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Item 1A. Risk Factors

2025-03-28 compared with 2024-04-08 · 425 added, 44 removed, 326 unchanged (59% of the section changed)

Index to Risk Factors

Risks Relating to Our Business Generally

Risks Relating to our Fintech Segment

Risks Relating to Our Biotechnology Segment

G en eral Risk Factors

You should carefully consider the risks described below with respect to an investment in our shares.

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Risks Relating to Our Business Generally

If we fail to implement our biopharmaceutical business strategy or if our biopharmaceutical business strategy is ineffective, our financial performance could be materially and adversely affected.

Our future financial performance and success are dependent in large part upon the effectiveness of our new biopharmaceutical business strategy and our ability to implement our biopharmaceutical business strategy successfully.

Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources.

There are risks involved in pursuing our strategy, including those under the caption “Risks Relating to Our Biotechnology Segment”.

In addition to the risks set forth elsewhere in this Form 10-K, effectiveness of and the successful implementation of our business strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends.

We may decide to alter or discontinue certain aspects of our business strategy at any time.

If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected.

Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve and could decline substantially.

We have identified and disclosed in this Form 10-K material weaknesses in our internal control over financial reporting.

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We need to devote significant resources and time to comply with the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) with respect to internal control over financial reporting.

In addition, Section 404 under Sarbanes-Oxley

requires that we assess the design and operating effectiveness of our controls over financial reporting, which are necessary for us to provide reliable and accurate financial reports.

In addition, Section 404 under Sarbanes-Oxley requires that we assess the design and operating effectiveness of our controls over financial reporting, which are necessary for us to provide reliable and accurate financial reports.

As reported in Part II – Item 9A, Controls and Procedures, there were material weaknesses in our internal controls over financial reporting at January 1, 2022.

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To effectively manage our Company today and this anticipated complexity, we need to remediate these material weaknesses and continue to improve our operational, financial, and management controls and our reporting systems and procedures.

Any failure to remediate these material weaknesses and implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results or cause us to fail to meet our financial reporting obligations, which could adversely affect our business and jeopardize our listing on the Nasdaq Capital Market, either of which would harm our stock price.

or cause us to fail to meet our financial reporting obligations, which could adversely affect our business and jeopardize our listing on the Nasdaq Capital Market, either of which would harm our stock price.

If our estimates or judgment relating to our critical accounting estimates prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Application of Critical Accounting Policies” in Part II, Item 7 of this Annual Report on Form 10-K.

The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of expenses that are not readily apparent from other sources.

Significant estimates and judgments that comprise our critical accounting estimates involve the valuation of assets acquired and liabilities assumed in business combinations, valuation of strategic investments, evaluation of tax positions, and evaluation of legal and other contingencies.

Our business, operating results, and financial condition could be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to differ from the expectations of analysts and investors, resulting in a decline in the trading price of our Common Stock.

If we fail to maintain an effective system of disclosure controls and procedures and internal control over our financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company we incur significant legal, accounting, and other expenses.

The Sarbanes-Oxley Act of 2002 and related rules of the SEC require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

If we encounter material weaknesses or deficiencies in our internal control over financial reporting, we may not detect errors on a timely basis and our Consolidated Financial Statements may be materially misstated.

Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that are required to be included in our periodic reports filed with the SEC.

Ineffective disclosure controls and procedures or internal control over financial reporting may adversely affect investor confidence in us and, as a result, negatively impact the price of our Common Stock and have a material and adverse effect on our business, operating results, and financial condition.

Adverse economic conditions could adversely affect our business.

Our performance is subject to general economic conditions, and their impact on the crypto asset markets and our customers.

The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity declined resulting in lower consumption rates, restricted credit, reduced profitability, weaknesses in financial markets, bankruptcies, and overall uncertainty with respect to the economy.

Adverse general economic conditions have impacted in the past, and may impact in the future, the crypto-economy, although the extent of such impacts remains uncertain and dependent on a variety of factors, including market adoption of crypto assets, global trends in the crypto-economy, central bank monetary policies, instability in the global banking system, volatility and disruptions in the capital and credit markets, and other events beyond our control.

Geopolitical developments, such as trade and tariff wars and foreign exchange limitations, can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and crypto asset markets.

For example, in the past the capital and credit markets have experienced extreme volatility and disruptions, resulting in steep declines in the value of crypto assets.

To the extent general economic conditions and crypto assets markets materially deteriorate or decline for a prolonged period, our ability to generate revenue and to attract and retain customers could suffer and our business, operating results and financial condition could be adversely affected.

Moreover, even if general economic conditions were to improve following any such deterioration, there is no guarantee that the crypto-economy would similarly improve.

Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, or the financial services industry generally, or concerns or rumors about any such events or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

We may require additional capital to support business growth, and this capital might not be available.

We have funded our operations since inception primarily through equity financings, debt, and cash flows generated from operations.

We cannot be certain that our operations will continue to fund our ongoing operations or the growth of our business.

We intend to continue to make investments in our business, which investments may require us to secure additional funds.

Additional financing may not be available on terms favorable to us, if at all, including due to general macroeconomic conditions, crypto market conditions and any disruptions in the crypto market, instability in the global banking system, increasing regulatory uncertainty and scrutiny or other unforeseen factors.

In the event of a downgrade of our credit rating, our ability to raise additional financing may be adversely affected and any future debt offerings or credit arrangements we propose to enter into may be on less favorable terms or terms that may not be acceptable to us.

In addition, even if debt financing is available, the cost of additional financing may be significantly higher than our current debt.

If we incur additional debt, the debt holders would have rights senior to holders of our Common Stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our Common Stock.

Furthermore, we have authorized the issuance of “blank check” preferred stock and Common Stock that our board of directors could use to, among other things, issue shares of our capital stock in the form of blockchain tokens, implement a stockholder rights plan, or issue other shares of preferred stock or Common Stock.

We may issue shares of capital stock, including in the form of blockchain tokens, to our customers in connection with customer reward or loyalty programs.

If we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued Common Stock.

The trading prices for our Common Stock may be highly volatile, which may reduce our ability to access capital on favorable terms or at all.

In addition, a slowdown or other sustained adverse downturn in the general economic or crypto asset markets could adversely affect our business and the value of our Common Stock.

Because our decision to raise capital in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of securities.

As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Common Stock and diluting their interests.

We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as terrorism, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters or other catastrophic events may also cause damage or disruption to our operations, international commerce, and the global economy, and could have an adverse effect on our business, operating results, and financial condition.

Our business operations are subject to interruption by natural disasters, fire, power shortages, and other events beyond our control.

In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer.

For example, the COVID-19 pandemic and the related precautionary measures that we adopted have in the past resulted, and could in the future result, in difficulties or changes to our customer support, or create operational or other challenges, any of which could adversely affect our business, operating results, and financial condition.

Further, acts of terrorism, labor activism or unrest, and other geopolitical unrest, including ongoing regional conflicts around the world, could cause disruptions in our business or the businesses of our partners or the economy as a whole.

