in connection with our syringe products. Following the transfer by the Company of certain assets, the Company is no longer engaged in medical device related research and development activities and is limiting its medical device activity to sales and distribution. The Company is now engaged in research and development for certain new products related to building an agentic finance platform. (see Recent Developments). We continue to prioritize long-term growth of the Company’s business, using cash and proceeds from the sale of SOL to fund operating expenses and our expansion plans. On April 13, 2022, the Company’s Initial Public Offering was deemed effective with trading commencing on April 14, 2022. The Company received net proceeds of $14.2 million on April 19, 2022. We maintain a corporate office located in Melville, New York. As of August 3, 2026, we had approximately 30 employees worldwide. 3 Recent Developments On May 27, 2026, the Company announced its name change, the change in its ticker symbols, and a strategic transformation of its business, reflecting a shift from its legacy operations to the development of a technology-driven financial platform. The Company is now focused on building an agentic finance platform designed to serve emerging markets across Asia, Latin America, and Africa (the “Global South”). By leveraging AI to aggregate and analyze on-chain financial data, the platform is being designed to enable users to better manage their assets and access global markets. As part of its strategic transformation, the Company has established an international operational headquarters in Hong Kong to support strategic acquisitions, talent acquisition, and expansion efforts. The Company intends to utilize blockchain infrastructure, including the Solana network, as a foundational layer for its platform and treasury strategy. Critical Accounting Policies and Significant Judgments and Estimates This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The fair market value adjustments related to investments in digital assets and warrants classified as liabilities, as well as inventory related adjustments, could impact the operating results in the reporting periods. Summary of Significant Accounting Policies Our significant accounting policies are described in Note 2 of the accompanying condensed consolidated financial statements and further discussed in our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2025. 4 Results of Operations THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2026 2025 2026 2025 Net Revenue $ - $ 136,080 $ 192,780 $ 136,080 Cost of goods sold - 148,620 202,578 148,620 Cost of goods – inventory reserve 284,228 - 284,228 - Total cost of goods sold 284,228 148,620 486,806 148,620 Gross Margin (Loss) (284,228 ) (12,540 ) (294,026 ) (12,540 ) Staking Revenue, net 2,323,547 - 5,457,656 - Operating expenses: Consulting fees – related party 2,500,000 - 5,000,000 - Research and development 283,158 - 420,255 - Selling, general and administrative 5,163,257 1,411,161 10,216,580 2,775,456 Unrealized loss on digital commodities 13,490,351 - 84,336,553 - Realized loss on digital commodities 3,926,958 - 14,716,799 - Digital commodity transaction expenses 64,686 - 128,508 - Total Operating Expenses 25,428,410 1,411,161 114,818,695 2,775,456 Loss from Operations (23,389,091 ) (1,423,701 ) (109,655,065 ) (2,787,996 ) Other income (expense) Interest income (expense), net 76,746 96,953 86,784 (530,038 ) Fair market value adjustment on warrants 31,211 6,468,811 47,919 11,087,700 Other expense 336 (12 ) 329 (12 ) Other Income, net 108,293 6,565,752 135,032 10,557,650 Income (Loss) Before Provision for Taxes (23,280,798 ) 5,142,051 (109,520,033 ) 7,769,654 Tax Provision - - - - Income (Loss) from Continuing Operations (23,280,798 ) 5,142,051 (109,520,033 ) 7,769,654 Discontinued Operations: Loss from discontinued operations - (1,582,744 ) - (2,413,513 ) Income tax benefit - - - 132,000 Loss from Discontinued Operations - (1,582,744 ) - (2,281,513 ) Net Income (Loss) $ (23,280,798 ) $ 3,559,307 $ (109,520,033 ) $ 5,488,141 Comparison of the Six Months Ended June 30, 2026 and 2025. Product Net Revenue/Gross Margin For the six months ended June 30, 2026 and June 30, 2025, revenue increased by $56,700 to $192,780 from $136,080 driven by the sale of the Sologard product line of syringes in 2026. The inventory reserve increased by $284,228 for the six month period ended June 30, 2026, with the prior period ended June 30, 2025 reserve of $0. 