SONM 10-Q
DNA X, Inc. (SONM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
On August 18, 2026, there were shares of the registrant’s common stock, par value $, outstanding.
Table of Contents
| Page | ||
| Cautionary Note about Forward-Looking Statements | ii | |
| PART I. | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | 1 |
| Condensed Consolidated Balance Sheets | 1 | |
| Condensed Consolidated Statements of Operations | 2 | |
| Condensed Consolidated Statements of Stockholders’ Equity | 3 | |
| Condensed Consolidated Statements of Cash Flows | 4 | |
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 30 |
| Item 4. | Controls and Procedures | 30 |
| PART II. | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 31 |
| Item 1A. | Risk Factors | 31 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 31 |
| Item 3. | Defaults Upon Senior Securities | 31 |
| Item 4. | Mine Safety Disclosures | 31 |
| Item 5. | Other Information | 31 |
| Item 6. | Exhibits | 32 |
| Signatures | 34 | |
| i |
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains statements that we believe are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that act as well as protections afforded by other federal securities laws. Generally, words such as “achieve,” “aim,” “ambitions,” “anticipate,” “believe,” “committed,” “continue,” “could,” “designed,” “estimate,” “expect,” “forecast,” “future,” “goals,” “grow,” “guidance,” “intend,” “likely,” “may,” “milestone,” “objective,” “on track,” “opportunity,” “outlook,” “pending,” “plan,” “position,” “possible,” “potential,” “predict,” “progress,” “roadmap,” “seek,” “should,” “strive,” “targets,” “to be,” “upcoming,” “will,” “would,” and variations of such words and similar expressions identify forward-looking statements, which are not historical in nature. The forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission or the SEC, including without limitation, the following sections:
| (i) | Note 10 - Commitments and Contingencies to these Consolidated Financial Statements regarding the possible outcome of, and future effect on our financial condition and results of operations of, certain litigations and other proceedings to which we are a party; | |
| (ii) | Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including the statements with regard to the future changes to our business and our expectations regarding our strategy and new lines of products, future cash requirements, assessment of our liquidity, the availability, uses, sufficiency, and cost of capital resources, and sources of funding, and future products, services, and technologies; and | |
| (iii) | Part I, Item 4. “Controls and Procedures,” including the description of limitations on effectiveness of controls and procedures. |
Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following:
| ● | the availability of cash on hand and other sources of liquidity to fund our operations and grow our business; | |
| ● | our ability to compete effectively depends on multiple factors and we may not be able to continue to develop solutions to address user needs effectively; | |
| ● | we may not be able to continue to develop solutions to address user needs effectively, including features for traders on our cryptocurrency trading platform; | |
| ● | cryptocurrency values have been volatile and may cause a decrease in trading activity on our cryptocurrency trading platform; | |
| ● | the financial and operational projections that we may provide from time to time are subject to inherent risks; | |
| ● | our ability to incorporate emerging technologies into our trading software given the lengthy development cycle; | |
| ● | our ability to adapt to new requirements from customer in our evolving industry; | |
| ● | our ability to remain in compliance with the listing requirements of the Nasdaq Capital Market; | |
| ● | our quarterly results may vary significantly from period to period; | |
| ● | we rely primarily on third-party contractors to maintain and develop our trading platform; | |
| ● | if our software contains defects or errors, we could incur significant unexpected expenses, experience downtime on our online trading platform with a loss of commission revenue, and be subject to liability for claims; | |
| ● | we are dependent on the continued services and performance of a concentrated and limited group of senior management; | |
| ● | we face risks related to the impact of various economic, political, environmental, social, and market events beyond our control that can impact our business and results of operations; and | |
| ● | other risks and uncertainties described in this Quarterly Report in the “Risk Factors” section, as such descriptions may be updated or amended in any future reports we file with the SEC. |
We urge investors to consider all of the risks, uncertainties, and other factors disclosed in these filings carefully in evaluating the forward-looking statements contained in this report. We cannot assure you that the results or developments anticipated by us and reflected or implied by any forward-looking statement contained in this report will be realized or, even if substantially realized, that those results or developments will result in the forecasted or expected consequences for us or affect us, our operations or financial performance as we forecasted or expected. As a result of the matters discussed above and other matters, including changes in facts, assumptions not being realized, or other factors, the actual results relating to the subject matter of any forward-looking statement in this report may differ materially from the anticipated results expressed or implied in that forward-looking statement. The forward-looking statements included in this report are made only as of the date of this report, and we undertake no obligation to update any such statements to reflect subsequent events or circumstances.
As used herein, “DNA X,” the “Company,” “we,” “us,” “our,” and similar terms include DNA X, Inc. and its subsidiaries, unless the context indicates otherwise.
| ii |
PARI I – FINANCIAL INFORMATION
Item 1. Financial Statements.
DNA X, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
June 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Receivable for cash held back from the asset sale | ||||||||
| Receivable, related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets held for sale | ||||||||
| Total Current assets | ||||||||
| Investment in DNA X LLC under equity method | ||||||||
| Identifiable intangible assets | ||||||||
| Deferred tax assets | ||||||||
| Other assets | ||||||||
| Non-current assets held for sale | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ deficit | ||||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Promissory note, net from related party | ||||||||
| Promissory notes, net | ||||||||
| Derivative liability | ||||||||
| Income tax payable | ||||||||
| Current liabilities held for sale | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Redeemable common stock; $ par value; shares issued and outstanding; redemption value $ | ||||||||
| Stockholders’ deficit | ||||||||
| Common stock, $ par value per share; shares authorized: and and shares issued and outstanding at June 30, 2026 and December 31, 2025 respectively* | ||||||||
| Preferred stock, $ par value per share, shares authorized: and shares issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital* | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities, redeemable common stock, and stockholders’ deficit | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 1 |
DNA X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Continuing operations | ||||||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on remeasurement of derivative liability | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Equity income from DNA X LLC | ||||||||||||||||
| Net loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit from continuing operations | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations | ||||||||||||||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net income (loss) per share basic and diluted: | ||||||||||||||||
| Continuing operations* | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Discontinued operations* | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Net income (loss)* | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Weighted-average shares used in computing net income (loss) per share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
DNA X, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
(UNAUDITED)
| Common stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| For the Three Months Ended June 30, 2025 | Shares (*) | Amount | Capital | Deficit | Deficit | |||||||||||||||
| Balance at April 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock upon settlement of restricted stock units | ||||||||||||||||||||
| Issuance of common stock, net of issuance costs | ||||||||||||||||||||
| Stock-based compensation related to 2024 bonus accrual | — | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Impact of retroactively adjusted reverse stock split | — | ( | ) | |||||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| For the Three Months Ended June 30, 2026 | Shares(*) | Amount | Capital | Deficit | Deficit | |||||||||||||||
| Balance at April 1, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Reclass redeemable common stock to permanent common stock at $ on May 26, 2026 | ( | ) | ||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| For the Six Months Ended June 30, 2025 | Shares (*) | Amount | Capital | Deficit | Deficit | |||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Issuance of common stock upon settlement of restricted stock units | ||||||||||||||||||||
| Issuance of common stock, net of issuance costs | ||||||||||||||||||||
| Stock-based compensation related to 2024 bonus accrual | — | |||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Impact of retroactively adjusted reverse stock split | — | ( | ) | |||||||||||||||||
| Net income | — | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock | Additional Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| For the Six Months Ended June 30, 2026 | Shares(*) | Amount | Capital | Deficit | Deficit | |||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Change in fair value of redeemable common stock | — | |||||||||||||||||||
| Reclass redeemable common stock to permanent common stock at $ on May 26, 2026 | ( | ) | ||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| (*) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
DNA X, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Gain on sale of assets, net of cash | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation ($ from continuing and $ from discontinued operations for 2026 and all from discontinued operations for 2025-see Note 8) | ||||||||
| Loss on remeasurement of derivative liability | ||||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Release of customer allowance liability | ( | ) | ||||||
| Impairment of contract fulfillment assets | ||||||||
| Investment income from DNA X LLC under the equity method | ( | ) | ||||||
| Other | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Non-trade receivable | ||||||||
| Deferred tax liability | ||||||||
| Deferred tax asset | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Contract fulfillment assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Income tax payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Net cash received from asset sale | ||||||||
| Additions to identifiable intangibles - software assets | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock, net of issuance costs | ||||||||
| Proceeds from promissory note, net of issuance costs | ||||||||
| Repayments of short-term borrowings | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash activities: | ||||||||
| Repayment of notes payable from proceeds of asset sale | $ | $ | ||||||
| Receivable for cash held back from asset sale | $ | $ | ||||||
| Reclass of investment to intangibles, related party receivables, and accrued liabilities | $ | $ | ||||||
| Accrued bonus settled in equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
DNA X, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In Thousands, except Share and Per Share Amounts)
NOTE 1 — The Company and Its Significant Accounting Policies
Description of Business—DNA X, Inc.