In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our platform, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results.

We do not maintain insurance sufficient to compensate us for the potentially significant losses that could result from disruptions to our services.

Additionally, all the aforementioned risks may be further increased if we do not implement a disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate.

To the extent natural disasters or other catastrophic events concurrently impact data centers we rely on in connection with private key restoration, customers will experience significant delays in withdrawing funds, or in the extreme we may suffer loss of customer funds.

Risks Relating to our Fintech Segment

Our operating results have and will significantly fluctuate, including due to the highly volatile nature of crypto.

Due to the highly volatile nature of the crypto economy and the prices of crypto assets, our operating results have, and will continue to, fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader crypto-economy.

Our operating results will continue to fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including:

• crypto asset trading activity, including trading volume and the prevailing trading prices for crypto assets, which can be highly volatile;

• our ability to attract, maintain, grow, and engage our customer base;

• changes in the legislative or regulatory environment, or actions by Common Stock or foreign governments or regulators, including fines, orders, or consent decrees;

• regulatory changes or scrutiny that impact our ability to offer certain products or services;

• pricing for or temporary suspensions of our products and services;

• our ability to establish and maintain partnerships, collaborations, joint ventures, or strategic alliances with third parties;

• market conditions of, and overall sentiment towards, the crypto-economy;

• macroeconomic conditions, including interest rates, inflation, and instability in the global banking system;

• adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceedings, and enforcement-related costs;

• the development and introduction of existing and new products and services by us or our competitors;

• the amount and timing of our operating expenses related to the maintenance and expansion of our business and operations, including investments we make in the development of products and services;

• system failures, outages, or interruptions, including with respect to our platform and third-party crypto networks;

• our lack of control over decentralized or third-party blockchains and networks that may experience downtime, cyberattacks, critical failures, errors, bugs, corrupted files, data losses, or other similar software failures, outages, breaches, and losses;

• breaches of security or privacy;

• inaccessibility of our platform due to our or third-party actions;

• our ability to attract and retain talent;

• our ability to compete with our competitors.

As a result of these factors, it is difficult for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate, particularly in the short term.

Therefore, our operating results could fluctuate significantly as a result of changes in the demand for our subscription and service offerings, in interest rates, and to our ongoing relationships with third parties.

In view of the rapidly evolving nature of our business and the crypto-economy, period-to-period comparisons of our operating results may not be meaningful, and you should not rely upon them as an indication of future performance.

Quarterly and annual expenses reflected in our financial statements may be significantly different from historical or projected rates.

Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors.

As a result, the trading price of our Common Stock may increase or decrease significantly.

Our total fintech revenue is substantially dependent on the volume of transactions conducted on our platform.

If volume declines, our business, operating results, and financial condition would be adversely affected and the price of our Common Stock could decline.

We generate a large portion of our total fintech (and corporate) revenue from transaction fees on our platform.

Transaction revenue is based on transaction fees.

Such revenue has grown over time.

Declines in the volume of crypto asset transactions, among other reasons, may result in lower total revenue to us.

The price of crypto assets and associated demand for buying, selling, and trading crypto assets and conversions back and forth with fiat have historically been subject to significant volatility.

If the volume of such transactions declines in the future, our ability to generate revenue, which could adversely affect our business, operating results, and financial condition and cause the price of our Common Stock to decline.

The transaction volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of factors, including:

• market conditions of, and overall sentiment towards, crypto assets and the crypto-economy, including, but not limited to, as a result of actions taken by or developments of other companies in the crypto-economy;

• trading activities on other crypto platforms worldwide, many of which may be unregulated, and may include manipulative activities;

• investment and trading activities of highly active consumer and institutional users, speculators, miners, and investors;

• the speed and rate at which crypto is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial assets worldwide, if at all;

• decreased user and investor confidence in crypto assets and crypto platforms;

• negative publicity and events relating to the crypto-economy;

• unpredictable social media coverage or “trending” of, or other rumors and market speculation regarding, crypto assets;

• the ability for crypto assets to meet user and investor demands;

• the functionality and utility of crypto assets and their associated ecosystems and networks, including crypto assets designed for use in various applications;

• consumer preferences and perceived value of crypto assets and crypto asset markets;

• increased competition from other payment services or other crypto assets that may exhibit better speed, security, scalability, or other characteristics;

• adverse legal proceedings or regulatory enforcement actions, judgments, or settlements impacting crypto-economy participants;

• regulatory or legislative changes, scrutiny, and updates affecting the crypto-economy;

• the characterization of crypto assets under the laws of various jurisdictions around the world;

• the adoption of unfavorable taxation policies on crypto asset investments by governmental entities;

• ongoing technological viability and security of crypto assets and their associated smart contracts, applications, and networks, including vulnerabilities against hacks and scalability;

• speed and fees associated with processing crypto asset transactions, including on the underlying blockchain networks and on crypto platforms;

• financial strength of market participants;

• the availability and cost of funding and capital;

• the liquidity and credit risk of other crypto platforms and other participants of the crypto-economy;

• interruptions or temporary suspensions or other compulsory restrictions in products or services from or failures of major crypto platforms;

• availability of an active derivatives market for various crypto assets;

• availability of banking and payment services to support crypto-related projects;

• instability in the global banking system and the level of interest rates and inflation;

• monetary policies of governments, trade restrictions, and fiat currency devaluations;

• national and international economic and political conditions.

There is no assurance that any supported crypto asset will maintain its value or that there will be meaningful levels of trading activities.

In the event that the price of crypto assets or the demand for trading crypto assets decline, our business, operating results, and financial condition would be adversely affected and the price of our Common Stock could decline.

Cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely affect our brand, reputation, business, operating results, and financial condition.

Our business involves the collection, storage, processing, and transmission of confidential information, customer, employee, service provider, and other personal data, as well as information required to access customer assets.

We have built our reputation on the premise that our platform offers customers a secure way to purchase, store, and transact in crypto assets.

As a result, any actual or perceived security breach of us or our third-party partners may:

• harm our reputation and brand;

• result in our systems or services being unavailable and interrupt our operations;

• result in improper disclosure of data and violations of applicable privacy and data protection laws;

• result in significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, and financial exposure;

• cause us to incur significant remediation costs;

• lead to theft or irretrievable loss of our or our customers’ fiat currencies or crypto assets;

• reduce customer confidence in, or decrease customer use of, our products and services;

• divert the attention of management from the operation of our business;

• result in significant compensation or contractual penalties payable by us to our customers or third parties as a result of losses to them or claims by them;

• adversely affect our business, operating results, and financial condition.

Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or crypto companies, whether or not we are directly impacted, could lead to a general loss of customer confidence in the crypto-economy or in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures and technology infrastructure.

An increasing number of organizations, including large merchants, businesses, technology companies, and financial institutions, as well as government institutions, have disclosed breaches of their information security systems, some of which have involved sophisticated and highly targeted attacks, including on their websites, mobile applications, and infrastructure.

