10-K: NovaBay Pivots to Digital Assets, Reports 2025 Financials

NovaBay Pharmaceuticals, Inc. has completed a significant business realignment, divesting its legacy pharmaceutical operations to focus on a blockchain-based digital asset strategy, primarily acquiring SKY tokens.

Summary

• NovaBay Pharmaceuticals, Inc. completed a comprehensive business realignment in 2025, shifting from its historical pharmaceutical operations to a capital allocation strategy focused on acquiring digital assets.
• The company's primary objective is to preserve and enhance stockholder value through disciplined participation in open, decentralized financial networks, with an initial focus on acquiring and holding SKY tokens.
• Divestitures included Avenova Assets on January 17, 2025, for approximately $10.6 million net, PhaseOne on January 8, 2025, for $0.5 million, and DERMAdoctor on March 12, 2024, for $1.1 million.
• NovaBay exited its involvement in the China NeutroPhase product line in October 2025, further reducing its legacy wound care activities.
• The net loss from continuing operations widened to $(33.2) million in 2025, compared to $(8.8) million in 2024, primarily due to a non-cash loss on changes in the fair value of warrant liabilities.
• Net income from discontinued operations was $11.081 million in 2025, up from $1.527 million in 2024, largely driven by gains from divestitures.
• The total net loss for 2025 was $(22.141) million, compared to $(7.223) million in 2024.
• Cash and cash equivalents increased to $8.0 million as of December 31, 2025, from $0.4 million as of December 31, 2024.
• Subsequent to year-end, on January 16, 2026, NovaBay completed a private placement raising approximately $137.4 million, consisting of $25.0 million in cash, $51.0 million in stablecoins (USDT and USDS), and $61.4 million in SKY tokens.
• All stablecoins received in the January 2026 private placement were converted into U.S. dollars to support operating liquidity, and approximately $70.7 million in cash was deployed to acquire an additional 1.1 billion SKY tokens through March 16, 2026.
• As of March 16, 2026, NovaBay held approximately 2.1 billion SKY tokens with an approximate value of $161.4 million.
• A 1-for-5 reverse stock split was effected on February 20, 2026, and as of March 16, 2026, there were 26,625,029 shares of common stock outstanding.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a highly speculative and risky transformation. While the company secured significant capital, the pivot to a volatile, unregulated digital asset strategy, coupled with substantial losses from continuing operations and significant dilution, presents considerable uncertainty for investors.

Positives

• Successfully completed a significant business realignment, transitioning to a blockchain-based digital asset strategy.
• Secured substantial capital through a private placement in January 2026, raising approximately $137.4 million, significantly improving liquidity.
• Increased cash and cash equivalents to $8.0 million by December 31, 2025, from $0.4 million in 2024.
• Management projects sufficient liquidity to fund planned operating expenses through at least March 19, 2027.
• Established a Digital Asset Strategy Advisory Committee to provide specialized oversight for the new digital asset strategy.
• Net income from discontinued operations significantly increased to $11.081 million in 2025 from $1.527 million in 2024, primarily due to divestiture gains.
• Reduced exposure to extensive government regulation previously associated with pharmaceutical operations.

Negatives

• Net loss from continuing operations significantly widened to $(33.2) million in 2025 from $(8.8) million in 2024.
• The overall net loss increased to $(22.141) million in 2025 from $(7.223) million in 2024.
• A non-cash loss of $24.5 million was recorded in 2025 due to changes in the fair value of warrant liabilities.
• Incurred an impairment of $854 thousand related to long-lived assets (right-of-use assets and fixed assets) due to excess leased office capacity.
• The new blockchain-based strategy is inherently subject to extreme price volatility of digital assets like SKY.
• Existing stockholders face significant dilution risk from the potential exercise of 168,620,309 outstanding pre-funded warrants, compared to 26,625,029 shares outstanding as of March 16, 2026.
• No expectation of paying cash dividends in the foreseeable future, with future earnings to be retained for business operations.
• Experienced an ownership change in 2025, which is expected to significantly limit the ability to use pre-change Net Operating Loss (NOL) carryforwards.
• The company no longer has a significant revenue-generating wound care business following divestitures.