(“the Company”) was incorporated in the state of Delaware on
The trading platform generates revenue from trading commissions that are based on the value of the trades that customers execute on the DNA X trading website. The trading platform is adding enhancements such as perpetual futures and trading in AI compute time. The website is not currently open to the public as the Company is developing and testing the new services. Potential customers are individual and institutional investors.
Liquidity and Ability to Continue as a Going
Concern—The Company’s consolidated financial statements account for the continuation of its business as a going concern.
The Company is subject to the risks and uncertainties associated with operating an AI and crypto trading platform including the ability
to attract new customers and to keep existing customers from moving their business to other competitors. On July 8, 2026, the Company
received $
Reverse Stock Split—On October 28,
2025, the Company effected a
The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock. All outstanding stock options, restricted stock units, and warrants entitling their holders to purchase or obtain or convert into shares of our common stock were adjusted, as required by the terms of these securities.
The Company’s stockholders’ equity, in the aggregate, remained unchanged following the Reverse Stock Split. Net income (loss) per share increased because there were fewer shares of common stock outstanding. There were no other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, that arose as a result of the Reverse Stock Split.
All common share and per-share amounts in this Form 10-Q have been retroactively restated to reflect the effect of the Reverse Stock Split.
Financial Statement Presentation—The unaudited condensed consolidated financial statements include the accounts of DNA X, Inc. and its wholly owned subsidiaries (collectively “DNA X” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the unaudited condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these unaudited condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the unaudited condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2025.
| 5 |
Principles of Consolidation—The accompanying consolidated financial statements through January 23, 2026 include the accounts of DNA X, Inc. and its wholly owned foreign subsidiaries, Sonim Technologies (India) Private Limited, Sonim Technologies (Shenzhen) Limited, Sonim Technologies Inc. Shenzhen Limited Beijing Branch, Sonim Technologies (Hong Kong) Limited, Sonim Technologies Germany GmbH and Sonim Technologies Communications India Private Limited (collectively, the “Company”). After the Company’s subsidiaries in Shenzhen, Beijing, Hong Kong, and Germany were sold on January 23, 2026, only Sonim Technologies (India) Private Limited is consolidated after January 23, 2026. On May 26, 2026, the Company was deemed to gain control over DNA X LLC, and after this date the Company also includes DNA X LLC in their consolidated financial statements.
Reclassifications—Prior period amounts were reclassified to conform to the current period presentation including the separation of amortization of debt discounts and issuance costs on the statement of cash flow.
Assets Held For Sale—The Company generally considers assets to be held for sale when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale immediately, (iii) management has initiated an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group, (iv) the sale of the property within one year is considered probable, (v) the property is actively being marketed for sale at a price that is reasonable in relation to its current fair value and (vi) significant changes to the plan to sell are not expected. Property classified as held for sale is no longer depreciated and is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. During the fourth quarter ended December 31, 2025, the Company deemed that its phone and hotspot operations met the held for sale criteria and was classified as such on the audited condensed consolidated balance sheet for the December 31, 2025 balance sheet and the prior period that was presented. The six criteria were met on December 30, 2025 when the stockholders approved the asset sale and the asset sale became probable.
Discontinued Operations—The Company deems it appropriate to classify a business as a discontinued operation if the related disposal group meets all the following criteria: (i) the disposal group is a component of the Company, (ii) the component meets the held-for-sale criteria, and (iii) the disposal of the component represents a strategic shift that has a major effect on the Company’s operations and financial results. During the fiscal quarter ended December 31, 2025, the Company deemed its phone and hotspot operations to be discontinued operations due to the disposal group meeting all three criteria. As such, the results of the phone and hotspot operations are presented as discontinued operations in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2026 and June 30, 2025, and have been excluded from both continuing operations and segment results for all periods presented.
Related Party Transactions— On October
1, 2024, the Company signed an agreement with a then-related party, in which a family member of the Company’s then-director, Jeffrey
Wang, holds an indirect interest of approximately
The Company’s director, Scott Walker, has
an ownership interest of approximately 50% in DNA Holdings, the entity that sold the DNA X LLC cryptocurrency trading platform to the
Company. The entity received
| 6 |
The Company has executed a Transition Services
Agreement with DNA Holdings to facilitate the paying of certain contractors that work on enhancements to the DNA X software. Through June
30, 2026, the company has reimbursed DNA Holdings $
Redeemable Common Stock—Stock that was issued for the DNA X LLC business was classified as redeemable common stock in the temporary equity section of the balance sheet from its issuance on December 15, 2025 until May 26, 2026, when the put option that gave DNA Holdings the right to take back the DNA X LLC business was terminated. As of June 30, 2026, the common stock that was issued to DNA Holdings for the DNA X LLC business is classified as permanent equity.
Estimates—The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates include, but are not limited to, estimates related to revenue recognition; valuation assumptions regarding the determination of the fair value of common stock, as well as stock options; the useful lives of the Company’s long-lived assets; intangible assets; product warranties; loss contingencies; the recognition and measurement of income tax assets and liabilities, including uncertain tax positions; the net realizable value of inventory; allowances for credit losses; and estimation of assets and liabilities for operating entities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities.
Concentrations of Credit Risk—The Company plans on relaunching its cryptocurrency trading platform later this year and the commission revenue will be concentrated in the cryptocurrency trading industry, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies, could adversely affect the Company’s consolidated operating results.
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high-quality, federally insured commercial banks in the United States and cash balances are in excess of federal insurance limits as of June 30, 2026 and the year ended 2025.
Segment Information—The Company considers the cryptocurrency trading platform that is under development to be a reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is the chief executive officer, in deciding how to allocate resources and assessing performance.
Cash
and Cash Equivalents—The Company considers all highly liquid investments with an original maturity from the date of
purchase of 90 days or less to be cash equivalents. As of June 30, 2026 and December 31, 2025, cash and cash equivalents consist of
cash deposited with banks and money market funds. Included in the Company’s cash and cash equivalents are amounts held by
foreign subsidiaries. After the sale of all of the Company’s foreign subsidiaries except for Inda, the Company has less than
$
Receivable for Cash Held Back from the Asset
Sale—All customer accounts receivable were sold on January 23, 2026 with the asset sale. The only remaining non-trade receivable
is from the Buyer of the Company’s assets and is due on October 28, 2026. The original amount held back was $
Receivables Financing Agreement—On August 7, 2025, the Company entered into a non-recourse factoring agreement with Tradewind GmbH (the “Factor”). This agreement was terminated in January 2026.
| 7 |
Inventory—The Company sold all of its inventory on or before January 23, 2026.