Attacks upon systems across a variety of industries, including the crypto industry, are increasing in their frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded, and organized groups and individuals, including state actors.

The techniques used to obtain unauthorized, improper, or illegal access to systems and information (including customers’ personal data and crypto assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they

have been launched against a target.

These attacks may occur on our systems or those of our third-party service providers or partners.

Certain types of cyberattacks could harm us even if our systems are left undisturbed.

For example, attacks may be designed to deceive employees and service providers into releasing control of our systems to a hacker, while others may aim to introduce computer viruses or malware into our systems with a view to stealing confidential or proprietary data.

Additionally, certain threats are designed to remain dormant or undetectable until launched against a target, and we may not be able to implement adequate preventative measures.

Although we have developed systems and processes designed to protect the data we manage, prevent data loss, and other security breaches, effectively to respond to known and potential risks, and expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security or prevent breaches or attacks.

We may experience in the future, breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities, or other irregularities.

Unauthorized parties may attempt to gain access to our systems and facilities, as well as those of our customers, partners, and third-party service providers, through various means, including hacking, social engineering, phishing, and attempting to fraudulently induce individuals (including employees, service providers, and our customers) into disclosing usernames, passwords, payment card information, or other sensitive information, which may in turn be used to access our information technology systems and customers’ crypto assets.

Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders.

Certain threat actors may be supported by significant financial and technological resources, making them even more sophisticated and difficult to detect.

If we acquire a third-party entity, as to which we do not have any current plans, r companies that expose us to unexpected security risks or increase costs to improve the security posture of the acquired company.

Further, there has been an increase in such threat actor activities as a result of the increased prevalence of hybrid and remote working arrangements in recent years.

As a result, our costs and the resources we devote to protecting against these advanced threats and their consequences may continue to increase over time.

Outages and disruptions of our platform, including any caused by cyberattacks, may harm our reputation, business, operating results, and financial condition.

We are subject to an extensive, highly-evolving, and uncertain regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.

Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, federal government contractors, trust companies, securities, derivative transactions and markets, broker-dealers and alternative trading systems (“ATS”), commodities, credit, crypto asset custody, exchange, and transfer, cross-border and domestic money and crypto asset transmission, commercial lending, usury, foreign currency exchange, privacy, data governance, data protection, cybersecurity, fraud detection, payment services (including payment processing and settlement services), consumer protection, escheatment, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.

Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, crypto assets, generative artificial intelligence (“AI”) and related technologies and may not directly apply to our fintech business.

As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the crypto-economy, are subject to significant uncertainty, and vary widely across US.

federal, state, and local and international jurisdictions.

These legal and regulatory regimes, including the laws, rules, and regulations thereunder, evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another.

Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto-economy requires us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions.

To the extent we have not complied with (or are deemed not to have complied with) such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on or temporary or permanent suspensions of our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.

Governmental and regulatory bodies, including in the United States, may introduce new policies, laws, and regulations relating to crypto assets and the crypto-economy generally, and crypto asset platforms in particular.

Other companies’ failures of risk management and other control functions could contribute to stricter oversight of crypto asset platforms and

the crypto-economy.

Furthermore, new interpretations of existing laws and regulations may be issued by such bodies or the judiciary, which may adversely impact the development of the crypto-economy as a whole and our legal and regulatory status in particular by changing how we operate our business, how our products and services are regulated, and what products or services we and our competitors can offer, requiring changes to our compliance and risk mitigation measures, imposing new licensing requirements, or imposing a total ban on certain crypto asset transactions, as has occurred in certain jurisdictions in the past.

If we are unable to comply with any new requirements, our ability to offer our products and services in their current form may be adversely affected.

Additionally, under recommendations from the Financial Crimes Enforcement Network (“FinCEN”), and the Financial Action Task Force, the United States and several foreign jurisdictions have or are likely to impose the Funds Travel Rule and the Funds Transfer Rule (commonly referred to collectively as the Travel Rule) on financial service providers in the crypto-economy.

We may face substantial costs to operationalize and comply with the Travel Rule and may be further subject to administrative sanctions for technical violations or customer attrition if the user experience suffers as a result.

There are substantial uncertainties regarding the scope of these requirements in practice, and we may face substantial costs to operationalize and comply with these rules.

Moreover, we offer and may in the future offer products and services whose functionality or value depends in part on our management of token transaction smart contracts, liquid staking, asset tracking, or other applications that provide novel forms of customer engagement and interaction delivered via blockchain protocols.

We may also offer products and services whose functionality or value depends on our ability to develop, integrate, or otherwise interact with such applications within the bounds of our legal and compliance obligations.

The legal and regulatory landscape for such products, including the law governing the rights and obligations between and among smart contract developers and users and the extent to which such relationships entail regulated activity is uncertain and rapidly evolving.

Our interaction with those applications, and the interaction of other blockchain users with any smart contracts or assets we may generate or control, could present legal, operational, reputational, and regulatory risks for our business.

Due to our business activities, we are subject to ongoing examinations, oversight, and reviews and currently are, and expect in the future, to be subject to investigations and inquiries, by U.S.

federal and state regulators and foreign financial service regulators, many of which have broad discretion to audit and examine our business.

We are periodically subject to audits and examinations by these regulatory authorities.

As a result of findings from these audits and examinations, regulators may in the future require us to take certain actions, including amending, updating, or revising our compliance measures from time to time, limiting the kinds of customers that we provide services to, changing, terminating, or delaying our licenses and the introduction of new products or services, and undertaking further external audit or being subject to further regulatory scrutiny, including investigations and inquiries.

We may in the future receive examination reports citing violations of rules and regulations, inadequacies in existing compliance programs, and requiring us to initiate or enhance certain practices with respect to our compliance program, including due diligence, monitoring, training, reporting, and recordkeeping.

Implementing appropriate measures to properly remediate these examination findings may require us to incur significant costs, and if we fail to remediate properly any of these examination findings, we could face civil litigation, significant fines, damage awards, forced removal of certain employees including members of our executive team, barring of certain employees from participating in our business in whole or in part, revocation of existing licenses, limitations on existing and new products and services, reputational harm, negative impact to our existing relationships with regulators, exposure to criminal liability, or other regulatory consequences.

Further, we believe increasingly strict legal and regulatory requirements and additional regulatory investigations and enforcement, any of which could occur or intensify, may continue to result in changes to our business, as well as increased costs, and supervision and examination for ourselves, our agents, and service providers.

Moreover, new laws, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying us from offering certain products or services offered by our competitors or could impact how we offer such products and services.

Adverse changes to, or our failure to comply with, any laws and regulations have had, and may continue to have, an adverse effect on our reputation and brand and our business, operating results, and financial condition.

Any significant disruption in our products and services, in our information technology systems, or in any of the blockchain networks we support, could result in a loss of customers or funds and adversely affect our brand, reputation, business, operating results, and financial condition.

Our reputation and ability to attract and retain customers and grow our business depends on our ability to operate our service at high levels of reliability, scalability, and performance, including the ability to process and monitor, on a daily basis, a large number of transactions that occur at high volume and frequencies across multiple systems.