Risks

• Inability to successfully implement the new blockchain-based asset strategy or operate SKY-related activities at anticipated scale or profitability.
• Significant technical, market, governance, regulatory, and operational risks associated with the Sky network (Sky Protocol) that are beyond the company's control.
• Extreme price volatility of SKY tokens, which could materially and adversely affect the company's financial condition and stock price.
• Regulatory uncertainty surrounding SKY's potential classification as a security and the risk of investment company status, which could lead to regulatory scrutiny, fines, or operational changes.
• Risks related to the use of third-party trading platforms for SKY, including potential non-compliance with anti-money laundering or sanctions laws.
• Evolving accounting standards for crypto assets may increase earnings volatility and reporting complexity.
• Cyberattacks or other malicious attacks on the SKY Protocol or the company's custody solutions could lead to the loss of SKY tokens, which may not be covered by insurance.
• Risks related to the custody of SKY tokens, including the loss or destruction of private keys and cyberattacks on custodians, with no separate insurance maintained for SKY losses.
• Decentralized finance (DeFi) arrangements may expose the company to smart contract risk, operational failures, and cybersecurity threats.
• Risk of non-performance by counterparties (e.g., execution partners, custodians), potentially resulting in a loss of SKY or funds.
• Significant uncertainty in the ability to generate income from blockchain-based asset holdings, as staking reward rates are unpredictable and subject to hacking risks.
• Political or economic crises may motivate large-scale sales of blockchain-based assets, leading to a reduction in values.
• Proof-of-stake blockchains are a relatively recent innovation and may have undetected vulnerabilities, structural design flaws, or operational problems.
• Changes in regulatory interpretations could require the company to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.
• Reliance on open-source code by blockchain-based asset networks exposes risks related to competitive networks, code maintenance failures, and security vulnerabilities.
• Risks relating to the USDS stablecoin, including de-pegging events, which could lead to losses of SKY holdings and undermine confidence in the Sky ecosystem.
• The emergence or growth of other digital assets, including those with significant private or public sector backing, could negatively impact SKY's price.
• If interest rates rise or other opportunities in external DeFi protocols or traditional finance become more attractive, the digital asset strategy may underperform or become unsustainable.
• Digital asset holdings will be less liquid than cash and cash equivalents and may not be able to serve as a reliable source of liquidity.
• Taxation of blockchain-based assets is complex and evolving, potentially leading to unexpected tax liabilities or increased audits.
• The blockchain-based asset strategy business model has multiple layers of corporate finance risks, including potential premium collapse, liquidity and macro sensitivity, and dilution fatigue.
• Increased exposure to market volatility and potential uninsured losses due to holding blockchain-based assets.
• Digital asset trading venues experience greater risk of fraud, market manipulation, and security failures due to their unregulated nature and lack of transparency.
• The irreversibility of digital asset transactions exposes the company to risks of theft, loss, and human error.
• The concentration of SKY holdings (approximately 90% of total assets, 9% of total supply as of March 16, 2026) enhances the risks inherent in the treasury strategy.
• Investors in the January 2026 Private Placement have certain consent rights that may influence the company's Digital Asset Strategy.
• Quarterly operating results, revenues, and expenses may fluctuate significantly, which could adversely affect the market price of listed securities.
• Significant disruptions of information technology systems or breaches of information security could adversely affect businesses.
• Failure to fully comply with privacy and data protection laws and regulations could incur significant civil and criminal penalties and liabilities.
• Employee or agent misconduct, or failure to comply with anti-bribery and other laws or regulations, could harm the company's reputation.
• Failure to maintain an effective system of internal controls over financial reporting could lead to inaccurate financial reporting.
• Business disruptions, including interruptions, delays, or failures of systems or third-party services, could materially adversely affect operating results.
• Inability to recruit or retain skilled personnel, particularly in the crypto space, or loss of current leadership, could materially adversely affect the business.
• Inability to raise additional capital when needed or on acceptable terms, and future financings may be highly dilutive.
• Remaining liable for claims, expenses, and contingent liabilities related to business operations prior to divestitures.
• Subject to litigation, which is expensive and could divert management's attention.
• The price of common stock may fluctuate substantially, resulting in losses to stockholders.
• Provisions of the company's charter, bylaws, and Delaware law may have anti-takeover effects that could prevent a change in control.
• Offers of new securities or availability for sale of a substantial number of shares of common stock may cause the price of publicly traded securities to decline.
• Subject to the continued listing standards of the NYSE American; failure to satisfy these criteria may result in de-listing.
• Ability to use net operating loss carryforwards and certain other tax attributes may be limited due to ownership changes.
• Stockholders may experience significant dilution as a result of the potential exercise of outstanding pre-funded warrants.
• Changes in senior executive management team could adversely affect the ability to operate business segments.