Property and Equipment—The Company sold all of its property and equipment on January 23, 2026. Prior to the sale, most property and equipment consisted of personal computers and related equipment.
Identifiable Intangible Assets—The
Company acquired identifiable intangible assets for the trading platform and for the trademarks and domain names of DNA X. These assets
were acquired on May 26, 2026 when the Company gained accounting control of DNA X LLC. The assets were recorded as fair value on May 26,
2026 based on information from a third party valuation company. The intangible assets are amortized on a straight-line bases over
Asset Acquisition vs. Business Acquisition— The Company evaluates each acquisition to determine whether the acquired set of assets and activities meets the definition of a business under ASC 805, Business Combinations. The Company may elect to apply the optional concentration test. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the acquired set is not considered a business. If the concentration test is not applied or is not met, the Company evaluates whether the acquired set includes, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. An acquired set that does not meet the definition of a business is accounted for as an asset acquisition. See Note 7 for how this was applied to the gain of control of DNA X LLC on May 26, 2026.
Variable Interest Entities—The Company evaluates its interests in legal entities to determine whether the entity is a variable interest entity (“VIE”) and whether the Company is the primary beneficiary of the VIE in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation.
A VIE is an entity that either (i) lacks sufficient equity to finance its activities without additional subordinated financial support or (ii) has equity holders that lack the characteristics of a controlling financial interest. The Company is considered the primary beneficiary of a VIE when it has both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If the Company is the primary beneficiary, the VIE is consolidated and all intercompany balances and transactions are eliminated. For VIEs in which the Company is not the primary beneficiary, the Company accounts for its interest under the equity method of accounting or other applicable guidance. The Company presents, on a separate line within the consolidated balance sheets, the assets of consolidated VIEs that can only be used to settle the obligations of the VIE and the liabilities of consolidated VIEs for which creditors do not have recourse to the general credit of the Company.
On May 26, 2026, the Company determined that its interest in DNA X LLC became a controlling interest and the assets of the DNA X LLC subsidiary were consolidated into the Company’s consolidated financial statements beginning on May 26, 2026
Equity Method Investments—The Company
accounts for investments in entities over which it has the ability to exercise significant influence, but not control, using the equity
method of accounting in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Significant influence
is generally presumed to exist when the Company owns between
| 8 |
The Company evaluates its equity method investments
for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.
If the Company determines that a decline in fair value is other-than-temporary, the investment is written down to its estimated fair value.
Distributions received from equity method investees are accounted for as reductions of the carrying amount of the investment unless the
distributions represent a return on investment. The Company discontinues applying the equity method when its investment balance is reduced
to zero and resumes recognizing its share of earnings only after its share of cumulative earnings exceeds previously unrecognized losses.
The Company recognized $
Leases—The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or finance leases and, if significant, are recorded on the Consolidated Balance Sheets as both a right of use asset and a lease liability. There were no such leases in 2026.
Non-recurring Engineering (“NRE”) Tooling and Purchased Software Licenses—For the discontinued operations, third-party design services relating to the design of tooling materials and purchased software licenses used in the manufacturing process are capitalized and included in other assets that are part of assets held for sale.
Long-lived Assets—The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Revenue Recognition—The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.
Revenue related to the phone and hotspot business is included in discontinued operations for all periods presented. DNA X LLC was accounted for as an equity investment through May 26, 2026. After May 26, 2026, control of DNA X LLC by the Company was achieved, and subsidiary is consolidated into the Company’s financial statements as of June 30, 2026.
Revenue recognition for discontinued operations was reduced for discounts, price protection and customer incentives.
Cost of Revenues—Cost of revenue is related to the phone and hotspot business.
Advertising—The Company expenses
the costs of advertising, including promotional expenses, as incurred. For the six months ended June 30, 2026 and 2025 the Company had
Research and Development—Research and development expenses consist of compensation costs and development fees paid to third parties. The Company expenses research and development costs as incurred.
Comprehensive Income or Loss—The Company had no items of comprehensive income or loss other than net loss for the six month ended June 30, 2026 and the year ended December 31, 2025. Therefore, a separate statement of comprehensive loss has not been included in the accompanying consolidated financial statements.
| 9 |
Income taxes—The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Compliance with income tax regulations requires the Company to make decisions relating to the transfer pricing of revenue and expenses between each of its legal entities that are located in several countries. The Company’s determinations include many decisions based on management’s knowledge of the underlying assets of the business, the legal ownership of these assets, and the ultimate transactions conducted with customers and other third parties. The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in multiple tax jurisdictions. The Company may be periodically reviewed by domestic and foreign tax authorities regarding the amount of taxes due. These reviews may include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the exposure associated with various filing positions, the Company records estimated reserves when it is more likely than not that an uncertain tax position will not be sustained upon examination by a taxing authority. Such estimates are subject to change. See Note 9.
Promissory Notes—The Company accounts for promissory notes in accordance with ASC 470, Debt. Promissory notes are initially recorded at the amount of cash proceeds received, net of any original issue discount and direct issuance costs. Debt discounts and issuance costs are amortized to interest expense over the term of the note using the effective interest rate method, which approximates the effective interest method. Interest is accrued based on the stated interest rate. For convertible notes we analyze the note’s terms and determine if the conversion feature needs to be bifurcated from the debt portion. For the two DNA Notes (see note 6) we determined that they needed to be bifurcated between the debt portion and a derivative liability for the conversion feature.
Derivative Liability—The Company evaluates financial instruments containing characteristics of both liabilities and equity in accordance with FASB ASC 480, Distinguishing Liabilities from Equity, and FASB ASC 815, Derivatives and Hedging. Derivative liabilities are revalued at fair value at each reporting period, with changes in fair value recognized in the results of operations as a gain or loss on derivative remeasurement. The Company uses a Binomial option pricing model to determine the fair value of these instruments. Derivative liabilities are revalued at fair value at each reporting period, with changes in fair value recognized in the results of operations as a gain or loss on derivative remeasurement. The Company uses a Binomial option pricing model to determine the fair value of these instruments.
Debt Extinguishment—The Company evaluates new debt agreements with the counterparties of existing debt holders to determine if the new debt should be accounted for as a debt modification or a debt extinguishment of the old debt. If the change in value between the new debt and the old debt is greater than or equal to 10% of the debt, then the transaction would be considered a debt extinguishment. If less than 10% then it would be considered a debt modification. See Note 6 for how this was applied to the new note on May 26, 2026.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
| 10 |
Pronouncements adopted in 2025
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures This guidance requires expanded annual income tax disclosures, including (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. This guidance was adopted by the Company effective for the annual period ending December 31, 2025. The adoption affected the footnote disclosures and did not have a material impact on the unaudited condensed consolidated financial statements.
Pronouncements adopted in 2026
None.
Pronouncements not yet adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual 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 impact the adoption of this guidance will have on its consolidated financial statements and related disclosures.
NOTE 2 — Revenue Recognition
The Company recognized revenue from discontinued operations. The Company’s contracts for its products include only one performance obligation, namely the delivery of the product. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition under ASC 606.
Disaggregation of net revenues
The Company did not have revenue from continuing operations.