5 Staking Revenue – net For the six months ended June 30, 2026, the Company recognized net staking revenue of $5,457,656 resulting from the digital treasury strategy implemented during the third quarter of 2025. No staking revenue was recognized in the same period of 2025. Transaction expense – digital commodities For the six months ended June 30, 2026, $128,508 in transaction expenses relate to custodian and exchange for digital commodity investments. No digital commodity transaction expenses were incurred in the same period of 2025. Unrealized loss on digital commodities During the six months ended June 30, 2026, the Company recognized $84,336,553 in unrealized loss on investments in digital commodities. The unrealized loss resulted from a decrease of the average fair market value per unit of our investments net of the reduction in the discount on our Locked SOL. No digital commodities were held in the same period of 2025. Realized loss on digital commodities During the six months ended June 30, 2026, the Company recognized $14,716,799 in losses on investments in digital commodities. The realized loss reflected the difference between the average price of $92.09 received for the sale of 135,399 SOL and the cost basis of $200.79. No digital commodities were held in the same period of 2025. Research and Development For the six months ended June 30, 2026, Research and Development (“R&D”) expenses increased to $420,255 compared to none in continuing operations for the six months ended June 30, 2025. This increase resulted from new R&D activities related to the Company’s software development. Prior period R&D was related to the Company’s manufacturing activities that are now included in the Loss from discontinued operations. Selling, General and Administrative For the six months ended June 30, 2026, General and Administrative (“G&A”) expenses were $10,216,580 as compared to $2,775,456 for the six months ended June 30, 2025. The increase of $7,441,124 was primarily attributable to the following factors ● An increase of approximately $4.3 million in payroll and related costs of, primarily due to an increase of $4.1 million in stock compensation expense due to the vesting of stock options. The remaining $0.2 million increase was mainly due to payroll from new hires. ● An increase of approximately $2.3 million in professional services: ○ $0.8 million related to audit, accounting and tax advisory services ○ $0.4 million increase in legal fees ○ $1.1 million increase in consulting and other professional services ● All other G&A expenses increased approximately $0.8 million primarily due to an increase of $0.6 million in insurance costs Consulting fees – related parties This amount of $5,000,000 represents consulting fees to Sol Edge. See Note 13 to the Condensed Consolidated Financial Statements. 6 Net Interest expense (income) Net interest income was $86,784 for the six months ended June 30, 2026, compared to interest expense of $ 530,038 for the six months ended June 30, 2025. Net interest changed by $616,822 due to a) interest earned on cash in 2026 of $117,884 as compared to $178,351 in 2025 b) interest expense of $708,390 for the accreted interest on the debt financing that originated in the third quarter of 2024 as compared to $19,229 in interest expense during 2026. FMV Adjustment for Warrants The value of the Warrants recorded as a liability requires the Fair Market Value (“FMV”) to be recorded at the date warrants are issued and then be remeasured at each reporting date while outstanding with recognition of the changes in fair value to other income or expense in the Condensed Consolidated Statement of Operations. For the six months ended June 30, 2026, and 2025 the Company recorded a FMV gain adjustment of $47,919 and $11,087,700, respectively. Comparison of the Three Months Ended June 30, 2026 and 2025. Product Net Revenue/Gross Margin For the three months ended June 30, 2026 and June 30, 2025, we recognized revenues of $0 and $136,080 from the sale of the Sologard product line of syringes. Staking Revenue – net For the three months ended June 30, 2026, the Company recognized net staking revenue of $2,323,547 resulting from the digital treasury strategy implemented during the third quarter of 2025. Transaction expense – digital commodities For the three months ended June 30, 2026, $64,686 in transaction expenses relate to custodian and exchange for digital commodity investments. Unrealized loss on digital commodities During the three months ended June 30, 2026, the Company recognized $13,490,351 in unrealized loss on investments in digital commodities. The unrealized loss resulted from a decrease of the average fair market value per unit of our investments net of the reduction in the discount on our Locked SOL. No digital commodities were held in the same period of 2025. Realized loss on digital commodities During the three months ended June 30, 2026, the Company recognized $3,926,958 in losses on investments in digital commodities. The realized loss reflected the difference between the average price of $89.85 received for the sale of 35,399 SOL and the cost basis of $200.79. Research and Development For the three months ended June 30, 2026, R&D expenses increased to $283,158 compared to none in continuing operations for the three months ended June 30, 2025. This increase resulted from new R&D activities based at the Company’s Hong Kong operation. 