Our platform, the

ability of our customers to trade, and our ability to operate at a high level, are dependent on our ability to access the blockchain networks underlying the supported crypto assets, for which access is dependent on our systems’ ability to access the internet.

Further, the successful and continued operations of such blockchain networks will depend on a network of computers, miners, or validators, and their continued operations, all of which may be impacted by service interruptions.

The systems of our third-party service providers and certain crypto asset and blockchain networks have experienced from time to time, and may experience in the future service interruptions or degradation because of hardware and software defects or malfunctions, distributed denial-of-service and other cyberattacks, insider threats, break-ins, sabotage, human error, vandalism, earthquakes, hurricanes, floods, fires, and other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses or other malware, or other events.

In addition, extraordinary trading volumes or site usage could cause our computer systems to operate at an unacceptably slow speed or even fail.

If any of our systems, or those of our third-party service providers, are disrupted for any reason, our products and services may fail, resulting in unanticipated disruptions, slower response times and delays in our customers’ trade execution and processing, failed settlement of trades, incomplete or inaccurate accounting, recording or processing of trades, unauthorized trades, loss of customer information, increased demand on limited customer support resources, customer claims, complaints with regulatory organizations, lawsuits, or enforcement actions.

Further, when these disruptions occur, we have in the past, and may in the future, fulfill customer transactions using inventory to prevent adverse user impact and limit detrimental impact to our operating results.

A prolonged interruption in the availability or reduction in the availability, speed, or functionality of our products and services could harm our business.

Significant or persistent interruptions in our services could cause current or potential customers or partners to believe that our systems are unreliable, leading them to switch to our competitors or to avoid or reduce the use of our products and services, and could permanently harm our reputation and brands.

Moreover, to the extent that any system failure or similar event results in damages to our customers or their business partners, these customers or partners could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.

Problems with the reliability or security of our systems would harm our reputation and the cost of remedying these problems could negatively affect our business, operating results, and financial condition.

Because we are a regulated financial institution in certain jurisdictions, interruptions have resulted and in the future may result in regulatory scrutiny, and significant or persistent interruptions could lead to significant fines and penalties, and mandatory and costly changes to our business practices, and ultimately could cause us to lose existing licenses or banking relationships that we need to operate or prevent or delay us from obtaining additional licenses that may be required for our business.

In addition, we are continually improving and upgrading our information systems and technologies.

Implementation of new systems and technologies is complex, expensive, time-consuming, and may not be successful.

If we fail to timely and successfully implement new information systems and technologies, or improvements or upgrades to existing information systems and technologies, or if such systems and technologies do not operate as intended, it could adversely affect our internal controls (including internal controls over financial reporting), and our business, operating results, and financial condition.

If we fail to retain existing customers or add new customers, or if our customers decrease their level of engagement with our products, services and platform, our business, operating results, and financial condition may be significantly harmed.

Our success depends on our ability to retain existing customers and attract new customers, including developers, to increase engagement with our products, services, and platform.

To do so, we must continue to offer leading technologies and ensure that our products and services are secure, reliable, and engaging.

We must also expand our products and services, and offer competitive prices in an increasingly crowded and price-sensitive market.

There is no assurance that we will be able to continue to do so, that we will be able to retain our current customers or attract new customers, or keep our customers engaged.

Any number of factors can negatively affect customer retention, growth, and engagement, including if:

• customers increasingly engage with competing products and services, including products and services that we are unable to offer due to regulatory reasons;

• we fail to introduce new and improved products and services, or if we introduce new products or services that are not favorably received;

• we fail to support new and in-demand crypto assets or if we elect to support crypto assets with negative reputations;

• there are changes in sentiment about the quality or usefulness of our products and services or concerns related to privacy, security, fiat pegging, or other factors;

• there are adverse changes in our products and services that are mandated by legislation, regulatory authorities, or litigation;

• customers perceive the crypto assets on our platform to be bad investments, or experience significant losses in investments made on our platform;

• technical or other problems prevent us from delivering our products and services with the speed, functionality, security, and reliability that our customers expect;

• cybersecurity incidents, employee or service provider misconduct, or other unforeseen activities cause losses to us or our customers, including losses to assets held by us on behalf of our customers;

• modifications to our pricing model or modifications by competitors to their pricing models;

• we fail to provide adequate customer service;

• regulatory and governmental bodies in countries that we target for expansion express negative views towards crypto asset trading platforms and, more broadly, the crypto-economy;

• we or other companies or high-profile figures in our industry are the subject of adverse media reports or other negative publicity.

From time to time, certain of these factors may negatively affect customer retention, growth, and engagement to varying degrees.

If we are unable to maintain or increase our customer base and customer engagement, our revenue and financial results may be adversely affected.

Any decrease in user retention, growth, or engagement could render our products and services less attractive to customers and lead to a decrease in revenue, and our business, operating results, and financial condition could be adversely affected.

If our customer growth rate slows or declines, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to drive growth of revenue.

Our operating expenses may increase in the future and we may not be successful in increasing our revenue to sufficiently offset these higher expenses, which could impact our ability to achieve profitability or positive cash flow from operations on a consistent basis and cause our business, operating results, and financial condition to be adversely affected.

Our operating expenses may increase in the future as we continue to grow our business.

While we consistently evaluate opportunities to drive efficiency, we cannot guarantee that these efforts will be successful or that we will not need to accelerate operating expenditures in the future.

Our operations may prove more expensive than we currently anticipate, and we may not succeed in increasing our net revenue sufficiently to offset these higher expenses.

Additionally, our revenue growth may be negatively impacted by, among other things, reduced demand for our offerings, increased competition, adverse macroeconomic conditions, any decrease in the growth or size of the crypto-economy, regulatory uncertainty or scrutiny, changes that impact our ability to offer certain products or services, or failure of new products and services to gain market adoption.

As a result, we cannot be certain that we will be able to achieve profitability or achieve positive operating cash flow on any quarterly or annual basis.

If we are unable to effectively manage these risks and difficulties as we encounter them, our business, operating results, and financial condition may suffer.

If we do not effectively manage our growth, including by maintaining and improving our systems and processes, our business, operating results, and financial condition could be adversely affected.

We have experienced, and may experience in the future, periods of significant growth.

To manage and capitalize on our growth periods effectively, we will need to manage headcount, capital, and processes efficiently, while making investments, such as expanding our information technology and financial, operating, and administrative systems and controls, and such initiatives could strain our resources.

We could experience operating difficulties in managing our business as it expands across numerous jurisdictions, including difficulties in hiring, training, managing, and retaining a

remote and evolving employee base.

If we do not adapt or scale to meet these evolving challenges, we may experience erosion to our brand, the quality of our products and services may suffer, and our Company’s culture may be harmed.

Moreover, the failure of our systems and processes could undermine our ability to provide accurate, timely, and reliable reports on our financial and operating results, including the financial statements provided herein, and could impact the effectiveness of our internal controls over financial reporting.

