Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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.

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.

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.

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	)

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.

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.