NOTE 3—Fair value measurement
The fair value measurements standard establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the standard are described below:
Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2—Inputs to the valuation methodology include:
| ● | Quoted market prices for similar assets or liabilities in active markets; |
| 11 |
| ● | Quoted prices for identical or similar assets or liabilities in inactive markets; | |
| ● | Inputs other than quoted prices that are observable for the asset or liability; | |
| ● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used for the period ended June 30, 2026 and December 31, 2025.
Money market funds are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value (in thousands of dollars):
| June 30, 2026 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Money market funds * | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability – conversion feature on note | $ | $ | $ | |||||||||||||
| December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | ||||||||||||||||
| Money market funds * | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability – conversion feature on note | $ | $ | $ | |||||||||||||
| * |
| 12 |
NOTE 4—Identifiable Intangible Assets
The company acquired identifiable intangible assets as part of the asset acquisition of DNA X LLC. The details for identifiable intangible assets as of June 30, 2026 are as follows in thousands of dollars:
| Transfer from DNA X LLC May 26, 2026 | Additions YTD 2026 | Accumulated Amortization | Ending Balance June 30, 2026 | |||||||||||||
| Software Technology DNA X platform | $ | $ | $ | $ | ||||||||||||
| Trademarks DNA X | ||||||||||||||||
| Outstanding at June 30, 2026 | $ | $ | $ | $ | ||||||||||||
The software assets will be amortized over management’s
estimated useful life of
NOTE 5—Closing of the Asset Sale
On January 23, 2026 (the “Closing Date”) the Company (“the “Seller”) completed its previously announced sale (the “Asset Sale”) of substantially all of its assets and liabilities related to the enterprise 5G solutions business, including rugged handsets, smartphones, wireless internet device, software, services, and accessories to Pace Car Acquisition LLC, (the “Buyer”). Excluded assets include the DNA X LLC cryptocurrency trading business, cash, and the Company’s Indian subsidiary. Excluded liabilities include compensation for employees that did not transfer to the Buyer, certain excluded corporate liabilities, and certain excluded contracts.
The purchase price of $
The Company changed its name to DNA X, Inc. in connection with the Asset Sale. Following the closing, the Company has focused on the development and commercialization of the DNA X trading platform that uses on-chain trading protocol designed to enable users to automate certain decentralized exchange trading strategies. The Company is enhancing the platform to include trading of AI compute time.
The transaction resulted in a $
On December 30, 2025, a special stockholders’ meeting was held and stockholders voted the majority of the outstanding shares in favor of approving the asset sale. This approval made it probable that the assets sale would be completed and was the final criteria that was necessary to record the assets as held for sale. On December 31, 2025 the assets and liabilities of the phone and hotspot disposal group were classified as held for sale. The disposal group was also classified as discontinued operations as of December 31, 2025 and for the six months ended June 30, 2026.
The following schedules present the carrying amounts of major classes of assets and liabilities associated with the disposal group as of December 31, 2025, the statement of operations for the disposal group, and cash flow for the disposal group. All assets and liabilities that were held for sale on December 31, 2025, were sold or disposed of as of June 30, 2026:
DISCONTINUED OPERATIONS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2025
(IN THOUSANDS)
| December 31, 2025 | ||||
| Assets held for sale | ||||
| Accounts receivable, net | $ | |||
| Non-trade receivables | ||||
| Inventory | ||||
| Prepaid expenses and other current assets | ||||
| Total current assets held for sale | ||||
| Property and equipment, net | ||||
| Contract fulfilment assets | ||||
| Other assets | ||||
| Total non-current assets held for sale | ||||
| Total assets held for sale | $ | |||
| Liabilities held for sale | ||||
| Accounts payable | ||||
| Accrued liabilities | ||||
| Total liabilities held for sale | $ | |||
Non-trade receivables are from the Company’s manufactures who buy parts from the Company. The receivable is paid by the manufacturer after Company pays the related accounts payable for the inventory.
Discontinued operations activity for the six months ended 2026 covers the period January 1, 2026 through January 23, 2026. Discontinued operations activity for 2025 covers the entire three or six month period.
| 13 |
DNA X, INC.
DISCONTINUED OPERATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit (loss) | ( | ) | ||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain (loss) on sale of assets | ( | ) | ||||||||||||||
| Other income | ( | ) | ( | ) | ||||||||||||
| Net before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax benefit (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) from discontinued operations | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
The following cash flows are for discontinued operations only and are supplemental to the Statement of Cash Flows that includes both continuing operations and discontinued operations.
DISCONTINUED OPERATIONS
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2026 and 2025
(IN THOUSANDS)
| 2026 | 2025 | |||||||
| Cash flows from operating activities for discontinued operations: | ||||||||
| Net income | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Release of customer allowance liability | ( | ) | ||||||
| Gain on sale of assets, net assets transferred | ( | ) | ||||||
| Other | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Non-trade receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Contract fulfillment assets | ( | ) | ||||||
| Other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued liabilities | ( | ) | ||||||
| Income taxes payable | ||||||||
| Net cash provided by (used in) operating activities from discontinued operations | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Net cash received from asset sale | ||||||||
| Net cash provided by investing activities from discontinued operations | ||||||||
The Company ceased depreciation and amortization of property, plant, and equipment and intangible assets included in the Disposal Group starting on December 31, 2025.
NOTE 6 — Promissory Notes
Convertible Promissory Note from DNA Holdings Venture Inc., a Related Party
On December 15, 2025, the Company issued a note
(the “Original DNA Note”) to DNA Holdings in exchange for proceeds of $
On May 26, 2026, the Original DNA Note was cancelled
and the $
| 14 |
The Company reviewed the transaction to determine if it met the criteria as a debt modification or a debt extinguishment. The Company evaluated the exchange of the Original DNA Note for the New DNA Note to determine whether the transaction should be accounted for as a debt modification or a debt extinguishment. Because the present value of the cash flows under the terms of the New DNA Note differed by more than 10% from the present value of the remaining cash flows under the Original DNA Note, the Company determined that the transaction should be accounted for as a debt extinguishment. Accordingly, the Company derecognized the Original DNA Note and accounted for the New DNA Note as a new debt instrument.
On May 26, 2026, the Company derecognized the
outstanding loan principal, loan discounts, accrued interest, and derivative liability for the conversion feature associated with the
Original DNA Note. A gain on extinguishment of $
The New DNA note issued on May 26, 2026 was cancelled and exchanged for preferred stock on July 8, 2026. See Note 13.
Prior to its cancellation, the New DNA Note provided
for maturity on
The Company’s obligations under the New DNA Note were secured by a first priority lien and security interest in and to the following collateral: (i) the limited liability company membership interests owned by the Company in DNA X, LLC, and all dividends, cash, instruments, and other property from time to time received or distributed in respect thereof and all proceeds of any of the foregoing in whatever form. The security interest in the pledged collateral terminated and all rights to the pledged collateral reverted to the Company in connection with the cancellation of the New DNA Note.
The following table presents the components of the net carrying amount of the New DNA Note that is from a related party. This is the only note outstanding as of June 30, 2026. (in thousands of dollars):
| Principal | $ | |||
| Less: unamortized debt discount | ( | ) | ||
| Current portion | $ | |||
| Long term portion | $ |
Cancellation and Exchange of New DNA Note
On July 8, 2026, the full value of the New DNA
Note, including accrued interest, was cancelled and exchanged for preferred stock of the Company at a purchase price of $
Because the New DNA Note contained an alternate
conversion price, the conversion price was not fixed, and we are required to separate the debt portion from the conversion feature portion.