In addition, our systems and processes may not prevent or detect all errors, omissions, or fraud.

Any of the foregoing operational failures could lead to noncompliance with laws and regulations, loss of operating licenses or other authorizations, or loss of bank relationships that could substantially impair or even suspend company operations.

Successful implementation of our growth strategy will also require significant expenditures possibly prior to the generation of any substantial associated revenue and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth.

Because we have a limited history operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth.

Our limited operating experience at this scale, combined with the rapidly evolving and volatile nature of the cryptoasset market in which we operate, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue accurately.

Due to our limited fintech operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period .

We acquired our crypto processing segment in Spring of 2024 with the acquisition of our operating subsidiary and since then our business model has continued to evolve.

Our net revenue has significantly grown since that acquisition;

but, there is no assurance that growth will continue in future periods and you should not rely on growth of our revenue in any given prior quarterly or annual period as an indication of our future performance.

If our net revenue were to decline significantly for any extended period of time, our business, operating results, and financial condition could be adversely affected.

Our limited operating history and the volatile nature of our business make it difficult to evaluate our current business and our future prospects.

We have encountered and will continue to encounter risks and difficulties as described in this section.

If we do not manage these risks successfully, our business, operating results, and financial condition could be adversely affected.

Any acquisitions and investments that we make could require significant management attention, disrupt our business, result in dilution to our stockholders, and could adversely affect our business, operating results, and financial condition.

As part of our business strategy, we routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, entries into new businesses, joint ventures, and other transactions.

We have made, and may make, acquisitions of and investments in, among other things, specialized employees and complementary companies, products, services, licenses, or technologies.

In the future, the pace and scale of our acquisitions may increase and may include larger acquisitions than we have done historically.

In the future, we may not be able to find other suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all.

In some cases, the costs of such acquisitions may be substantial, and there is no assurance that we will receive a favorable return on investment for our acquisitions.

Our acquisitions may not achieve our goals, and any future acquisitions we complete could be viewed negatively by customers, developers, or investors.

In addition, if we fail to successfully close or integrate any acquisitions, or integrate the products or technologies associated with such acquisitions into our Company, our business, operating results, and financial condition could be adversely affected.

Our ability to acquire and integrate companies, products, services, licenses, employees, or technologies in a successful manner is unproven.

Any integration process may require significant time and resources, and we may not be able to manage the process successfully, including successfully securing regulatory approvals which may be required to close the transaction and to continue to operate the target firm’s business or products in a manner that is useful to us.

We may not successfully evaluate or utilize the acquired products, services, technology, or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges.

We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, which could adversely affect our business, operating results, and financial condition.

The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders, which, depending on the size of the acquisition, may be significant.

The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

If we fail to develop, maintain, and enhance our brand and reputation, our business, operating results, and financial condition could be adversely affected.

Our brand and reputation are key assets and a competitive advantage.

Maintaining, protecting, and enhancing our brand depends largely on the success of our marketing efforts, ability to provide consistent, high-quality, and secure products, services, features, and support, and our ability to successfully secure, maintain, and defend our rights to use the ALT5 and ALT5 Sigma branding.

We believe that the importance of our brand will increase as competition further intensifies.

Our brand and reputation could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity, unexpected events, or actions by third parties.

Unfavorable publicity regarding, for example, our product changes, product quality, litigation or regulatory activity, privacy and data security practices, terms of service, employment matters, the use of our products or services for illicit or objectionable ends, the actions of our customers, or the actions of other companies that provide similar services to ours, has in the past, and could in the future, adversely affect our reputation.

Moreover, to the extent that we acquire a company and maintain that acquired company’s separate brand, we could experience brand dilution or fail to retain positive impressions of our own brand to the extent such impressions are instead attributed to the acquired company’s brand.

Such negative publicity also could have an adverse effect on the size and engagement of our customers and could result in decreased revenue, which could adversely affect our business, operating results, and financial condition.

Internal key business metrics and other estimates are subject to inherent challenges in measurement and change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.

We regularly review our internal key business metrics to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions.

These internal key business metrics are calculated using internal company data and have not been validated by an independent third party.

While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement at the time of reporting, there are inherent challenges in such measurements.

If we fail to maintain an effective analytics platform, our internal key business metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.

Additionally, we may in the future calculate certain internal key business metrics using third-party data.

While we believe the third-party data we may use in the future will be reliable, we may not in the future independently verify the accuracy or completeness of the data contained in such sources and there can be no assurance that such data is free of error.

Any inaccuracy in the third-party data we use could cause us to overstate or understate our internal key business metrics.

We regularly review our processes for calculating these metrics, and from time to time we have made adjustments that we believe may improve their accuracy.

Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams.

If our platform is used to further such illegal activities, our business, operating results, and financial condition could be adversely affected.

Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams.

We or our partners may be specifically targeted by individuals seeking to conduct fraudulent transfers, and it may be difficult or impossible for us to detect and avoid such transactions in certain circumstances.

The use of our platform for illegal or improper purposes could subject us to claims, individual and class action lawsuits, and government and regulatory investigations, prosecutions, enforcement actions, inquiries, or requests that could result in liability and reputational harm for us.

Moreover, certain activities that may be legal in one jurisdiction may be illegal in another jurisdiction, and certain activities that are at one time legal may in the future be deemed illegal in the same jurisdiction.

As a result, there is significant uncertainty and cost associated with detecting and monitoring transactions for compliance with local laws.

In the event that a customer is found responsible for intentionally or inadvertently violating the laws in any jurisdiction, we may be subject to governmental inquiries, enforcement actions, prosecuted, or otherwise held secondarily liable for aiding or facilitating such activities.

Changes in law have also increased the penalties for money transmitters for certain illegal activities, and government authorities may consider increased or additional penalties from time to time.

Owners of intellectual property rights or government authorities may seek to bring legal action against money transmitters, including us, for involvement in the sale of infringing or allegedly infringing items.

Any threatened or resulting claims could result in reputational harm, and any resulting liabilities, loss of transaction volume, or increased costs could harm our business.

Moreover, while fiat currencies can be used to facilitate illegal activities, crypto assets are relatively new and, in many jurisdictions, may be lightly regulated or largely unregulated.

Many types of crypto assets have characteristics, such as the speed with which digital currency transactions can be conducted, the ability to conduct transactions without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, the irreversible nature of certain crypto asset transactions, and encryption technology that anonymizes these transactions, that make crypto assets susceptible to use in illegal activity.

federal and state and foreign regulatory authorities and law enforcement agencies, such as the Department of Justice, Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Trade Commission, or the Internal Revenue Service, and various state securities and financial regulators have taken and continue to take legal action against persons and entities alleged to be engaged in fraudulent schemes or other illicit activity involving crypto assets.

We also support crypto assets that incorporate privacy-enhancing features, and may from time to time support additional crypto assets with similar functionalities.

These privacy-enhancing crypto assets obscure the identities of sender and receiver, and may prevent law enforcement officials from tracing the source of funds on the blockchain.