7 Selling, General and Administrative For the three months ended June 30, 2026, G&A expenses were $5,163,257 as compared to $1,411,161 for the three months ended June 30, 2025. The increase of $3,752,096 was primarily attributable to the following factors ● An increase of approximately $2.2 million in payroll and related costs, consisting of $1.9 million increase in stock compensation expense and $0.3 million payroll increase. ● All other G&A expenses increased approximately $ 1.5 million, primarily due to higher professional and legal fees $0.6 million, insurance costs $0.2 million and consulting fees $0.7 million. Consulting fees – related parties This amount of $2,500,000 represents consulting fees to Sol Edge. See Note 13 to the Condensed Consolidated Financial Statements. Net Interest expense (income) Net Interest income was $76,746 for the three months ended June 30, 2026, compared to $ 96,953 for the three months ended June 30, 2025. FMV Adjustment for Warrants For the three months ended June 30, 2026, and 2025 the Company recorded a FMV gain adjustment of $31,211 and $6,468,811, respectively. Liquidity and Capital Resources At June 30, 2026, and December 31, 2025, we had a cash balance of $12,071,008 and $10,382,745, respectively. The Company had working capital of $12,627,942 at June 30, 2026 as compared to a working capital of $14,187,484 as of December 31, 2025. The decrease in our working capital of $1,559,542, after net proceeds from the sale of Solana in 2026 of $12,469,465, was primarily related to increases use of cash of $5,672,370 in operations, cash used to repay the margin loan of $3,084,931 and the share repurchase program of $2,011,573. The Company intends to finance its future development and commercialization activities and its working capital needs with a combination of the sale of a portion of its Solana holdings, the sale of equity securities and/or with additional funding from other traditional financing sources until such time that funds provided by operations are sufficient to fund working capital requirements. The Company is debt free and intends to maintain sufficient cash and other immediately liquid resources on hand to satisfy current obligations. Cash Flows Net Cash Used in Operating Activities The Company used cash of $5,672,370 and $2,276,940 in operating activities for the six months ended June 30, 2026 and 2025, respectively. The change in cash used was principally due to the Company incurring higher G&A expenses and new R&D activities, as described above, during the six months ended June 30, 2026. Net Cash Provided By Investing Activities For the six months ended June 30, 2026, the Company provided cash from investing activities of $12,457,526. For the six months ended June 30, 2025, the Company had no cash provided by or used for continuing operations. The increase in net cash provided by investing activities was indicative of the changing nature of the business driven by the sale of Solana and the decrease in fixed asset additions. 8 Net Cash Provided by Financing Activities For the six months ended June 30, 2026 and 2025, the Company used and provided cash from financing activities of $5,096,894 and $ 13,953,030 respectively. In the 2025 period, the cash provided was from the $18.2 million in net proceeds from the Offering in January 2025 offset by the debt repayment of $4.2 million. In the 2026 period, the cash was used for the repayment of the margin loan $3,084,931 and the share repurchase program $ 2,011,573. Off-Balance Sheet Arrangements During the periods presented, we did not have any off-balance sheet arrangements as defined under Regulation S-K Item 303(a)(4). Emerging Growth Company Status We are an “emerging-growth company”, as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the initial public offering; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common shares less attractive, there may be a less active trading market for our common shares and the price of our common shares may be more volatile. We are also a “smaller reporting company”, meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for smaller reporting companies. 9