Item 1A. Risk Factors
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 27, 2026 (as amended the “ Annual Report ”). Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report filed with the SEC, except as described below.
Our digital asset treasury yield-generation activities expose us to significant risks including counterparty credit risk, operational risks, and potential loss of assets.
As part of our digital asset treasury strategy, we have deployed a portion of our bitcoin holdings to third-party counterparties through lending, placement, and other yield-generation arrangements designed to generate additional income on our treasury-held digital assets. These strategies are relatively new and the legal, regulatory, and market frameworks governing such activities remain subject to change.
Our yield-generation counterparties may not be rated by nationally recognized statistical rating organizations, and our ability to monitor their credit quality may accordingly be limited. Additionally, the volatility of bitcoin increases the likelihood that counterparties may default due to market downturns, liquidity crises, fraud, or other financial distress, and to the extent our arrangements are unsecured, we may be unable to recover deployed bitcoin in a counterparty insolvency. We are limited in our ability to sell, pledge, or otherwise use the deployed bitcoin while such arrangements are outstanding, and the counterparty can deploy those assets at its discretion. Where we have pledged bitcoin as collateral, certain arrangements permit counterparties to liquidate such bitcoin without prior notice if margin requirements are not met, and a rapid price decline could trigger forced liquidations at prices significantly below fair value.
Applicable insolvency and property law for digital assets remains unsettled; if a counterparty were to become insolvent, our bitcoin could potentially be treated as part of the counterparty’s bankruptcy estate, and we could be deemed an unsecured creditor with limited or no recovery, as illustrated in the cases of recent high-profile bankruptcies of companies including FTX, Celsius, Voyager, BlockFi and others. Our yield-generation activities also require us to rely on the security protocols of third-party counterparties and platforms, which may be subject to cyberattacks or operational failures resulting in the loss of our digital assets, and in certain arrangements private keys are controlled by the counterparty or its custodial partners. Certain counterparties may re-lend, re-pledge, or otherwise rehypothecate our deployed bitcoin to additional third parties, introducing layers of counterparty risk over which we have limited visibility or control.
Bitcoin deployed to third parties does not enjoy the protections available to cash or securities deposited with institutions subject to FDIC regulation; accordingly, no governmental insurance or guarantee program would make us whole in the event of a loss. The broader digital asset industry remains subject to significant contagion risks, and industry-wide failures can cascade across interconnected counterparties, depress liquidity, and create operational risks that impact our ability to recover deployed bitcoin. The concentration of our yield-generation activities with a limited number of counterparties amplifies this risk. Any of the foregoing risks, individually or in combination, could result in a partial or total loss of the bitcoin we have deployed to third parties, which could have a material adverse effect on our business, prospects, financial condition, and results of operations, and could cause a significant decline in the market price of our securities.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) None.
(b) Not applicable.
(c) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
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