Facilitating transactions in these crypto assets may cause us to be at increased risk of liability arising out of anti-money laundering and economic sanctions laws and regulations.

Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results, and financial condition.

Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the establishment, maintenance, and scaling of our compliance, internal audit, and reporting systems continuously to keep pace with our customer activity and transaction volume, as well as our ability to attract and retain qualified compliance and other risk management personnel.

While we have devoted comparatively significant resources to develop policies and procedures to identify, monitor, and manage our risks, and expect to continue to do so in the future, we cannot assure you that our policies and procedures are and will always be effective or that we have been and will always be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments or against all types of risks, including unidentified or unanticipated risks.

Our risk management policies and procedures rely on a combination of technical and human controls and supervision that are subject to error and failure.

Some of our methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices.

These methods may not adequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations in the market.

Accordingly, in the future, we may identify gaps in such policies and procedures or existing gaps may become higher risk, and may require significant resources and management attention.

Our risk management policies and procedures also may not adequately prevent losses due to technical errors if our testing and quality control practices are not effective in preventing failures.

In addition, we may elect to adjust our risk management policies and procedures to allow for an increase in risk tolerance, which could expose us to the risk of greater losses.

The crypto-economy is novel.

As a result, policymakers are just beginning to consider what a regulatory regime for crypto would look like and the elements that would serve as the foundation for such a regime.

This less developed consideration of crypto may harm our ability to effectively react to proposed legislation and regulation of crypto assets or crypto asset platforms adverse to our business.

As crypto assets have grown in both popularity and market size, various U.S.

federal, state, and local and foreign governmental organizations, consumer agencies, and public advocacy groups have been examining the operations of crypto networks, users, and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and simultaneously how to ensure the safety and soundness of platforms and other service providers that hold crypto assets for users.

Many of these entities have called for heightened regulatory oversight, and have issued consumer advisories describing the risks posed by crypto assets to users and investors.

Competitors, including traditional financial services, have spent years cultivating professional relationships with relevant policymakers on behalf of their industry so that those policymakers may understand that industry, the current legal landscape affecting that industry, and the specific policy proposals that could be implemented in order to responsibly develop that industry.

The lobbyists working for these competitors have similarly spent years developing and working to implement strategies to advance these industries.

Members of the crypto-economy have started to engage policymakers directly and with the help of external advisors and lobbyists.

However, these efforts to educate policymakers and advocate for sensible regulation are nascent compared to more established industries, and may be perceived unfavorably by investors and the public and have an adverse impact on our brand and reputation.

As a result, new laws and regulations may be

proposed and adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that harm the crypto-economy or crypto asset platforms, which could adversely affect our business, operating results, and financial condition.

We obtain and process a large amount of sensitive customer data.

Any real or perceived improper use of, disclosure of, or access to such data could harm our reputation, as well as adversely affect our business, operating results, and financial condition.

We obtain and process large amounts of sensitive data, including personal data related to our customers and their transactions, such as their names, addresses, social security numbers, visa information, copies of government-issued identification, facial recognition data (from scanning of photographs for identity verification), trading data, tax identification, and bank account information.

We face risks, including to our reputation, in the handling and protection of this data, and these risks will increase as our business continues to expand, including through our acquisition of, and investment in, other companies and technologies.

Federal, state, and international laws and regulations governing privacy, data protection, and e-commerce transactions require us to safeguard our customers’, employees’, and service providers’ personal data.

We have administrative, technical, and physical security measures and controls in place and maintain a robust information security program.

However, our security measures, those of our vendors or service providers, or the security measures of companies we acquire, may be inadequate or breached as a result of third-party action, employee or service provider error, malfeasance, malware, phishing, hacking attacks, system error, trickery, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security or otherwise, and, as a result, someone may be able to obtain unauthorized access to sensitive information, including personal data, on our systems.

We could be the target of a cybersecurity incident, which could result in harm to our reputation and financial losses.

Additionally, privacy and data protection laws are evolving, and these laws may be interpreted and applied in a manner that is inconsistent with our data handling safeguards and practices that could result in fines, lawsuits, and other penalties, and significant changes to our or our third-party partners’ business practices and products and service offerings.

Our future success depends on the reliability and security of our platform.

To the extent that the measures we, any companies we acquire, or our third-party service providers, vendors, or business partners have taken prove to be insufficient or inadequate, or to the extent we discover a security breach suffered by a company we acquire following the closing of such acquisition, we may become subject to litigation, breach notification obligations, or regulatory or administrative sanctions, which could result in significant fines, penalties, damages, harm to our reputation, or loss of customers.

If our own confidential business information or sensitive customer information were improperly disclosed, our business, operating results, and financial condition could be adversely affected.

Additionally, a party who circumvents our security measures could, among other effects, appropriate customer information or other proprietary data, cause interruptions in our operations, or expose customers to hacks, viruses, and other disruptions.

Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to our customer data, we may also have obligations to notify customers and regulators about the incident, and we may need to provide some form of remedy, such as a subscription to credit monitoring services, pay significant fines to one or more regulators, or pay compensation in connection with a class-action settlement.

Breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another.

In the United States, the SEC has adopted rules for mandatory disclosure of material cybersecurity incidents suffered by public companies, as well as cybersecurity governance and risk management.

Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises customer data.

Any failure or perceived failure by us to comply with these laws may also subject us to enforcement action or litigation, any of which could harm our business.

Additionally, the financial exposure from the events referenced above could either not be insured against or not be fully covered through any insurance that we may maintain, and there can be no assurance that the limitations of liability in any of our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages as a result of the events referenced above.

Any of the foregoing could adversely affect our business, reputation, operating results, and financial condition.

Furthermore, we may be required to disclose personal data pursuant to demands from individuals, regulators, government agencies, and law enforcement agencies in various jurisdictions with conflicting privacy and security laws, which could result in a breach of privacy and data protection policies, notices, laws, rules, court orders, and regulations.

Additionally, changes in the laws and regulations that govern our collection, use, and disclosure of customer data could impose additional requirements with respect to the retention and security of customer data, could limit our marketing activities, and adversely affect our business, operating results, and financial condition.

We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection where we conduct our business, and industry requirements and such laws, regulations, and industry requirements are constantly evolving and changing.

Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business.

Various local, state, federal, and international laws, directives, and regulations apply to our collection, use, retention, protection, disclosure, transfer, and processing of personal data.

These data protection and privacy laws and regulations are subject to uncertainty and continue to evolve in ways that could adversely affect our business, operating results, and financial condition.

These laws have a substantial impact on our operations both outside and in the United States, either directly or as a data processor and handler for various offshore entities.

In the United States, state and federal lawmakers and regulatory authorities have increased their attention on the collection and use of user data and various laws and regulations apply to the collection, processing, disclosure, and security of certain types of data, including the Gramm Leach Bliley Act (“GLBA”) and state laws relating to privacy and data security.

GLBA requires financial institutions to explain their information sharing practices to their customers and to safeguard sensitive data.

Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination, and security of data.

For example, California has enacted the California Consumer Privacy Act (the “CCPA”).