Future Outlook

Management believes that the company's existing cash and cash equivalents, combined with recent financing proceeds, will be sufficient to fund planned operating expenses through at least March 19, 2027. The company intends to continue its capital allocation strategy focused on acquiring and holding a portfolio of select digital assets that exhibit revenue-generating characteristics, with SKY token being the only currently approved asset. This strategy anticipates holding digital assets for extended periods, periodically monetizing holdings, evaluating liquidity and financing opportunities collateralized by assets, and investing in internal capabilities for digital asset management. The company will continue to monitor and adjust its strategy for the impact of volatility, technology, operational, and governance risks inherent to open-source networks, market structure risks, and evolving regulatory frameworks. No cash dividends are anticipated in the foreseeable future, with future earnings expected to be retained for business operations.

Management Comments

• "Management believes that the Company's existing cash and cash equivalents will be sufficient to fund its planned operating expenses at least through March 19, 2027."
• "Our primary objective is to preserve stockholder value and, over time, seek opportunities to enhance value through disciplined participation in such networks."
• "The Company holds digital assets as part of a long-term capital allocation strategy and does not engage in short-term speculative trading, proprietary trading strategies, margin arrangements, or derivatives transactions referencing digital assets unless expressly authorized by the Digital Asset Strategy Advisory Committee and supported by appropriate risk management, compliance, and liquidity controls."

Industry Context

StockSavvy.ai notes that NovaBay's pivot from traditional pharmaceuticals to a blockchain-based digital asset treasury strategy is a bold and high-risk move, reflecting a broader trend of companies exploring new avenues for value creation in the rapidly evolving digital economy. This shift positions NovaBay within the nascent but growing sector of corporate digital asset holders, a strategy notably pursued by companies like MicroStrategy with Bitcoin, though NovaBay's focus on a specific protocol token (SKY) introduces a different risk profile compared to more established cryptocurrencies. The company's emphasis on "protocol-level economics" and "decentralized financial networks" aligns with the increasing interest in DeFi and Web3 infrastructure, but also exposes it to the inherent volatility and regulatory uncertainties of this emerging industry.

Comparison to Industry Standards

• StockSavvy.ai notes that NovaBay's strategy of holding a significant portion of its assets in a single, less established digital asset like SKY (approximately 90% of total assets as of March 16, 2026) deviates significantly from traditional corporate treasury management, which typically prioritizes liquidity and capital preservation in low-risk assets.
• Compared to companies like MicroStrategy, which holds Bitcoin (a more liquid and widely recognized digital asset), NovaBay's concentration in SKY, a protocol token of the Sky Protocol, exposes it to higher idiosyncratic risks related to the specific network's performance, governance, and adoption.
• The reliance on third-party custodians like Fireblocks and Kraken is standard practice in the digital asset space, but the filing explicitly states that "no assurance can be provided that such coverage will be sufficient to fully cover potential losses" and "do not provide for insurance protections for our SKY holdings under their control," which highlights a higher risk exposure compared to traditional financial asset custody.
• The company's net loss from continuing operations of $(33.2) million in 2025, largely driven by non-cash warrant liability adjustments, is not directly comparable to industry peers without a similar business model. However, the substantial dilution from pre-funded warrants (168.6 million exercisable shares vs. 26.6 million outstanding) is a significant factor that would be viewed negatively against typical equity issuance standards.