We determined the value of the conversion feature using a binomial tree option calculation. A debt discount of $
| 15 |
The schedule below shows the change in the fair value of the derivative liability for the December 15, 2025 DNA Holdings Note (in thousands of dollars):
| Activity | ||||
| Beginning balance (December 15, 2025) | $ | |||
| Balance at December 31, 2025 | ||||
| Fair value adjustment March 31, 2026 | ||||
| Balance at March 31, 2026 | ||||
| Fair value adjustment May 26, 2026 | ( | ) | ||
| Ending value prior to derecognition (May 26, 2026) | $ | |||
For the DNA Holdings May 26, 2026 Note (in thousands of dollars):
| 2026 | 2025 | |||||||
| Beginning balance (May 26, 2026) | $ | $ | ||||||
| Fair value adjustment | ||||||||
| Ending value (June 30) | $ | $ | ||||||
On May 26, 2026, the Company used a binomial tree
option calculation to determine the fair value of the conversion feature using the following inputs: strike price $
The closing of the note transaction on May 26, 2026 was done contemporaneously with the termination of the put option on the purchase of the DNA X LLC business. See Note 7.
Streeterville Capital LLC Notes
On January 23, 2026, the Company paid off promissory
notes issued to Streeterville Capital LLC in February 2025 and July 2025 using proceeds from the transactions contemplated by the Asset
Purchase Agreement. The total payoff for both notes was $
The effective interest rate on the February 2025
note and the July 2025 note are approximately
The following table sets forth total interest expense recognized related to the Streeterville notes and the DNA Holdings December 15, 2025 note, and financing fees from factored accounts receivable for the three and six months ended June 30, 2026 (in thousands of dollars):
| Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 | |||||||
| Contractual interest expense | $ | $ | ||||||
| Amortization of debt discount and issuance costs | ||||||||
| Financing costs on factored accounts receivable | ||||||||
| $ | $ | |||||||
The following table presents the components of the net carrying amount of the only outstanding note as of December 31, 2025:
| Principal | $ | |||
| Less: unamortized debt discount and debt issuance costs | ( | ) | ||
| $ | ||||
| Current portion | $ | |||
| Long-term portion | $ |
| 16 |
The effective interest rate on the Note was
Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | |||||||
| Contractual interest expense | $ | $ | ||||||
| Amortization of debt discount | ||||||||
| Amortization of debt issuance costs | ||||||||
| Interest expense | $ | $ | ||||||
NOTE 7 — Stockholders’ Deficit
On October November 2, 2018, the Company amended
and restated its previous certificate of incorporation and adjusted its authorized capital stock (par value of $
Purchase of DNA X LLC Membership Units with Issuance of Redeemable Common Stock
On December 15, 2025, the Company entered into
a membership interest purchase agreement with DNA Holdings pursuant to which the Company purchased
DNA X LLC is engaged in the business of DNA X DeFi, an advanced on-chain trading protocol that lets users automate their decentralized exchange trading — things like limit orders, grid / range orders, and recurring trades. DNA X LLC operates a crypto trading platform (https//dnax.us) that allows customers to buy and sell cryptocurrencies, and to implement strategies to buy and sell cryptocurrency pairs to take advantage of fluctuations of market prices between cryptocurrency pairs. The platform allows investors to efficiently implement trading strategies, to track historical results, and to monitor other traders’ strategies. The Company purchased this business because of the growth potential of commission revenue that will be generated as more customers join the platform and as trading volume increases as additional cryptocurrencies are added. The purchase allows the Company to diversify away from the capital intensive device hardware business that has little growth potential, into an industry with huge growth potential and requires lass ongoing capital investments.
The transaction closed contemporaneously with
the sale of a note for $
Under the Membership Interest Purchase Agreement, DNA Holdings also agreed to vote all shares of the Company’s common stock beneficially owned by DNA Holdings in favor of the asset purchase agreement, dated July 17, 2025, as subsequently amended and as amended from time to time, by and among the Company and Pace Car Acquisition LLC. This asset purchase agreement was approved by the Company’s stockholders on December 30, 2025.
| 17 |
The Company determined that it had significant influence over DNA X LLC because it participated in the
governance and operations of DNA X LLC and had the ability to influence its operating and financial policies. However, while the Put
Option remained outstanding, the substantive rights held by the Seller prevented the Company from having the power to direct the
activities that most significantly impacted DNA X LLC’s economic performance. Accordingly, the Company accounted for its
investment in DNA X LLC under the equity method of accounting until May 26, 2026, when the Put Option was terminated. The carrying
amount of the Company’s investment in DNA X LLC was $
The Company determined that it has significant
influence over DNA X LLC because until the Put Option is exercised, it controls the governance structure and directs the activities that
most significantly impact DNA X LLC’s economic performance. This significant influence requires the Company to account for the investment
in DNA X LLC under the equity method of accounting. The carrying amount of the Company’s investment in DNA X LLC is $
Because the stock issued could have been returned
to the Company if the Seller exercised its Put Option, the Company classified the stock issued to the Seller as redeemable common stock
on the consolidated balance sheets prior to May 26, 2026. The Company considered this to be temporary equity which was not included with
other permanent equity on the consolidated balance sheets. When the Put Option was terminated on May 26, 2026, the redeemable common stock
was reclassified as permanent equity. The redemption value at May 26, 2026 is calculated as $
The activity of the redeemable common stock is as follows:
| Value upon share issuance on December 15, 2025 | $ | |||
| Less: decrease in value through March 31, 2026 | ( | ) | ||
| Plus: increase in value through May 26, 2026 | ||||
| Redeemable stock reclassified to permanent equity on May 26, 2026 | $ |
Securities Purchase Agreement for DNA Holdings for Shares Received from the Sale of DNA X LLC
The Purchase Agreement contains customary representations and warranties of the Company and DNA Holdings. Additionally, pursuant to the Purchase Agreement, the Company made certain covenants including, but not limited to: (i) timely filing of its reports with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended, (ii) restrictions on the adoption of stockholder rights plans, poison pills, or similar anti-takeover measures, (iii) limitations on the use of proceeds from the Offering to the ordinary course of business of the Company, and (vi) for so long as the DNA Note remained outstanding, a covenant not to effect or enter into any variable rate transaction (as defined in the Purchase Agreement).
| 18 |
Additionally, under the Purchase Agreement, DNA Holdings has agreed to a voting arrangement that is substantially identical to the voting arrangement described above under “Membership Interest Purchase Agreement.”
See Note 6 for information on the convertible promissory note that was with the same counterparty.
On May 26, 2026 the Put Option was terminated. Upon termination, the Company reevaluated its position as it relates to DNA X LLC and determined that the Company is now the primary beneficiary, as DNA Holdings no longer has the power to direct the activities that most significantly impact DNA X LLC’s economic performance. The Company’s assessment considered DNA X LLC’s governance structure and contractual arrangements established in connection with the acquisition of its interest. The termination of the Put Option eliminates the ability of DNA Holdings to remove the Company from its decision-making role over DNA X LLC’s significant activities. As a result, the Company gained full control over DNA X LLC and the Company recorded the acquisition of DNA X LLC as an asset acquisition on May 26, 2026. The Company has operated the DNA X LLC platform since December 15, 2025.
The following are the fair values of major classes of assets acquired and liabilities assumed as of the May 26, 2026 acquisition date (in thousands of dollars):
| Assets acquired: | ||||
| Receivable from DNA Holdings | ||||
| Intangible assets-software | ||||
| Intangible assets-trademarks | ||||
| Total asset | ||||
| Liabilities assumed: | ||||
| Accounts payable | ||||
| Net assets acquired | $ | |||
| Derecognition of equity investment | $ |
ChEF Purchase Agreement
On September 29, 2025, the Company entered into a ChEF purchase agreement (the “ChEF Agreement”) and registration rights agreement (the “Registration Rights Agreement”), each with Chardan Capital Markets LLC (“Chardan”) related to a “ChEF,” Chardan’s committed equity facility.
