Item 1A. Risk Factors
Item 1A. Risk Factors.
The
following description of risk factors includes any material changes to risk factors associated with our business, financial condition
and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report. Our business, financial condition
and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those
described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to
vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in
part, could materially and adversely affect our business, financial condition, operating results, and stock price.
The
following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other
statements in this Quarterly Report. The following information should be read in conjunction with the condensed consolidated financial
statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” of this Quarterly Report.
Our
indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.
In
May 2025, we entered into the MLA with Coinbase and Coinbase, Inc. pursuant to which Coinbase may lend us certain digital assets or cash.
As of the date of this Quarterly Report, we have received $500,000 under the MLA and the principal amount outstanding as of the date
of this Quarterly Report is $500,000. The borrowings under the Master Loan are collateralized by approximately $1.25 million of bitcoin
as of the date of this Quarterly Report.
Our
indebtedness could, among others:
●
increase our vulnerability to general adverse economic and
industry conditions;
●
require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital
expenditures, acquisitions, research and development efforts and other general corporate purposes;
●
limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
●
place us at a competitive disadvantage compared to our competitors
that have less debt;
●
result in greater interest rate risk and volatility;
●
limit our ability to borrow additional funds; and
●
make it more difficult for us to satisfy our obligations with
respect to our debt, including our obligation to repay the MLA under certain circumstances, or refinance our indebtedness on favorable
terms or at all.
In
addition, if the value of bitcoin declines precipitously, the value of our collateral under the MLA would also decline. In such case,
we could be required to provide Coinbase with additional collateral. If we are unable to do so, we could default under the MLA, which
could have a material adverse effect on our operations, liquidity, financial condition, and results of operations.
Our
ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business,
economic, regulatory, and other factors. We will be unable to control many of these factors, such as economic conditions. We cannot be
certain that we will continue to have sufficient capital to allow us to pay the principal and interest on our outstanding debt and meet
any other obligations. If we do not have enough money to service our debt, we may be required, but unable to refinance all or part of
our existing debt, sell assets, borrow money, or raise equity on terms acceptable to us, if at all, and Coinbase could sell any collateral
in a commercially reasonable manner and freeze certain of our accounts, among other measures.
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