Management Changes

Corporate Governance

Legal Proceedings

• A class action complaint was received on behalf of a purported Company stockholder alleging breach of fiduciary duty related to claimed deficiencies regarding disclosures in the Definitive Proxy Statement for the January 2026 Private Placement.
• The Company voluntarily supplemented certain disclosures on March 2, 2026, to moot the purported stockholder's disclosure claims.
• The Company filed a motion to dismiss the Stockholder Complaint on March 17, 2026.
• The outcome of this matter is uncertain, and the Company cannot reasonably estimate the possible loss or range of loss, if any, at this time.

Related Party Transactions

• Consulting agreement with Henry Blynn, an employee of R01 Fund LP (a significant stockholder), for general corporate and digital asset treasury operations. Fees paid were approximately $53 thousand in 2025, and the semi-monthly rate increased to $12,500.00 effective February 3, 2026. Michael Kazley, CEO, is the managing member of R01 Capital Manager LLC, which manages R01 Fund LP.
• Issuance of October 2025 Pre-Funded Warrants to R01 Fund LP and Framework Ventures IV L.P., which are considered related parties due to Michael Kazley's affiliation with R01.
• Issuance of January 2026 Pre-Funded Warrants to R01 Fund LP, Framework Ventures IV L.P., Tether Investments, S.A. de C.V., and Sky Frontier Foundation. R01 Fund LP and Framework Ventures IV L.P. are related parties, and Sky Frontier Foundation's mission is to support the Sky Ecosystem, aligning with the company's new strategy.

Stakeholder Impact

• Shareholders: Face significant dilution from new warrant issuances, potential for increased stock price volatility due to digital asset holdings, no anticipated dividends, and the influence of major investors through consent and nomination rights.
• Employees: Experienced a significant reduction in legacy pharmaceutical business operations, leading to a smaller workforce (4 employees as of December 31, 2025), and new skill requirements for the digital asset strategy.
• Customers: Legacy pharmaceutical customers are impacted by the divestitures, as the new business model does not directly serve traditional customers.
• Creditors: Improved liquidity from recent capital raises may reduce immediate credit risk, but exposure to digital asset volatility introduces new risks.

Next Steps

• Continue to acquire and hold a portfolio of select digital assets, with SKY token being the only currently approved asset.
• Periodically monetize a portion of digital asset holdings for general corporate purposes, including tax management.
• Evaluate opportunities to generate liquidity or financing that reference or are collateralized by digital assets.
• Continue to invest in internal capabilities and third-party relationships necessary to transact, settle, account for, and safeguard SKY.
• Monitor market conditions, risk limits, commercial opportunities, and regulatory, legal, and tax considerations for the digital asset strategy.
• Seek additional digital asset custodians and infrastructure providers to further diversify risk.
• Explore options to reduce costs of the office lease, including subleasing.
• Management expects to fund planned operating expenses through at least March 19, 2027.
• Stockholders approved the issuance of shares underlying the January 2026 and October 2025 Pre-Funded Warrants on March 12, 2026.
• Stockholders approved an amendment to increase authorized common stock from 1.5 billion to 5 billion shares on March 12, 2026.
• Stockholders approved the adoption of the 2026 Equity Incentive Plan on March 12, 2026.
• Company filed a motion to dismiss the Stockholder Complaint on March 17, 2026.

Key Dates

Recommendation

StockSavvy.ai recommends a "hold" for NovaBay. The company has undergone a radical transformation, pivoting from a traditional pharmaceutical business to a digital asset treasury strategy. While the recent capital raise provides significant liquidity and the new strategy offers exposure to potentially high-growth blockchain networks, the inherent extreme volatility of digital assets like SKY, coupled with regulatory uncertainties and substantial shareholder dilution from recent warrant issuances, introduces a very high level of risk. The long-term viability and profitability of this new model are unproven, and the concentration of assets in a single, less established digital asset further amplifies risk. Investors should monitor the execution of the digital asset strategy, regulatory developments, and the impact of dilution before considering a more aggressive stance.

Keywords

Digital Assets, Blockchain, Cryptocurrency, SKY Token, Stablecoin, DeFi, SEC Filing, 10-K, Financial Report, Business Transformation, Corporate Strategy, Risk Management, NYSE American, Reverse Stock Split, Capital Raise, Investor Rights, Corporate Governance, Cybersecurity, Pharmaceutical Divestiture, Liquidity