The CCPA requires covered companies to, among other things, provide disclosures to individuals in California, and affords such individuals new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used, and shared.

The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase security breach litigation.

In addition, other U.S.

states have proposed or enacted laws that contain obligations similar to the CCPA that have taken effect or will take effect in coming years.

We cannot fully predict the impact of recently proposed or enacted laws or regulations on our business or operations, but compliance may require us to modify our data processing practices and policies incurring costs and expense.

Further, to the extent multiple state-level laws are introduced with inconsistent or conflicting standards, it may require costly and difficult efforts to achieve compliance with such laws.

Our failure or perceived failure to comply with state privacy laws or regulations passed in the future could adversely affect our business, including how we use personal information, operating results, and financial condition.

There is a risk that as we expand, we may assume liabilities for breaches experienced by the companies that we may acquire.

Additionally, there are potentially inconsistent world-wide government regulations pertaining to data protection and privacy.

Despite our efforts to comply with applicable laws, regulations, and other obligations relating to privacy, data protection, and information security, it is possible that our practices, offerings, or platform could fail, or be alleged to fail to meet applicable requirements.

For instance, the overall regulatory framework governing the application of privacy laws to blockchain technology is still highly undeveloped and likely to evolve.

Further there are also changes in the regulatory landscape relating to new and evolving technologies.

Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, severe criminal, or civil sanctions, damage our reputation, or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, and financial condition.

Our intellectual property rights are valuable, and any inability to protect them could adversely affect our business, operating results, and financial condition.

Our business depends in large part on our proprietary technology and, to a smaller extent, on our brand.

We rely on, and expect to continue to rely on, a combination of trade dress, domain name, and trade secrets, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.

However, our efforts to protect our intellectual property rights may not be sufficient or effective.

Our proprietary technology and trade secrets could be lost through misappropriation or breach of our confidentiality and license agreements, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable.

There can be no

assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar to ours and that compete with our business.

Effective protection of our intellectual property may be expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights.

Further, intellectual property protection may not be available to us in every country in which our products and services are available, and the regulatory landscape in such jurisdictions may evolve rapidly, leading to an unanticipated change in the ability to obtain and enforce intellectual property rights in these jurisdictions.

The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could adversely affect our business, operating results, and financial condition.

We operate in a relatively new industry that is not widely understood and requires highly skilled and technical personnel.

We believe that our future success is highly dependent on the talents and contributions of our operating subsidiary’s management team and other key employees across product, engineering, risk management, finance, and marketing.

Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled employees.

The pool of qualified talent in our industry is extremely limited, particularly with respect to executive talent, engineering, risk management, and financial regulatory expertise.

We face intense competition for qualified individuals from numerous software and other technology companies.

To attract and retain key personnel, we incur significant costs, including salaries and benefits and equity incentives.

Even so, these measures may not be enough to attract and retain the personnel we require to operate our business effectively.

The loss of even a few key employees or senior leaders, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business could adversely affect our business, operating results, and financial condition and impair our ability to grow.

Our culture emphasizes innovation, and if we cannot maintain this culture, our business, operating results, and financial condition could be adversely affected.

We believe that our entrepreneurial and innovative corporate culture has been a key contributor to our success since our acquisition of our operating subsidiary.

We encourage and empower our employees to develop new and innovative products and services, which we believe is essential to attracting high quality talent, partners, and developers, as well as serving the best, long-term interests of our company.

If we cannot maintain this culture, we could lose the innovation, creativity, and teamwork that has been integral to our operating crypto business.

Risks Relating to Our Biotechnology Segment

If we fail to implement our biopharmaceutical business strategy or if our biopharmaceutical business strategy is ineffective, our financial performance could be materially and adversely affected.

Implementation of our strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources.

There are risks involved in pursuing our strategy, including those under the caption “Risks Relating to Our Biotechnology Segment”.

We may decide to alter or discontinue certain aspects of our business strategy at any time.

If we are not able to implement our business strategy successfully, our long-term growth and profitability may be adversely affected.

Even if we are able to implement some or all of the initiatives of our business strategy successfully, our operating results may not improve and could decline substantially.

Our biotechnology business has a limited operating history.

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Our limited operating history makes it difficult for potential investors to evaluate our technology or the prospective operations of our biotechnology business.

You should consider the prospects of our biotechnology business in light of the costs, uncertainties, delays, and difficulties frequently encountered by companies in the early stages of development, especially clinical-stage biopharmaceutical businesses such as ours.

Potential investors should carefully consider the risks and uncertainties that a biotechnology business with a limited operating history faces.

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As of the date of this Form 10-K, we believe we are in compliance with the patent license agreement and consider our relationship with the Licensors to be excellent.

FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of JAN101 or JAN123, or fail to do so at acceptable quality levels or prices.

We will be completely dependent on third parties to manufacture JAN101 and JAN123, and their commercialization could be halted, delayed, or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of JAN101 or JAN123, or fail to do so at acceptable quality levels or prices.

We do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture our drug candidate for use in our clinical trials or for commercial sales, if any.

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If our contract manufacturers do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, we will not be able to secure or maintain regulatory approval for products made at their manufacturing facilities.

If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our initial or subsequent product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, manufacture, obtain regulatory approval for, or market our initial or subsequent product candidates, if approved.

If the FDA or a comparable foreign regulatory

authority does not approve these facilities for the manufacture of our initial or subsequent product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, manufacture, obtain regulatory approval for, or market our initial or subsequent product candidates, if approved.

Likewise, we could be negatively impacted if any of our contract manufacturers elect to discontinue their business relationship with us.

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CoreRx identified an API from Merck KGaA for use in the current production of clinical grade JAN101.

At the time of the manufacture of the API, the product met the specifications outlined in both the drug

substance monographs for Europe and the US.

At the time of the manufacture of the API, the product met the specifications outlined in both the drug substance monographs for Europe and the US.

However, subsequent to the manufacture of the API, the US monograph was changed in the US Pharmacopeia (“USP”) and, while most of the tests conform, Merck KGaA was unable to complete two of the new testing requirements.

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We will be validating the manufacturing process, with appropriate process parameters and critical process, at CoreRx in 2024.

Based on current batch sizes, these validated processes will support the manufacture of approximately 6.5 million tablets a month.

Based on current batch sizes, these validated processes will support the manufacture of approximately 6.5 million

tablets a month.

This would allow us to enter the marketplace, but would support sales of only 1-2% of the addressable market.

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However, compounding pharmacies have already sold a non-biphasic LDN for this purpose and for other purposes.

The patent JanOne was issued for JAN123, in

conjunction with Orphan Drug approval, will provide additional marketing protection for CRPS.

The patent ALT5 Sigma Corporation was issued for JAN123, in conjunction with Orphan Drug approval, will provide additional marketing protection for CRPS.

Compounding pharmacies are not subject to FDA approval and could compound LDN for their patients.

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Because of the clinical trial history of JAN101, we believe that JAN101 will qualify for FDA approval through the FDA’s 505(b)(2) regulatory pathway and in corresponding regulatory paths in other foreign jurisdictions.