Pursuant to the ChEF Agreement, the Company has
the right from time to time at its option to sell to Chardan up to the lesser of (i) $
While there are distinct differences, the facility pursuant to the ChEF Agreement is structured similarly to a traditional “at-the-market” equity facility, insofar as it allows the Company to raise primary equity capital on a periodic basis. The net proceeds from any sales under the ChEF Purchase Agreement will depend on the frequency of and the prices for which the shares of our common stock are sold to Chardan. The registration statement in connection with the facility became effective on October 29, 2025.
In November 2025, the Company sold shares
of stock through the ChEF and received $
The ChEF agreement was terminated on May 29, 2026.
| 19 |
Warrants issued to Roth Capital Partners, LLC in connection with its services as placement agent with respect to a registered public offering of the Company’s common stock
The Company issued to Roth Capital Partners, LLC
(“Roth”), (the “Placement Agent”) warrants to purchase up to an aggregate of
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Cost of revenues | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
In 2026, continuing operations includes the stock-based compensation of $ for general and administrative. In 2025 the general and administrative stock-based compensation is included in discontinued operations. For both years the other stock-based compensation is all included in discontinued operations.
Stock-based compensation in Cost of Revenues relates to employees who focus on supply chain management.
Stock Options
| Options | Weighted average exercise price per share | Weighted average remaining contractual life (in years) | Aggregate Intrinsic Value* | |||||||||||||
| Outstanding at January 1, 2026 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited and Expired | ( | ) | ||||||||||||||
| Outstanding at June 30, 2026 | $ | $ | ||||||||||||||
| Vested and Expected to Vest at June 30, 2026 | $ | $ | ||||||||||||||
| Exercisable at June 30, 2026 | $ | $ | ||||||||||||||
| * |
As of June 30, 2026, there was approximately $ of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of years.
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Restricted Stock Units
| RSUs | ||||
| Outstanding at January 1, 2026 | ||||
| Granted | ||||
| Released | ||||
| Forfeited | ||||
| Outstanding at June 30, 2026 | ||||
| Number of warrants | Weighted average exercise price per share | |||||||
| Outstanding at January 1, 2026 | $ | |||||||
| Granted | ||||||||
| Forfeited | ||||||||
| Expired | ||||||||
| Outstanding at June 30, 2026 | $ | |||||||
| Exercisable at June 30, 2026 | $ | |||||||
NOTE 9 — Income Taxes
The Company recognized income tax expense/(benefit)
of $(
The Company’s tax expense for the six months ended June 30, 2026 is higher than our tax expense for the same period last year due to the sale of the Company’s legacy business assets.
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The Company’s tax expense for discontinued operations for the six months ended June 30, 2026 is higher than its tax expense for the same period last year due to the sale of the Company’s phone and hotspot assets on January 23, 2026. Tax expense through January 23, 2026 is included in discontinued operations because they primarily relate to the sale of the assets and the gain on the sale of the assets is included in discontinued operations. After January 23, 2026, tax expense is included in continuing operations in 2026. For 2025, tax expense is included in discontinued operations.
The Company’s effective tax rate is -
The Company’s material income tax jurisdictions are the United States (federal and California), China and India. As a result of net operating loss and credit carryforwards, the Company is subject to audit for tax years 2023 and forward for federal and California purposes. The China and India tax years are open under the statute of limitations from 2013 and forward.
It is projected that the Company will utilize
$
The Company is subject to ongoing tax examinations
of its tax returns by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance
on the accounting for uncertainty in income taxes, the Company regularly assesses the likelihood of adverse outcomes resulting from these
examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates and judgments.
As of June 30, 2026, the gross amount of unrecognized tax benefits was approximately
NOTE 10 — Commitments and Contingencies
Purchase Commitments
There are no noncancelable purchase orders as of June 30, 2026 or December 31, 2025 for continuing operations. The company stopped issuing purchase commitments in 2025 in anticipation of the closing of the asset sale.
Royalty payments
For its discontinued operations, the Company is required to pay per unit royalties to wireless essential patent holders.
General litigation
The Company is involved in various legal proceedings arising in the normal course of business. The Company does not believe that the ultimate resolution of these other matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
| 22 |
Indemnification
Under the terms of the asset purchase agreement,
the Company has indemnification obligations for representations and warranties made by the Company. The $
For discontinued operations, under the terms of its agreements with wireless carriers and other partners, the Company has agreed to provide indemnification for intellectual property infringement claims related to the Company’s products sold by them to their end customers. From time to time, the Company receives notices from these wireless carriers and other partners of a claim for infringement of intellectual property rights potentially related to their products. These infringement claims have been settled, dismissed, or have not been further pursued by the customers.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Numerator: | ||||||||||||||||
| Loss from continuing operations | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| Income/(loss) from discontinued operation | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income/(loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares used in computing net loss per share, basic and diluted | ||||||||||||||||
| Earnings (loss) per share – basic and diluted | ||||||||||||||||
| Continuing operations | ) | ) | ) | ) | ||||||||||||
| Discontinued operations | ) | ) | ) | |||||||||||||
| Net income (loss) per share, basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
Because the Company had a net loss from continuing operations, it did not disclose diluted earnings per share amounts for discontinued operations or for overall net income.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Shares subject to options to purchase common stock | ||||||||||||||||
| Unvested restricted stock units | ||||||||||||||||
| Shares subject to warrants to purchase common stock | ||||||||||||||||
| 23 |
NOTE 12 — Entity Level Information
Segment Information—The Company operates
in
The Company’s Chief Executive Officer is the Company’s chief operating decision maker (“CODM”). The Company’s CODM primarily uses consolidated net loss to allocate resources and assess Company performance, primarily through periodic budgeting and Company performance reviews. The CODM utilizes discrete financial information at the consolidated level, including cash spending and cash forecasts.
There was no significant revenue in 2026 for continuing operations. The CODM managed spending on enhancements to the DNA X trading platform by reviewing payments made to consultants and financial forecasts.
Other than intangible software assets and intangible trademark assets, the Company has no significant long-lived assets. There are no significant customers at June 30, 2026.
NOTE 13 — Subsequent Events
Securities Purchase Agreement
On June 29, 2026, the Company entered into the
Securities Purchase Agreement with DNA Holdings pursuant to which the Company agreed to issue and sell, in private placement,
shares on non-voting Series B Convertible Preferred Stock (“Series B Preferred Stock”) at a purchase price of $ per share,
for an aggregate offering price of $
On July 8, 2026, the Company completed the sale
of shares of Series B Preferred Stock in exchange for $
On August 7, 2026, the Company completed the sale
of the remaining shares of Series B Preferred Stock purchasable under the Securities Purchase Agreement in exchange for cash proceeds
of $
| 24 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations together with “Cautionary Note About Forward-Looking Statements” and our condensed consolidated financial statements and related notes included under Item 1 of this Quarterly Report as well as our most recent Annual Report on Form 10-K for the year ended December 31, 2025 as amended, including Part 1, Item 1A “Risk Factors.”
Company Overview
We are a provider of cryptocurrency trading services to the public. Our services are available over the internet at https://dnax.us. We serve individual cryptocurrency traders. Our products allow users to efficiently buy and sell cryptocurrencies with cash or cash equivalents, or to exchange one cryptocurrency for another cryptocurrency. Our platform allows users to execute strategies between pairs of cryptocurrencies that allow them to swap between the currencies as the prices diverge or converge. This allows users to automate strategies without the need to continuously monitor the market. We are developing products that facilitate the buying and selling of AI compute time from providers to users of AI compute time. The Company is currently operating the platform on a limited basis to monitor and address any bugs or performance issues. We plan to add additional features and products to the platform through the end of 2026 as we execute our growth strategy.
Prior to December 2025, when we acquired our platform, we operated under the name Sonim Technologies, Inc. and were primarily focused on designing and manufacturing cell phones and mobile hotspots. We also developed the software that ran on our products. We completed the disposition of substantially all assets of our phone and hotspot business on January 23, 2026.
Our Products
Trading and Swapping Cryptocurrencies
The Company’s https://dnax.us website allows users to trade or swap certain cryptocurrencies for other cryptocurrencies or for cash equivalent currencies. New customers can set up an account on our website that will allow them to trade cryptocurrencies. The customer owns the assets before and after the trade and commissions are automatically deducted from the trade. We do not take custody of any of our customers’ crypto assets. We employ various security measures in an effort to protect our customers and ourselves from cyber threats. The trades on our platform are generally completed immediately and there is no delay in settling the transactions.
Our platform allows anyone to set up an automated trading strategy and to buy one currency when the price ratio with another currency is reached in one direction, and to sell the currency when the ratio is reached in the other direction. This allows users to automatically trade and capture profits as cryptocurrencies trade within certain ranges. These strategies can be viewed by all users and can be duplicated. Our platform maintains histories of the strategies that can be analyzed to develop new strategies. We generate commission revenue from our users trading activity on our platform.
We are developing new enhancements to our trading platform that when implemented, are expected to increase trading volume.
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Recent Developments
Completion of the Asset Purchase Agreement with Pace Car Acquisition LLC. On January 23, 2026, we completed the sale of substantially all assets and most liabilities related to our legacy phone and mobile hotspot business for a purchase price of $15,000 in cash, less working capital adjustments, indebtedness and transaction expense adjustments for a net sales price of $13,500.
Acquisition of assets of DNA X LLC. On May 26, 2026, the Put Option referred to in our consolidated condensed financial statements, which allowed DNA Holdings to reacquire DNA X LLC, was terminated. This gave the Company full control over DNA X LLC and requires the Company to consolidate DNA X LLC with the Company’s financial statements commencing on May 26, 2026. We expect to continue to execute our strategy of adding enhancements to DNA X and re-launching DNA X in the fourth quarter of 2026.
Results of Operations
The results of operations for the six months ended June 30, 2026 are not necessarily indicative of the operating results to be expected for the full year or in any future period. On January 23, 2026, we completed the sale of our phone and hotspots assets, and many of our employees transferred to the buyer. The accompanying consolidated financial statements and certain tables below present operations from this legacy business as discontinued operations for all periods presented, and the assets and liabilities of this legacy business are presented as assets and liabilities held for sale for the period ended December 31, 2025.
Since the closing of the asset sale, we have focused on growing and developing our cryptocurrency trading platform, We closed the DNA X cryptocurrency trading platform to the public in March 2026 to allow us to develop and test enhancements. We have used third-party consultants for the software development and have licensed additional software to add additional services. In January 2026 and February 2026 the DNA X platform averaged $47 per month in commission revenue. Cost of revenue is primarily licensing fees on the software and is currently fixed at 50% of commission revenue. Once we re-launch the platform, we expect commissions to return to levels achieved in early 2026.
On May 26, 2026, we issued a convertible note to DNA Holdings and received cash proceeds of $1,800. On July 8, 2026 we sold convertible preferred stock in the Company to DNA Holdings for $2,500 in cash proceeds and the cancellation of the entire balance of $3,053 due under the convertible note. On August 7, 2026 we sold convertible preferred stock in the Company to DNA Holdings for $2,500 in cash proceeds. See Note 13 to our consolidated condensed financial statements included in Part I, Item 1 of this Quarterly Report. The cash proceeds from the two transactions will be used for general corporate purposes, to continue to enhance the DNA X platform, and to promote the platform once it is relaunched.
| 26 |
The following tables present key components of our results of operations for continuing operations (dollars in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2026 | 2025 | Increase (Decrease) | % | 2026 | 2025 | Increase (Decrease) | % | |||||||||||||||||||||||||
| Net revenues | $ | — | $ | — | $ | — | % | $ | — | $ | — | $ | — | % | ||||||||||||||||||
| Cost of revenues | — | — | — | % | — | — | — | % | ||||||||||||||||||||||||
| Gross profit | — | — | — | % | — | — | — | % | ||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||
| General and administrative | 1,278 | 1,471 | (193 | ) | -13 | % | 4,896 | 2,341 | 2,555 | 109 | % | |||||||||||||||||||||
| Interest expense, net | (140 | ) | (389 | ) | 249 | (64 | )% | (271 | ) | (480 | ) | 209 | 44 | % | ||||||||||||||||||
| Gain (Loss) on remeasurement of derivative liability | (11 | ) | — | (11 | ) | -100 | % | (238 | ) | — | (238 | ) | -100 | % | ||||||||||||||||||
| Gain on extinguishment of debt | 191 | — | 191 | 100 | % | 191 | — | 191 | 100 | % | ||||||||||||||||||||||
| Equity income from DNA X LLC | — | — | — | 48 | — | 48 | 100 | % | ||||||||||||||||||||||||
| Net loss from continuing operations before income taxes | (1,238 | ) | (1,860 | ) | 622 | 33 | % | (5,166 | ) | (2,821 | ) | (2,345 | ) | -83 | % | |||||||||||||||||
| Income tax expense | — | — | — | % | — | — | — | % | ||||||||||||||||||||||||
| Net loss from continuing operations | (1,238 | ) | (1,860 | ) | 622 | 33 | % | (5,166 | ) | (2,821 | ) | (2,345 | ) | -83 | % | |||||||||||||||||
| Income (loss) from discontinued operations | (9 | ) | (5,615 | ) | 5,606 | 99 | % | 10,259 | (4,196 | ) | 14,455 | 344 | % | |||||||||||||||||||
| Net income (loss) | $ | (1,247 | ) | $ | (7,475 | ) | $ | 6,228 | 83 | % | $ | 5,093 | $ | (7,017 | ) | $ | 12,353 | 27 | % | |||||||||||||
Total Net Revenues
There was no revenue from continuing operations during the three and six months ended June 30, 2025 and 2026 because we acquired DNA X LLC in the fourth quarter of 2025 and because revenue from the DNA X platform was not consolidated into the Company prior to the Company gaining accounting control of DNA X LLC on May 26, 2026. Revenue from DNA X LLC from December 15, 2025, when we acquired the business, until May 26, 2026, when the Company gained control of the business, was $120. Net income of $48 from DNA X LLC for the six months ending June 30, 2026 was recorded by the Company as income from investment in DNA X LLC. After May 26, 2026 we began consolidating the financials from DNA X LLC into the Company. There was no revenue from DNA X LLC from May 26, 2026 through June 30, 2026. We will consolidate future activity from DNA X LLC into the Company’s financial statements.
Cost of Revenues
Cost of revenues was $0 during the three and six months ended June 30, 2025 and 2026 because we acquired DNA X LLC in the fourth quarter of 2025 and because revenue from the DNA X platform was not consolidated prior to the Company gaining accounting control of DNA X LLC on May 26, 2026. Cost of revenues for the DNA X trading platform was approximately 50% of the revenue for the period that the DNA X website was operating before it was taken offline in March 2026. We expect the cost of revenues as a percentage of revenue to decrease as revenue increases in the future.
Research and Development
There were no R&D expenses for the DNA X business during the three and six months ended June 30, 2026 because software development costs were capitalized as intangible software assets From May 26, 2026 to June 30, 2026, $94 of software development costs were capitalized. These costs were primarily for direct labor by contractors to produce enhancements to the DNA X trading platform. Once the DNA X platform is relaunched, we will amortize the intangible software assets costs over the estimated useful life of the software.
General and Administrative
General and administrative expenses for the three months ended June 30, 2026, decreased by $0.2 million compared to 2025 primarily because of lower legal expense in 2026.
General and administrative expenses for the six months ended June 30, 2026, increased by $2.6 million, or 174%, as compared to 2025, primarily due to $1.9 million in severance that was paid to employees that were terminated as a result of the completion of the asset sale, and $0.8 million in executive compensation that was included in continuing operations in 2026, but similar compensation was included in discontinued operations in 2025.
| 27 |
Interest expense
Interest expense decreased by $0.2 million for both the three months and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025 because the outstanding balance of the Streerterville note in 2025 was $3.3 million and the outstanding balance of the DNA Holding note in 2026 was $1.2 million until May 26, 2026. The Streeterville note was repaid in full on January 23, 2026 and the larger $3.1 million note with DNA Holdings was only active from May 26, 2026 through June 30, 2026.
Gain (Loss) on remeasurement of derivative liability
A derivative liability was recorded with the issuance of the note to DNA Holdings on December 15, 2025. The derivative liability represents the value of the conversion feature of the note. This derivative liability was remeasured at March 31, 2026, and at May 26, 2026 which was when the note was cancelled. A new derivative liability was recorded with the issuance of a new DNA Holdings Note on May 26, 2026, and was remeasured on June 30, 2026. Upon remeasurement, the derivative liability was adjusted to fair value, and the offset was recorded as a gain or loss on remeasurement. On May 26, 2026, the derivative liability from the December 15, 2025 DNA Holdings Note was derecognized when the note was cancelled. The derivative liability from the May 26, 2026 DNA Holdings Note was derecognized on July 8, 2026 when the note was cancelled and exchanged for shares of preferred stock. See Note 13 to our consolidated condensed financial statements included in Part I, Item 1 of this Quarterly Report.
Gain on extinguishment of debt
On May 26, 2026, the note dated December 15, 2025 that was held by DNA Holdings was cancelled in connection with DNA Holdings’ purchase of a new note with a principal amount of $3,053. The outstanding balances for the cancelled note for principal, loan discount, accrued interest, and derivative liability for the conversion feature were all derecognized and the resulting gain of $191 was recorded as a gain on extinguishment of debt.
Liquidity and Capital Resources
During the six months ended June 30, 2026, the Company received $3.4 million in net cash from the sale of our legacy assets, and we received $1.8 million in proceeds from a new note that we issued to DNA Holdings on May 26, 2026. On July 8, 2026, we received $2.5 million in cash from the issuance of preferred stock to DNA Holdings. On August 7, 2026 we received an additional $2.5 million in cash from the issuance of preferred stock to DNA Holdings. See Note 13 to our consolidated condensed financial statements included in Part I, Item 1 of this Quarterly Report. The May 2026 convertible note that we issued to DNA Holdings was cancelled and exchanged for shares of preferred stock on July 8, 2026, leaving the Company with no indebtedness for borrowed money. Management believes that the $5 million received will be sufficient to pay our existing obligations for at least twelve months following the filing date of this Quarterly Report.
Cash Flows
The following table summarizes our sources and uses of cash for the periods presented (in thousands):
Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities | $ | (5,467 | ) | $ | (14,488 | ) | ||
| Net cash provided by investing activities | 3,264 | — | ||||||
| Net cash provided by financing activities | 1,800 | 11,151 | ||||||
| Net decrease in cash and cash equivalents | $ | (403 | ) | $ | (3,337 | ) | ||
| 28 |
Cash flows from operating activities
For the six months ended June 30, 2026, cash used in operating activities was $5.5 million, primarily attributable to the non-cash portion of the gain on the sale of the assets of $15.3 million, partially offset by $5.1 million in net income and by cash used from a change in net operating assets and liabilities of $4.8 million, that includes a decrease in inventory of $5.5 million.
For the six months ended June 30, 2025, cash used in operating activities was $14.5 million, primarily attributable to net cash used in a change in net operating assets and liabilities of $6.2 million and a net loss of $7.0 million, excluding net non-cash operating activity of $1.3 million. The change in net operating assets and liabilities was primarily due to net payments made on accounts payable and accrued liabilities and an increase in contract fulfillment assets, which are capitalized costs for product certifications, partially offset by a decrease in accounts receivable. Non-cash charges primarily consist of $5.5 million related to the expiration of customer allowance agreements, $1.9 million in depreciation and amortization, $1.2 million for stock-based compensation, and $1.1 million for the impairment of contract fulfillment assets related to the end of life of our legacy products.
Cash flows from investing activities
For the six months ended June 30, 2026, the Company received $3.3 million in cash from the sale of assets.
For the six months ended June 30, 2025, there were no investing activities.
Cash flows from financing activities
For the six months ended June 30, 2026, the Company received $1.8 million in cash from issuing a new convertible note to DNA Holdings.
For the six months ended June 30, 2025, the Company received $9.0 million in cash, net of issuance costs, from sales of common stock, as well as $2.8 million in net proceeds from the issuance of the Note and repaid $0.6 million borrowed under the Receivables Financing Agreement.
Material Cash Requirements
There have been no material changes to our material cash requirements from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.
| 29 |
A description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our consolidated financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2025, that have had a material impact on our condensed consolidated financial statements and related notes.
Segment Information
We have one business activity and operate in one reportable segment.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act, prior to filing this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective for accounting for complicated transactions related to investments and acquisitions.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.
Material Weakness in Internal Control Over Financial Reporting
The Company identified a material weakness in its internal control over financial reporting related to a lack of personnel with sufficient technical accounting expertise to appropriately analyze and account for complex, non-routine transactions. Specifically, the Company did not maintain adequate resources with the requisite knowledge of U.S. GAAP to properly evaluate the accounting implications of significant transactions, including accounting for business acquisitions.
As a result of this deficiency, the Company failed to appropriately apply relevant accounting guidance, which led to errors in the initial recording of certain transactions and required adjustments during the financial statement close process. Additionally, the review controls designed to detect such errors were not effective due to the same lack of technical expertise.
Management concluded that this control deficiency constitutes a material weakness because there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis.
The Company has not resolved this material weakness as of June 30, 2026.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
For information regarding our material legal proceedings, see “Note 10 — Commitments and Contingencies” in the accompanying “Notes to Condensed Consolidated Financial Statements” in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Item 1A. Risk Factors.
There are no material changes to the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None of our directors or officers
| 31 |
Item 6. Exhibits.
| 32 |
| * | The certifications furnished in Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
| † | Indicates a management contract or compensatory plan or arrangement |
| # | Schedules have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish a copy of all omitted schedules to the SEC upon its request. |
| + | Certain portions of this exhibit (indicated by [***]) have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K because the registrant has determined that such redacted information is not material and is the type that the registrant treats as private or confidential. |
| 33 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| DNA X, INC. | ||
| Date: August 19, 2026 | By: | /s/ Michael Mulica |
| Michael Mulica | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 19, 2026 | By: | /s/ Clay Crolius |
| Clay Crolius | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
| 34 |