Notwithstanding the use of the FDA’s 505(b)(2) regulatory pathway, we will be required to conduct Phase IIb and Phase III studies prior to filing for marketing approval of JAN101.

Notwithstanding the use

of the FDA’s 505(b)(2) regulatory pathway, we will be required to conduct Phase IIb and Phase III studies prior to filing for marketing approval of JAN101.

The active ingredient in JAN123 is naltrexone, which has been approved for use at much higher doses by the FDA for other indications, thus we believe that JAN123 will also qualify for the 505(b)(2) regulatory pathway.

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(vi) the dosing of JAN101 in a particular clinical trial may not be at an optimal level;

(vii) patients in our clinical trials may

suffer adverse effects for reasons that may or may not be related to JAN101;

(vii) patients in our clinical trials may suffer adverse effects for reasons that may or may not be related to JAN101;

(viii) the data collected from clinical trials may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

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Three INDs have previously been submitted by previous licensees/assignees of JAN101 and were accepted by the FDA.

These INDs were transferred to JanOne in 2020.

These INDs were transferred to ALT5 Sigma Corporation in 2020.

Even though the INDs were transferred to us, the FDA may still require additional work prior to re-initiation of clinical trials.

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(xi) limitations or warnings contained in approved labeling from regulatory authorities;

(xii) our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare

and Medicaid, private health insurers, and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics;

(xii) our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers, and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics;

and (xiii) the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals.

4 unchanged sentences

We believe that JAN123 will have advantages over the compounded LDN in terms of reduced side effects, but many patients currently have not had the side effects or accepted these as part of reducing their pain with compounded LDN.

JanOne may have to enforce its patents, which could result in lengthy and costly litigation, to prevent compounding pharmacies from selling LDN for indications for which JanOne has received patent protection.

ALT5 Sigma Corporation may have to enforce its patents, which could result in lengthy and costly litigation, to prevent compounding pharmacies from selling LDN for indications for which ALT5 Sigma Corporation has received patent protection.

If JAN101 or JAN123 is approved but does not achieve an adequate level of acceptance by physicians, health care payors, and patients, our biotechnology business may not generate sufficient revenue to cover costs.

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Even if we obtain regulatory approval for our product candidate for an indication, the FDA or foreign equivalent may still impose significant restrictions on its indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase IV clinical trials, and post-market surveillance to monitor safety and efficacy.

Our product candidate will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events, and other post-market information.

Our product candidate will also be subject to ongoing regulatory

requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events, and other post-market information.

These requirements include registration with the FDA, as well as continued compliance with current good clinical practices regulations for any clinical trials that we conduct post-approval.

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In the United States, the distribution of product samples to physicians must comply with the requirements of the United States Prescription Drug Marketing Act.

Application holders must obtain FDA approval for

product and manufacturing changes, depending on the nature of the change.

Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change.

We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the United States Anti-Kickback Statute, United States False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs.

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For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of that product candidate in those countries.

Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.

conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.

In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction.

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We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance, or interpretations will be changed, or what the impact of such changes on the marketing approvals of JAN101 or JAN123, if any, may be.

In addition, increased scrutiny by Congress of the FDA’s approval process may

significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Any termination or suspension of, or delays in the commencement or completion of, any necessary studies of any of our product candidate for any indications could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects .

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In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical studies may also ultimately lead to the denial of regulatory approval of one of more of our product candidates.

In addition, if one or more clinical studies are delayed, our competitors may be able to bring competing products to market before we do, and the commercial viability of our affected product candidates could be significantly reduced.

In addition, if one or more clinical studies are delayed, our competitors may be able to

bring competing products to market before we do, and the commercial viability of our affected product candidates could be significantly reduced.

Third-party coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.

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In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices.

We may not be able to sell JAN101 or JAN123 profitably if adequate prices are not approved or coverage and reimbursement is

unavailable or limited in scope.

We may not be able to sell JAN101 or JAN123 profitably if adequate prices are not approved or coverage and reimbursement is unavailable or limited in scope.

Increasingly, third-party payors attempt to contain health care costs in ways that are likely to impact the development of our product including:

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Typically, research collaborators and scientific advisors have rights to publish data and information in which we may have rights.

Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable.

Enforcing a claim that a third party illegally obtained and is using any of our trade secrets is expensive and time

consuming, and the outcome is unpredictable.

In addition, courts are sometimes less willing to protect trade secrets than patents.

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As a repurposed drugs, our APIs have previously been approved for other indications and therefore cannot be protected.

Although none of the approved indications for the API used in JAN101 represent a threat to JAN101, the API used in naltrexone has been formulated by compounding pharmacies to treat the indication JanOne is pursuing and thus represents a real threat in commercialization of JAN123.

Although none of the approved indications for the API used in JAN101 represent a threat to JAN101, the API used in naltrexone has been formulated by compounding pharmacies to treat the indication ALT5 Sigma Corporation is pursuing and thus represents a real threat in commercialization of JAN123.

We will rely on our method of use and oral formulation patents to protect JAN101 and JAN123, which may also put JAN101 and JAN123 at risk from companies developing oral formulations using the same API for other indications.

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The price at which our common stock trades depends upon a number of factors, including our historical and anticipated operating results, our financial situation, announcements of technological innovations or new products by us, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general market and economic conditions.

these factors are beyond our control.

Some of these factors are beyond our control.

Broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations, business or prospects.

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Such litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm our financial condition and results of operations.

Our executive offices were located in Las Vegas, Nevada in a leased facility consisting of 11,000 square feet of office space.

Effective August 2023, due to the winding down of operations of the Recycling Subsidiaries, we reduced the leased office space in the Las Vegas, Nevada facility to approximately 800 square feet.

LEGAL PROCEEDINGS

The information in response to this item is included in Note 19, Commitments and Contingencies, to the Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K.

MINE SAFETY DISCLOSURES

Sales or distribution of substantial amounts of our Common Stock, or the perception that such sales or distributions might occur, could cause the market price of our Common Stock to decline.

The sale or distribution of a substantial number of shares of our Common Stock, particularly sales by us or our directors, executive officers, and principal stockholders, or the perception that these sales or distributions might occur in large quantities, could cause the market price of our Common Stock to decline.

If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or unfavorable research, about our business, the price of our Common Stock and its liquidity could decline.

The trading market for our Common Stock may be influenced by the research and reports that securities or industry analysts publish about us or our business, our market, and our competitors.

We do not have any control over these analysts.

If securities and industry analysts cease coverage of us altogether, the market price for our Common Stock may be negatively affected.

If one or more of the analysts who cover us downgrade our Common Stock, or publish inaccurate or unfavorable research about our business, the price of our Common Stock may decline.

If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common Stock could decrease, which might cause our Common Stock price and trading volume to decline.

In light of the unpredictability inherent in our business, our financial outlook commentary may differ from analysts’ expectations, which could cause volatility to the price of our Common Stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors