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Item 1A. Risk Factors

2026-03-31 compared with 2025-03-21 · 1160 added, 264 removed, 1630 unchanged (47% of the section changed)

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the key challenges and material risks to our business and an investment in our Class A common stock.

Related to Our Digital Asset Trading Strategy and Cryptocurrencies

have recently adopted a digital asset treasury strategy with a focus on BERA, and we may be unable to successfully implement this new

have recently adopted our Treasury Policy primarily dedicated to BERA, including potential investments in BERA, including through staking,

validator activities and engaging in other DeFi strategies.

There is no assurance that we will be able to successfully implement our

Treasury Policy or operate BERA-related activities at the scale or profitability currently anticipated.

BERA operates with a proof-of-liquidity

consensus mechanism, which differs significantly from other consensus mechanisms, and will require specialized employee skillsets and

novel treasury management practices tailored to the Berachain network.

Further, there is ongoing scrutiny and limited formal guidance

from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company digital asset strategies.

inability to implement the Treasury Policy for whatever reason, could have a material adverse effect on our business and financial condition.

shift towards a BERA -focused strategy requires substantial changes in our day-to-day operations and exposes us to significant

operational risks.

shift towards a BERA-focused strategy exposes us to significant operational risks.

In connection with the implementation of our Treasury

Policy, we intend to operate a validator to help secure the Berachain network, and we expect to allocate a portion of our BERA holdings

to other onchain activities, including staking and certain DeFi strategies.

If we serve as a validator, we may suffer slashing or forfeiture

of rewards due to downtime, misconfiguration, or malicious software, materially reducing the number of BERA held in our treasury.

addition, the Berachain protocol is rapidly evolving, with frequent upgrades and protocol changes that may require significant adjustments

to our operational setup and allocation strategy.

The upgrades and protocol changes may require that we incur unanticipated costs and

could cause temporary service disruptions.

We may also need to employ third-party service providers in our operations, which may introduce

risks outside of our control, including significant cybersecurity risks.

In connection with our proposed activities, we intend to operate

a validator to secure the Berachain network.

If we choose to serve as a validator, we may suffer slashing or forfeiture of rewards due

to downtime, misconfiguration, or malicious software, materially reducing the number of BERA held in our treasury.

Any of these operational

risks could materially and adversely affect our ability to execute our Treasury Policy, prevent us from realizing positive returns and

severely hurt our financial condition.

disruption of the internet may affect the operation of blockchain networks, which may adversely affect the digital asset industry and

an investment in us.

protocols rely on the internet.

A significant disruption of internet connectivity could disrupt blockchain networks’ functionality

until such disruption is resolved.

A disruption in the internet could adversely affect an investment in us.

In particular, some variants

of blockchain protocols have experienced denial-of-service attacks, which have led to temporary delays in block creation and digital

asset transfers.

assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”).

Such an attack can be a very effective

way for an attacker to intercept traffic en route to a legitimate destination.

BGP hijacking impacts the way different nodes are connected

to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending

and other security issues.

internet failures or internet connectivity-related attacks that impact the ability to transfer or secure digital assets could have a

material adverse effect on the price of digital assets generally, and BERA’s value specifically, and the value of an investment

technologies are based on theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly.

These premises

may be incorrect or may become incorrect due to technological advances.

technologies are premised on theoretical conjectures as to the impossibility, in practice, of solving certain mathematical problems quickly.

Those conjectures remain unproven, however, and mathematical or technological advances could conceivably prove them to be incorrect.

Blockchain technology companies may also be negatively affected by cryptography or other technological or mathematical advances, such

as the development of quantum computers with significantly more power than computers presently available, that undermine or vitiate the

cryptographic consensus mechanism underpinning Berachain and other blockchain protocols.

If either of these events were to happen, markets

that rely on blockchain technologies could quickly collapse, and an investment in our Common Stock may be adversely affected.

shortcomings or defects in the BERA network, including changes to its validator structure, governance model, or core software, could

diminish the utility and value of BERA and harm our business.

BERA network is a public, open-source and decentralized blockchain protocol that is not under our or any single party’s control.

Its ongoing viability depends on the continued consensus and cooperation of independent developers, validators, tokenholders, and other

ecosystem participants.

The existing Berachain protocol may be subject to significant alterations, including by way of community governance

votes, and any such changes may have a material adverse effect on BERA and the viability of the Berachain protocol.

If Berachain experiences

a successful cyber-attack, a material software bug, a “hard fork” that fragments the network, or a prolonged outage, market

confidence in BERA could be severely undermined.

Similarly, decisions by influential validators to adopt protocol changes, modify transaction-fee

structures, or alter other existing practices or network governance could adversely affect BERA’s economics and, therefore, the

value of our holdings.

Further, because the governance of decentralized networks, such as Berachain, is by voluntary consensus, a single

party could gain majority control of the network, and enact changes or amendments to the network that are otherwise undesirable to other

participants.

Were this to happen, it could harm the value of BERA and therefore the value of the Common Stock.

validators exit the BERA network, it could increase the likelihood of a malicious actor obtaining control.

exiting the network could make BERA more vulnerable to a malicious actor obtaining control of a large percentage of staked BERA, which

might enable them to manipulate the BERA network by censoring or manipulating specific transactions, or undermining the economic incentives

underlying the Berachain ecosystem.

If the BERA network suffers such an attack, the price of BERA could be negatively affected, and a

loss of confidence in the BERA network could result.

Any reduction in confidence in the transaction confirmation process or staking power

of the BERA network may adversely affect an investment in the Common Stock.

may not be able to compete with other blockchain networks.

If Berachain is not able to compete successfully, the value of BERA would

be significantly affected.

faces intense competition from a large number of established layer-1 blockchains, including Ethereum, Solana, and Binance Smart Chain,

layer-2 scaling solutions, and emerging protocols, many of which currently maintain significantly larger active user bases, higher total

value locked (“TVL”), more extensive developer communities, broader third-party tooling and wallet support, deeper liquidity

across centralized and decentralized exchanges, and more robust cross-chain interoperability frameworks.

These competing networks may

offer lower transaction fees, faster finality, superior virtual machine performance, more advanced smart-contract languages, or more

effective incentive programs that attract users, liquidity providers, dApp developers, and other participants away from Berachain.

Berachain fails to generate sufficient user interest relative to these alternatives, the network could experience reduced protocol adoption

and diminished liquidity.

Such outcomes may lead to lower user and transaction volumes, reduced fee revenue, impaired ability to fund

ongoing development, and a downward spiral in token valuation, ultimately jeopardizing the long-term viability of the Berachain ecosystem.

economic design underlying PoL may be flawed, may fail to gain adoption, or may be exploited.

Any such events could undermine the growth

and development of the Berachain network.

network security, incentive alignment, and ecosystem growth depend entirely on the proper functioning of its novel PoL consensus mechanism,

including the recently introduced PoLv2 framework.

Under this design, validators stake BERA to secure the network and earn BGT emissions

through block production, then stake or delegate BGT to dApps to direct future reward allocation;

dApps distribute BGT to users for providing

liquidity or engaging in protocol activity;

and users may burn BGT for BERA.

As a new consensus mechanism, users may be reluctant or

unable to understand the technical underpinnings and benefits of PoL, and may favor a more traditional consensus mechanism, such as proof

of stake or proof of work.

If validators delegate BGT to low-performing or malicious dApps, dApps distribute rewards inefficiently or

in ways that favor short-term speculation over sustained usage, or liquidity suffers due to lack of actual or perceived alignment between

different ecosystem parties, the intended incentive loop may break.

Such failures could result in misaligned emissions, and if rewards

are capture by a limited set of participants, or if there is insufficient liquidity in core DeFi primitives or declining BERA staking

participation, the network effect intended by the PoL consensus mechanism may fail to be achieved.

From time to time, the Berachain community

may also make additional changes to the PoL mechanism, such as via the PoLv2 update, which introduces increased complexity through dynamic

emission schedules, delegation weighting mechanisms, and customizable reward modules, any of which may contain latent design flaws, unintended

economic consequences, or vulnerabilities not identified during testing or early deployment.

Future iterations of PoL may introduce additional

changes that disrupt existing incentives, and even a well-designed system remains susceptible to coordinated exploitation, front-running

of reward signals, or sybil attacks.

A breakdown in PoL functionality or adoption could lead to declining network activity, erosion of

economic security, loss of developer and user confidence, and a decline of the Berachain ecosystem, any of which could have significant

adverse consequences for BERA.

and other users may suffer losses due to staking or validator slashing, which could make Berachain less attractive.

native staking protocol is relatively new and requires users to place BERA in a smart contract that is not under anyone’s control.

Users who serve as validators also risk losing some or all of their BERA if they intentionally or unintentionally perform their duties

poorly, for example, by double-signing a transaction or experiencing downtime, in a process known as slashing.

Any cybersecurity attacks,

security issues, hacks, penalties, slashing events, or other problems could damage validators’ willingness to participate in validation

and stakers’ willingness to participate in staking, and this could further discourage existing and future validators and stakers

from serving as such, thereby adversely impacting Berachain’s adoption and the price of BERA.

Any disruption of validation on Berachain

could interfere with network operations and cause Berachain to be less attractive to users and application developers than competing

blockchain networks, which could cause the price of BERA to decrease.

Further, the limited liquidity during the unbonding period of the

staking process could cause Berachain to be less attractive to users and application developers than competing blockchain networks, which

could cause the price of BERA to decrease.

Any decrease in the price of BERA could have a material adverse effect on our business and

financial condition.

face risks relating to the potential compromise of Berachain’s and other blockchains’ network security by emerging technologies,

including artificial intelligence and quantum computing, which may materially and adversely impact our operations and financial condition.

security and integrity of Berachain and other blockchains’ network are fundamentally dependent on the robustness of its cryptographic

BERA and other cryptocurrencies’ protocol relies heavily on public key cryptography and hashing algorithms to secure

transactions, safeguard private keys, and prevent double-spending.

Advances in emerging technologies, particularly artificial intelligence

(“AI”) and quantum computing may pose significant risks to Berachain and other blockchains’ network’s security

and operational stability.

computing, in particular, presents a long-term threat to the cryptographic assumptions underpinning BERA and other digital assets.

quantum computing achieve sufficient maturity, it could undermine the effectiveness of the cryptographic algorithms used to secure the

A sufficiently powerful quantum computer could potentially reverse-engineer private keys from public addresses or compromise

the blockchain’s consensus mechanism, leading to the theft of digital assets, double-spending, and other forms of fraud.

current quantum computing capabilities are not yet at this level, advancements in quantum technologies could materialize more rapidly

than anticipated, creating significant systemic risks for the Berachain protocol and the BERA token.

may also pose indirect security risks.

AI-driven cyberattacks, including advanced phishing schemes, autonomous malware, and intelligent

blockchain analysis tools, could increase the sophistication and success rate of attacks targeting Berachain and other blockchains’

users, exchanges, custodians, and node operators.

The use of AI to exploit vulnerabilities in software, hardware, or network protocols

could threaten the stability and reliability of Berachain and other blockchains’ ecosystems.

can be no assurance that Berachain’s and other blockchains’ current cryptographic safeguards will be sufficient to protect

against future technological advances.

While research and development efforts are ongoing to develop quantum-resistant cryptographic

protocols, Berachain’s and other blockchains’ networks may face challenges in adopting such technologies at scale, particularly

given their decentralized governance structure.

Any successful attack or perceived vulnerability arising from AI or quantum computing

could materially and adversely affect the price, liquidity, and adoption of BERA and other digital assets and could negatively impact

our business, financial condition and results of operations.

is created and transmitted through the operations of the Berachain network, a decentralized network of computers running software following

the Berachain protocol.

If the Berachain network is disrupted or encounters any unanticipated difficulties, the value of BERA could be

negatively impacted.

the Berachain network is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the Berachain

network may be disrupted, which in turn may prevent us from depositing or withdrawing BERA from our accounts or otherwise effecting BERA

transactions.

Such disruptions could include, for example:

the price volatility of BERA;

the insolvency, business failure, interruption,

default, failure to perform, security breach, or other problems of network participants, custodians or others;

the closing of trading

platforms on which BERA is transacted due to fraud, failures, security breaches or otherwise;

or network outages or congestion, power

outages, or other problems or disruptions affecting the Berachain network.

face risks relating to the custody of our BERA or other digital assets, including the loss or destruction of private keys required to

access our BERA or other digital assets and cyberattacks or other data loss relating to our BERA or other digital assets.

expect to self-custody our BERA using, in part, the Fireblocks Vault service.

If we lose access to our private keys, we may not be able

to recover all or any portion of our BERA, or any value thereof.

BERA is controllable only by the possessor of both the unique public

key and private key(s) relating to the local or online digital wallet in which the BERA is held.

While the blockchain ledger requires

a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private

in order to prevent a third party from accessing the BERA held in such wallet.

To the extent the private key(s) for a digital wallet

are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, we will not be able to access the BERA

held in the related digital wallet and such BERA will be irretrievably lost.

While Fireblocks Vault service may be able to initiate a

recovery if certain keys remain available, there can be no guarantee that not all keys will be lost or that a catastrophic error won’t

occur that would prevent recovery.

Furthermore, we cannot provide assurance that our digital wallets will not be compromised as a result

of a cyberattack.

Blockchain ledgers and blockchain technologies have been, and may in the future be, subject to security breaches, cyberattacks

or other malicious activities.

including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the

Certain employees or vendors may also be vulnerable to physical or psychological coercion, commonly referred to as “wrench

attacks,” as well as scams and social engineering tactics intended to obtain access to passwords or private cryptographic keys,

in order to then effectuate the unauthorized transfer or theft of digital assets.

A successful security breach or cyberattack could result

partial or total loss of our BERA;

harm to our reputation and brand;

disclosure of data and violations of applicable data privacy and other laws;

regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.

any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies

that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of users and confidence

in the broader BERA ecosystem or in the use of the BERA network, which could negatively impact us.

upon systems across a variety of industries, including industries related to BERA, are increasing in frequency, persistence, and sophistication,

and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors.

techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital 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.

We may experience breaches of our security measures due to human error, malfeasance, insider threats,

system errors or vulnerabilities or other irregularities.

In particular, we expect that unauthorized parties will attempt to gain access

to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking,

social engineering, phishing and fraud.

Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored

intrusions, industrial espionage, and insiders.

In addition, certain types of attacks could harm us even if our systems are left undisturbed.

For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts

of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers.

Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and

reportedly stole over $400 million in digital assets from customers.

More recently, Bybit was hacked by the Lazarus Group, a North Korean

state-sponsored organization, resulting in the loss of $1.5 billion of customer assets.

Further, there has been an increase in such activities

due to the increase in work-from-home arrangements.

The risk of cyberattacks could also be increased by cyberwarfare in connection with

the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems

unrelated to such conflicts.

Any future breach of our operations or those of others in the Berachain ecosystem, including third-party

services on which we rely, could materially and adversely affect our financial condition and results of operations.

intend to deploy our BERA into DeFi applications, which are subject to a variety of risks and vulnerabilities.

part of our treasury management strategy, we also intend to engage in staking, validating, and other permitted activities that involve

the use of “smart contracts”, DeFi or dApps.

DeFi protocols, wallets, and bridges have been frequent targets of sophisticated

cyberattacks, including flash-loan attacks, cross-chain bridge exploits, and private key compromises.

Losses from such incidents are

often immediate, irreversible, and may not be covered by insurance or contractual recourse.

use of smart contracts or dApps entails certain risks including risks stemming from the existence of an “admin key” or coding

flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or dApp, potentially

leading to a loss of our BERA.

Vulnerabilities or flaws in a smart contract could allow attackers to drain assets, prevent us from accessing

our holdings, or manipulate protocol operations.

Once deployed, smart contracts are difficult to amend, and in many cases cannot be modified

at all without widespread validator or governance consensus.

all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to

loss of assets that are held on or transacted through the smart contract or dAPP.

Smart contracts and dApps may contain bugs, security

vulnerabilities or poorly designed permission structures that could result in the irreversible loss of BERA or other digital assets.

DeFi protocols are also governed by decentralized communities through on-chain voting mechanisms, which may be subject to capture by

a small number of participants.

Protocol governance decisions could adversely affect our ability to use or recover assets.

Additionally,

protocols may change rules, fees, or parameters without advance notice.

Moreover, the legal and regulatory treatment of DeFi remains

highly uncertain.

Regulators could impose restrictions or obligations on participants or on protocols themselves, which could adversely

affect our ability to use, access or withdraw such platforms or the value of assets held in them.

we lose key personnel, including our Chief Investment Officer and Strategic Advisors, or if we fail to recruit additional highly skilled

personnel, our ability to operate and manage our digital asset treasury strategy will be impaired.

ability to operate and manage our digital asset treasury strategy depends upon our ability to attract and retain highly qualified personnel,

including our Chief Investment Officer and members of our executive team, and other key personnel, including the Strategic Advisors.

The loss of the services of any of our executive officers, key employees, and the Strategic Advisors, and our inability to find suitable

replacements, could result in significant disruption in our operations and management of our digital assets.

our efforts to retain valuable members of our management, employees and consultants, such key personnel may terminate their employment

with us on short notice.

Although we have agreements with our key employees and consultants, these agreements provide for at-will employment,

which means that any of our employees or consultants could leave our employment at any time, with or without notice.

We do not maintain

“key man” insurance policies on any of our employees or consultants.

we are unable to raise additional capital on acceptable terms, our ability to implement and sustain our Treasury Policy may be compromised.

strategy contemplates the discretionary purchase of BERA and related yield-generating instruments.

The capital required to acquire, stake,

and actively manage BERA may exceed our existing cash resources and cash flows from operations.

Market conditions, our share price performance,

the volatility of digital assets, and regulatory uncertainties could impair our ability to access debt or equity capital on terms acceptable

to us, or at all.

Failure to obtain necessary financing could force us to curtail or abandon our digital asset strategy, which could

materially harm our growth prospects and the value of our securities.

BERA holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us

to the same extent as cash and cash equivalents.

Historically,

the digital asset markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared

to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and

manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual

form and decentralized network.

During times of market instability, we may not be able to sell our BERA at favorable prices or at all.

Further, BERA we stake or otherwise deposit into dApps and DeFi protocols does not enjoy the same protections as are available to cash

or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the

Securities Investor Protection Corporation.

Further, any BERA staked or otherwise deployed in DeFi protocols could be subject to partial

or total loss if any third-party developer or recipient of the staked or deployed BERA is subject to a cyberattack of any sort or is

otherwise unable to repay the assets we’ve deployed.

In addition, Berachain’s native staking protocol currently requires

a 7-day unbonding period for withdrawing staked BERA tokens.

During this period, staked BERA will not earn rewards and will not be liquid.

The unbonding period may be subject to change with or without notice to us.

Moreover, we may be unable to enter into term loans or other

capital raising transactions collateralized by our unencumbered BERA or otherwise generate funds using our BERA holdings, including in

particular during times of market instability or when the price of BERA has declined significantly.

Furthermore, a certain portion of

our BERA are under a contractual lockup from the Berachain Foundation (the “Foundation”), and we may continue to acquire

locked BERA at a discount to market prices of unlocked BERA in order to generate value for stockholders.

These locked BERA are significantly

less liquid than cash and our unlocked BERA holdings.

If we are unable to sell our locked or unlocked BERA, enter into additional capital

raising transactions using locked or unlocked BERA as collateral, or otherwise generate funds using our locked or unlocked BERA holdings,

or if we are forced to sell our locked or unlocked BERA at a significant loss, in order to meet our working capital requirements, our

business and financial condition could be negatively impacted.

may be subject to regulatory developments related to digital assets and digital asset markets, which could adversely affect our business,

financial condition, and results of operations.

BERA and other digital assets are relatively novel and the application of state and federal securities laws and other laws and

regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign

countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of BERA, The U.S.

federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue

regulatory, legislative, enforcement or judicial actions, that could materially impact the price of BERA or the ability of

individuals or institutions such as us to own or transfer BERA.

Increased regulatory scrutiny may result in additional costs for us and may require our management team to devote

increased time and attention to regulatory matters, change aspects of our business, or result in limits on the utility of digital assets.

Due to the risk of a changing regulatory environment, we may be required to comply with new laws, regulations, or interpretations, which

may result in heightened regulatory and compliance related costs, litigation, regulatory investigations, and enforcement or other actions.

Adverse changes to, or our failure to comply with applicable laws may have an adverse effect on our reputation, brand, our business, operating

results, and financial condition.

Future regulatory developments regarding the treatment of digital assets, staking rewards, or digital

asset treasury strategies for U.S.

federal, state, or international tax purposes could materially affect the liquidity or value of BERA,

or the way we account for, recognize, and report our BERA holdings and related income.

The liquidity of digital assets may also be impacted

to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues

to provide services for digital assets.

The effect of any future regulatory change on the Company is impossible to predict, but such change

could be substantial and adverse.

the implementation of our Treasury Policy has created, and could continue to create complications due to the lack of experience that

third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or

the potential inability to obtain such coverage on acceptable terms in the future.

federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations,

or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of BERA or the ability of individuals

or institutions such as us to own or transfer BERA.

Regulatory authorities have been evolving in their approach to digital assets.

is not possible to predict whether, or when, any of these developments will lead to U.S.

Congress granting additional authorities to the

SEC or other regulators, or whether any other federal, state, or foreign legislative bodies will take any similar actions.

not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact

the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services

to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets

generally and any BERA we hold specifically.

The consequences of increased regulation of digital assets and digital asset-related activities

could adversely affect the market price of any BERA we hold and in turn adversely affect the market price of our common stock.

is a possibility that BERA tokens may be classified as a “security” under U.S.

federal securities laws.

If BERA tokens are

classified as a “security,” that would subject us to additional regulation and could materially impact the operations of

our treasury strategy and our business.

the SEC nor any other U.S.

federal or state regulator has publicly stated whether they agree that BERA tokens are a “security,”

and BERA tokens have not yet been classified with respect to the U.S.

federal securities laws.

Although we believe that BERA tokens are

not a “security” within the meaning of the U.S.

federal securities laws, we acknowledge the uncertainty that a regulatory

body or federal court may determine otherwise in the future.

If BERA is deemed a security, we may face legal or regulatory action, even

if our beliefs were reasonable under the circumstances.

part of our ongoing review of applicable securities laws, we take into account a number of factors, including the various definitions

of “security” under such laws, including but not limited to federal court decisions interpreting the elements of these definitions,

such as the U.S.

Supreme Court’s decisions in the Howey and Reves cases.

We also consider court rulings, reports, orders, press

releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction

to which a digital asset may relate may be a security for purposes of U.S.

federal securities laws.

We acknowledge, however, that the

SEC, a federal court or another relevant entity could take a different view.

The application of securities laws to the specific facts

and circumstances of digital assets is complex and subject to change.

Our conclusion, even if reasonable under the circumstances, would

not preclude legal or regulatory action based on a finding that BERA tokens, or any other digital asset we might hold, are a “security.”

Therefore, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders,

fines, penalties or other damages if BERA tokens were determined to be a security by a regulatory body or a court.

if BERA tokens are viewed as a security, it may become more difficult to purchase and sell BERA tokens, as they could only be traded

through SEC-registered broker-dealers or exchanges.

This would make it more difficult for us to continue our BERA treasury strategy,

or to monetize BERA tokens that we hold in the event we need to do so for working capital purposes.

Such developments could adversely

affect the fair value of BERA, our business, results of operations, financial condition, treasury operations and prospects.

change reclassifying BERA as a security could lead to our falling within the definition of “investment company” under the

Investment Company Act of 1940, as amended (the “1940 Act”), and could adversely affect the market price of BERA and the

market price of our Common Stock.

Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes

of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing,

reinvesting or trading in securities or (2) it is engaged, or proposes to engage, in the business of investing, reinvesting, owning,

holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of

its total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

We do not believe that we are an

“investment company,” as such term is defined in the 1940 Act, and are not registered as an “investment company”

under the 1940 Act as of the date of this Annual Report on Form 10-K.

the SEC has not stated a view as to whether BERA is or is not a “security” for purposes of the federal securities laws, a

determination by the SEC or a court of competent jurisdiction that BERA is a security could lead to our meeting the definition of “investment

company” under the 1940 Act, if the portion of our assets that consists of investments in BERA exceeds the 40% limit prescribed

in the 1940 Act, which would subject us to significant additional regulatory requirements that could have a material adverse effect on

our business and operations and may also require us to change the manner in which we conduct our business.

monitor our assets and income in order to conduct our business activities in a manner such that we do not fall within the definition

of “investment company” under the 1940 Act or would qualify under one of the exemptions or exclusions provided by the 1940

Act and corresponding SEC rules.

If BERA is determined to be a security for purposes of the federal securities laws, we would take steps

to reduce our holdings of BERA as a percentage of our total assets.

These steps may include, among others, selling BERA that we might

otherwise hold for the long term and deploying our cash in assets that are not considered to be investment securities under the 1940

Act, in which case we may be forced to sell our BERA at unattractive prices.

We may also seek to acquire additional assets that are not

considered to be investment securities under the 1940 Act, and we may need to incur debt, issue additional equity or enter into other

financing arrangements that are not otherwise attractive to our business.

Any of these actions could have a material adverse effect on

our results of operations and financial condition.

Moreover, we can make no assurance that we would successfully be able to take the

necessary steps to avoid meeting the definition of “investment company” under the 1940 Act and becoming subject to its requirements.

If BERA is determined to constitute a security for purposes of the federal securities laws, and if we are not able to come within an

available exemption or exclusion under the 1940 Act, then we would have to register as an investment company and require us to change

the manner in which we conduct our business.

In addition, such a determination could adversely affect the market price of BERA and in

turn adversely affect the market price of our Common Stock.

are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds,

or to obligations applicable to investment advisers.

funds, exchange-traded funds and their directors and management are subject to extensive regulation as “investment companies”

and “investment advisers” under U.S.

federal and state law;

this regulation is intended for the benefit and protection of

We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations.

This means, among other things,

that the execution of or changes to our Treasury Reserve Policy or our BERA strategy, our use of leverage, the manner in which our BERA

is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are

not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers.

For example, although a significant change to our Treasury Reserve Policy would require the approval of our Board, no stockholder or

regulatory approval would be necessary.

Consequently, our Board has broad discretion over the investment, leverage and cash management

policies it authorizes, whether in respect of our BERA holdings or other activities we may pursue, and has the power to change our current

policies, including our strategy of acquiring and holding BERA, See “ Use of Proceeds .”

in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance

costs or operational shutdowns.

regulatory regime for digital assets in the U.S.

and elsewhere is uncertain.

We may be unable to effectively react to proposed legislation

and regulation of digital assets, which could adversely affect our business.

regulates providers of certain services with respect to “convertible virtual currency,” including BERA tokens.

engaged in the transfer of convertible virtual currencies are subject to registration and licensure requirements at the U.S.

level and also under U.S.

There is a risk that if we decide to provide validator services to third parties, FinCEN or other

regulators could view such services as the provision of money transmission activities subject to regulations.

regulatory changes or interpretations require us to register as a money services business with FinCEN under the U.S.

Bank Secrecy Act,

or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance

costs and operational burdens.

In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may

determine that continued operations are not viable.

If we decide to cease certain operations in response to new regulatory obligations,

such actions could occur at a time that is unfavorable to investors.

states have implemented or proposed regulatory frameworks for digital asset businesses.

Compliance with such state-specific regulations

may increase costs or impact our business operations.

Further, if we or our service providers are unable to comply with evolving federal

or state regulations, we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.

regulatory enforcement actions, or legal proceedings against key participants in the Berachain ecosystem could materially harm network

activity, token demand, and the value of an investment in our Common Stock.

participants in the Berachain ecosystem including the Foundation, core contributors, validators, dApp developers, liquidity providers,

and token holders may become subject to litigation, regulatory investigations, or enforcement actions in the United States or other jurisdictions.

Such legal proceedings could arise from various allegations, including that BERA or BGT constitutes an unregistered security, that PoL

incentive mechanisms are illegal, or that ecosystem activities breach anti-money laundering, know-your-customer, sanctions, or consumer

protection or other regulations.

If any such participant is named in a lawsuit, subpoenaed in a regulatory inquiry, or subjected to an

enforcement action, whether by U.S.

state, federal or foreign authorities, it may be required to expend significant resources on legal

defense, modify or cease operations, restrict user access, or face monetary penalties, disgorgement, or injunctive relief.

Adverse outcomes

could damage the reputation of the affected participant and, by association, the broader Berachain network, leading to reduced validator

participation, declining user confidence, lower transaction volume, and reduced demand for BERA, any of which could materially and adversely

affect the price of BERA and the value of our Common Stock.

provides base layer infrastructure that can be used for multiple types of applications, including applications that may be unregulated

or face significant regulatory risks.

operates as a general-purpose layer-1 blockchain that provides base-layer infrastructure capable of supporting a wide range of dApps,

including but not limited to DeFi protocols, liquid staking platforms, decentralized exchanges, lending markets, derivatives platforms,

and other smart-contract-based services.

Many of these applications may operate in regulatory gray areas or involve activities that are

subject to evolving, unclear, or restrictive regulatory frameworks in the United States, European Union, United Kingdom, and other jurisdictions.

instance, regulatory treatment of liquid staking derivatives remains uncertain and varies by jurisdiction.

In the United States, the

SEC has taken enforcement actions against certain staking-as-a-service providers, asserting that staked assets or derivative tokens may

constitute unregistered securities under the Howey test.

While the SEC has recently released a statement stating that, in the views of

its Division of Trading and Markets, it will not consider certain qualifying staking services to constitute an offering of securities,

this statement is not a rule, regulation, guidance, or statement of the SEC and does not alter applicable law.

Given the evolving regulatory

framework in the United States, there can be no guarantees that the SEC will not pursue additional enforcement actions against such services

in the future.

Similarly, regulators in other jurisdictions have expressed concerns that liquid staking tokens could be classified as

securities, collective investment schemes, or derivatives requiring licensing.

liquid staking, other DeFi applications on Berachain—such as leveraged yield farming, perpetual futures, synthetic assets, or algorithmic

stablecoins—may trigger regulatory oversight under securities, commodities, stablecoin, money transmission, anti-money laundering

(AML), or know-your-customer (KYC) laws.

If any application is deemed to violate applicable regulations, authorities may impose fines,

require registration, mandate operational changes, restrict user access (including geo-blocking), or pursue enforcement actions against

the protocol’s developers, governance participants, or associated entities.

regulatory actions could materially reduce user participation in the affected application, leading to a decline in transaction volume,

TVL, and BGT reward delegation to that protocol.

Since network fees and BERA demand are directly tied to on-chain activity, a significant

reduction in usage of one or more major applications could decrease overall demand for BERA.

This, in turn, may result in lower BERA

staking participation, reduced network security under PoL, diminished validator revenue, and downward pressure on the market price of

BERA, which would adversely affect the value of the Common Stock.

sales, distributions, or issuances of BERA could cause the price of BERA to decline significantly

was created with an initial supply of 500 million BERA, of which 16.8% was allocated to initial core contributors, 34.3% was allocated

to investors, and 48.9% was allocated to community programs, including an airdrop (15.8%), future community initiatives to incentivize

applications, developers, and users (13.1%), and ecosystem development (20%) to support growth initiatives and the operations of the

Unlock schedules applicable to these allocations will periodically release additional BERA into circulation, which may create

sustained or concentrated selling pressure and adversely affect the market price of BERA.

Further, approximately 10% new BERA is generated

annually through the protocol’s built-in inflation mechanism via BGT emissions, the rate of which may be adjusted from time to

time by community governance.

Although BERA used to pay transaction fees is currently burned and removed from circulating supply, there

can be no assurance that this burn mechanism will offset inflationary issuances or vesting releases.

Sales, distributions, or secondary

market transfers of a substantial number of BERA by core contributors, investors, the Foundation, airdrop recipients, or any other holders—whether

pursuant to scheduled unlocks, governance-approved initiatives, or otherwise—or the market perception that such transfers are occurring

or imminent, could cause the price of BERA to decline significantly, resulting in a partial or complete loss of your investment.

BERA holdings may amplify market volatility.

As of February 27, 2026, we

hold approximately 70.4 million BERA, representing more than 10% of the total initial BERA supply of 500 million tokens.

A substantial

portion of the Company’s assets consists of BERA.

As a result, the Company is exposed to concentration risk associated with a single

digital asset, and changes in the market value, liquidity, utility, or regulatory treatment of BERA could materially adversely affect

This significant concentration means that any future sale, transfer, staking, delegation, or other disposition of BERA by

us, whether to fund operations, provide liquidity, or for any other purpose, could substantially increase the circulating supply and

exert downward pressure on the market price of BERA, regardless of the underlying performance or adoption of the Berachain network.

Additionally,

our large holdings may create actual or perceived conflicts of interest in governance decisions, validator delegation strategies, or

protocol upgrade proposals, particularly if such actions could directly or indirectly benefit our token position at the expense of other

BERA holders.

The market may also react negatively to the mere possibility of future dispositions by the Company, leading to increased

price volatility, reduced investor confidence, and a material decline in the value of BERA, which could adversely affect our financial

condition and the value of an investment in our Common Stock.

asset trading platforms on which BERA trades are relatively new and largely unregulated or may not be complying with existing regulations.

asset markets, including spot markets for BERA, are growing rapidly.

The digital asset trading platforms through which BERA and other

digital assets trade are new and largely unregulated or may not be complying with existing regulations.

These markets are local, national

and international and include a broadening range of digital assets and participants.

Significant trading may occur on systems and platforms

with minimum predictability.

Spot markets may impose daily, weekly, monthly or customer-specific transaction or withdrawal limits or

suspend withdrawals entirely, rendering the exchange of BERA for fiat currency difficult or impossible.

asset trading platforms may not be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms,

such as national securities exchanges or designated contract markets.

Many digital asset trading platforms are unlicensed, are unregulated,

operate without extensive supervision by governmental authorities, and do not provide the public with significant information regarding

their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance.

In particular, those located

outside the United States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions.

Digital asset trading platforms may be out of compliance with existing regulations.

a result, trading activity on or reported by these digital asset trading platforms may reflect behavior that would be prohibited in regulated

trading venues.

Furthermore, many digital asset trading platforms lack certain oversight and safeguards put in place by more traditional

exchanges to enhance the stability of trading on the platform and prevent market manipulation.

As a result, the prices of digital assets

such as BERA on digital asset trading platforms may be subject to larger and/or more frequent sudden declines than assets traded on more

traditional exchanges.

Tools to detect and deter fraudulent or manipulative trading activities (such as market manipulation, front-running

of trades, and wash-trading) may not be available to or employed by digital asset trading platforms or may not exist at all.

Consequently,

the marketplace may lose confidence in, or may experience problems relating to, these venues.

digital asset trading platform on which BERA trades is immune from these risks.

The closure or temporary shutdown of digital asset trading

platforms due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in Berachain and

can slow down the mass adoption of Berachain as a base layer protocol.

Further, digital asset trading platform failures or the failure

of any other major component of the overall Berachain ecosystem can have an adverse effect on the price of BERA, and could therefore

have a negative impact on our financial condition and the value of our Common Stock.

perception, a lack of stability in the digital asset trading platforms, manipulation of BERA on trading platforms by customers and/or

the closure or temporary shutdown of such trading platforms due to fraud, business failure, hackers or malware, or government-mandated

regulation may reduce confidence in digital assets generally or BERA specifically, and result in greater volatility in the market price

of digital assets, including BERA, and negatively impact the price of our Common Stock.

assets represent a new and rapidly evolving industry, and the value of our Common Stock may depend, in large part, on the acceptance

of Berachain and applications built on the Berachain protocol.

first digital asset, bitcoin, was launched in 2009.

The Berachain protocol launched its mainnet in February 2025.

In general, digital

asset networks, including Berachain and other cryptographic and algorithmic protocols governing the issuance of digital assets, represent

a new and rapidly evolving industry that is subject to a variety of factors that are difficult to evaluate.

For example, the realization

of one or more of the following risks could materially adversely affect the value of our Common Stock:

Berachain and Berachain-based applications today have limited use.

As a result, the price of BERA may be influenced to a significant

extent by speculators, thus contributing to price volatility.

Users, protocol and application developers and validators may otherwise switch to or adopt certain digital assets at the expense of their

engagement with other digital asset networks, which may negatively impact those networks, including Berachain.

Digital asset networks, including networks and networks utilizing Berachain, are in the early stages of development.

Given the recentness

of the development of digital asset networks, digital assets may not function as intended and parties may be unwilling to use digital

assets, which would dampen the growth, if any, of digital asset networks.

Because BERA is a digital asset, the value of the Common Stock

is subject to a number of factors relating to the fundamental investment characteristics of digital assets, including the fact that digital

assets are bearer instruments and loss, theft, compromise, or destruction of the associated private keys could result in permanent loss

of the asset.

Digital asset networks are dependent upon the internet.

A disruption of the internet or a digital asset network, such as Berachain, would

affect the ability to transfer digital assets, including BERA, and, consequently, a disruption may impact BERA’s value.

Although unlikely, the acceptance of software patches or upgrades by a significant, but not overwhelming, percentage of the users and

validators in a digital asset network, such as Berachain, could result in a “fork” in such network’s blockchain, including

Berachain, resulting in the operation of multiple separate networks.

Governance of the Berachain protocol is by voluntary consensus.

As a result, there may be a lack of consensus or clarity on the governance

of the Berachain protocol, which may stymie Berachain’s utility and ability to grow and face challenges.

In particular, it may

be difficult to find solutions or marshal sufficient effort to overcome any future problems on Berachain, especially long-term problems.

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality

for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets.

The cryptography underlying

Berachain or other blockchain networks could prove to be flawed or ineffective, or developments in mathematics and/or technology, including

advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective.

of these circumstances, a malicious actor may be able to compromise the security of Berachain or take our BERA, which would adversely

affect the value of the Common Stock.

Moreover, functionality of Berachain may be negatively affected such that it is no longer attractive

to users, thereby dampening demand for BERA.

Even if another digital asset other than BERA were affected by similar circumstances, any

reduction in confidence in the source code or cryptography underlying digital assets generally could negatively affect the demand for

digital assets and therefore adversely affect the value of the Common Stock.

because digital assets, including BERA, have been in existence for a relatively short period of time and are continuing to develop, there

may be additional risks in the future that are impossible to predict as of the date of this Annual Report on Form 10-K.

is a relatively new technological innovation with a limited operating history.

has a limited history of existence and operations.

The Berachain protocol launched in early 2025, with BERA first becoming tradable on

major global cryptocurrency exchanges in February 2025.

As a result, there is only a brief performance record regarding the technical

stability, security, scalability, and economic behavior of the Berachain protocol under real-world conditions.

The network has not yet

been tested through prolonged periods of high transaction volume, sustained validator participation, adverse market conditions, or significant

stress on the PoL incentive system, including PoLv2 mechanics such as dynamic emissions, delegation weighting, and reward module execution.

As such, there is only limited historical data to assess the resilience of core Berachain protocol components—such as BERA staking

dynamics, BGT governance efficiency, or dApp reward distribution—during network congestion, token price volatility, or coordinated

economic attacks.

Although past performance is not necessarily indicative of future results, a longer operational track record might

provide greater insight into the protocol’s ability to maintain PoL consensus stability, sustain liquidity in key markets, or adapt

to evolving user and validator behavior.

The absence of such history increases uncertainty regarding the long-term viability of the Berachain

network and the value of an investment in our Common Stock.

we or our counterparties suffer losses as a result of DeFi protocol failures, hacks, or exploits, we may be unable to recover some or

all of our assets.

Such an event could materially and adversely affect our business, financial condition, and the market price of our

Common Stock.

of the date of this Annual Report on Form 10-K we have not engaged a significant portion of our assets with DeFi protocols yet.

face other risks related to our BERA treasury reserve business model.

BERA treasury reserve business model exposes us to various risks, including the following:

and other digital assets are subject to significant legal, commercial, regulatory, and technical

uncertainty, and our BERA strategy subjects us to enhanced regulatory oversight;

changes could impact our ability to interact with DeFi protocols, stake our digital assets,

act as a validator or receive rewards;

scrutiny of our activities may increase potentially limiting our operations;

litigation risks exist related to smart contract vulnerabilities, or our business activities;

● uncertainty

around BERA’s regulatory status may impact our ability to maintain our listing;

in political administration may not guarantee a favorable regulatory environment for BERA;

SEC actions or court decisions could retroactively classify BERA as a security, potentially

leading to penalties or forced unwinding of transactions;

regulatory focus on Layer-1 blockchains beyond Bitcoin and Ethereum could result in new compliance

requirements;

use of call and put options on BERA exposes us to derivative-specific risks, including potential

leverage effects, counterparty default risk, valuation and liquidity challenges, and the

possibility that option strategies may not effectively hedge downside risk or may limit upside

participation;

● concentration

of influence by the Foundation or core contributors could impact protocol governance in ways

that are adverse to us;

instability or liquidity freezes could prevent us from liquidating BERA or using it as collateral

technology may expose us to sanctioned or blocked persons or may result in unintentional or inadvertent violations of economic sanctions

and anti-money laundering laws and regulations.

are subject to the rules enforced by the Office of Foreign Assets Control of the U.S.

Department of the Treasury (“OFAC”),

including prohibitions on conducting direct or indirect business with persons named on, or owned by persons named on, OFAC’s various

sanctions lists, including the Specially Designated Nationals and Blocked Persons list (“SDN List”).

We are also prohibited

from direct or indirect dealings with persons located, organized, or resident in jurisdictions subject to comprehensive U.S.

sanctions (as of today, Cuba, Iran, North Korea, the so-called Donetsk People’s Republic, the so-called Luhansk People’s

Republic, and the Crimea region of Ukraine), and may be prohibited from dealing with persons in other jurisdictions subject to targeted

sanctions such as Venezuela, Russia, and Belarus.

sanctions compliance obligations apply to all U.S.

persons and cover transactions in digital assets.

sanctions authorities and law

enforcement have, in recent years, directed significant attention to sanctions compliance among the digital assets industry.

OFAC has issued updated advisories regarding the use of virtual currencies, added a number of digital asset exchanges and service providers

to the SDN List, and engaged in several enforcement actions, including a series of enforcement actions that have either shut down or

significantly curtailed the operations of several smaller digital asset exchanges associated with Russian and/or North Korean nationals.

of the pseudonymous nature of blockchain transactions and decentralized applications, we may inadvertently and without knowledge, directly

or indirectly engage in transactions with or for the benefit of prohibited persons under U.S.

sanctions regulations, especially when

engaging in DeFi activities where it may be impossible for us to determine the identity of our counterparties.

OFAC may impose civil

penalties for sanctions violations on a “strict liability” basis, meaning we may be held responsible for transacting with

prohibited parties even if we have no knowledge that a particular counterparty is a prohibited person under U.S.

sanctions regulations.

In addition, we may be subject to non-U.S.

economic sanctions laws and regulations to the extent we conduct activity within the jurisdiction

of other sanctions regimes, including those of the European Union and United Kingdom.

and other governmental authorities have significant discretion in the interpretation and enforcement of U.S.

economic sanctions laws

and regulations.

Moreover, economic sanctions laws and regulations continue to evolve, often with little or no notice, which could raise

operational or compliance challenges.

If it is determined that we have transacted with prohibited persons under U.S.

sanctions regulations,

even inadvertently, this could result in substantial reputational harm, fines or penalties, and costs associated with governmental inquiries

and investigations.

Despite our compliance efforts and activities we cannot assure compliance by our employees or representatives for

which we may be held responsible, and any or all of the foregoing could have a material adverse effect on our business, prospects, operations

or financial condition.

addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities

or fund criminal or terrorist activities.

This misuse, or the perception of such misuse, could lead to greater regulatory oversight of

BERA and BERA platforms, and there is the possibility that law enforcement agencies could close or blacklist BERA platforms or other

BERA-related infrastructure with little or no notice and prevent users from accessing or retrieving BERA held via such platforms or infrastructure.

held by us are not subject to FDIC or SIPC protections.

will not hold our BERA with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the

Securities Investor Protection Corporation (“SIPC”), and, therefore, our BERA holdings are not subject to the protections

enjoyed by depositors with FDIC or SIPC member institutions.

As a result, we may suffer a loss with respect to our BERA that is not covered

by insurance, and we may not be able to recover any of our carried value in our BERA holdings if they are lost or stolen or suffer significant

and sustained reduction in conversion spot price.

If we are not otherwise able to recover damages from a malicious actor in connection

with these losses, our business and results of operations may suffer, which may have a material negative impact on our stock price.

Related to Our Use of Derivatives on BERA

plan to engage in derivatives transactions, including call options and put options on BERA, and such transactions may expose us to material

risks that could adversely impact our business, operating results and financial condition.

may from time to time utilize call options and put options on BERA as part of our treasury reserve strategy.

These derivatives are intended

to (i) hedge downside exposure to BERA price volatility and (ii) accelerate our accumulation of BERA in a capital-efficient manner.

these option strategies may enhance our risk-adjusted returns, they expose us to additional risks, including the following:

BERA options are traded over-the-counter or on non-qualified crypto venues.

If a counterparty fails to perform on its obligations,

we may be unable to realize gains, recover premiums, or receive delivery of BERA, potentially resulting in a total loss of value

associated with the position.

can introduce effective leverage, amplifying gains but also magnifying losses.

We may be required to post collateral or margin, which

could reduce liquidity available for our operations.

Option contracts may also be illiquid, particularly during periods of market

stress, making it difficult to exit or adjust positions.

put options may provide downside protection and call options may accelerate accumulation, there is no guarantee these strategies

will be effective.

Options may expire worthless, may not move in correlation with BERA spot prices, or may limit upside gains.

valuations are sensitive to assumptions about implied volatility, time to maturity, and counterparty pricing.

These variables may

fluctuate significantly, resulting in mark-to-market losses or earnings volatility.

regulatory treatment of BERA derivatives remains uncertain.

Future guidance could limit our ability to continue using derivatives

or require us to account for them in a manner that increases earnings volatility.

of these risks could materially and adversely affect the value of our BERA treasury, our financial condition, and the market price of

our Common Stock.

face market, liquidity, and concentration risks.

of digital assets, including BERA and stablecoins, can be volatile and may experience rapid declines, thin liquidity, trading halts,

forks, or network outages.

If active markets deteriorate or become unavailable, we may be unable to liquidate positions or may be required

to use less observable inputs to measure fair value, which would increase earnings volatility and valuation uncertainty.

Beginning with

periods after October 2025, in-scope crypto assets are measured at fair value with changes recognized in earnings, which may significantly

increase quarterly volatility.

face custody, security, and operational risks.

and third-party custody arrangements expose us to loss from cyberattacks, key compromise, operational error, or vendor failure.

include dual-authorization wallet policies and Board-level oversight through a Digital Assets Committee.

Crypto assets are not legal

tender, are not backed by any government, and are not insured by the Federal Deposit Insurance Corporation or the Securities Investor

Protection Corporation.

Custody arrangements, whether self-custody or with a third-party custodian, are not bank deposits.

occur due to cyberattack, key compromise, protocol failure, operational error, or custodian insolvency.

In an insolvency of a third-party

custodian, we could be treated as a general unsecured creditor and may not recover all assets.

face legal, regulatory, and sanctions risks.

Digital-asset

activities are subject to uncertain and evolving United States and foreign legal requirements, including securities, commodities, money

transmission, and sanctions laws.

The Securities and Exchange Commission has emphasized clear disclosure of crypto exposures, counterparties,

liquidity impacts, and regulatory developments.

Failure to comply with sanctions screening, including screening of counterparties and

addresses, may result in penalties under strict-liability regimes.

New rules, enforcement actions, or interpretations could restrict

activities, require changes to controls, or increase compliance costs.

face financial reporting and valuation risks.

fair-value accounting requires daily pricing controls, principal-market assessments, fair-value hierarchy classification, and expanded

Weaknesses in new processes could lead to control deficiencies or a material weakness.

We will measure in-scope crypto assets

at fair value with changes recognized in earnings beginning in the fourth quarter of 2025.

Market price swings could cause material variability

in reported results in periods when we hold crypto assets.

face counterparty, stablecoin, and protocol risks.

may lose their pegs, face redemption stress, or be subject to issuer or reserve-asset risk.

On-chain protocols and bridges can fail or

be exploited, causing loss of value or inaccessibility of assets.

Dependencies on exchanges, market-makers, analytics vendors, or custodians

introduce additional counterparty risk that may not be diversifiable.

Our ability to hedge these risks is limited and may be costly or

unavailable during market stress.

face governance, controls, and key-person risks.

digital-asset strategy relies on specialized expertise and new governance, including dual-authorization wallet policies and Board-level

If key personnel are unavailable or if controls are not designed and operated effectively, we could experience losses, reporting

errors, or control deficiencies and may incur increased audit and compliance costs.

face related-party and conflicts risks.

Chief Investment Officer has industry relationships in the digital-asset ecosystem, including with Berachain-affiliated entities.

or arrangements with related parties could create actual or perceived conflicts of interest.

We may determine that certain transactions

require disclosure under accounting standards or the federal securities laws, and any failure to identify, approve, and disclose such

transactions could result in regulatory scrutiny or reputational harm.

face stablecoin classification risks.

classification of U.S.

dollar-pegged stablecoins as cash equivalents involves judgment and may be subject to challenge.

Company classifies certain U.S.

dollar-denominated stablecoins as cash equivalents for financial reporting purposes based on management’s

assessment that such instruments are readily convertible to known amounts of U.S.

dollars and present an insignificant risk of changes

Stablecoins are not legal tender and may be subject to issuer credit risk, reserve adequacy risk, redemption limitations, de-pegging

events, cybersecurity incidents, or regulatory restrictions and are issued by private entities.

Regulatory, accounting, or market developments

could result in stablecoins being deemed not to meet the definition of cash equivalents.

If such classification were required to change,

the Company’s reported liquidity metrics, working capital, and presentation of financial position could be materially affected.

Face Stablecoin Liquidity and DeFi Deployment Risk.

deployed into decentralized finance protocols may not be immediately liquid and may be subject to additional risks.

To the extent

the Company deploys stablecoins into DeFi protocols for yield generation, such assets may be subject to smart contract risk,

liquidity risk, withdrawal restrictions, or protocol governance changes.

Stablecoins deposited into such protocols may not be

immediately redeemable at par value and could experience losses in the event of a protocol exploit, de-pegging event, or

counterparty failure.

To the extent the Company deploys stablecoins or digital assets into decentralized finance protocols, such

assets may become subject to smart contract risk, withdrawal restrictions, liquidity constraints, counterparty risk, or

protocol-level losses.

Such risks could materially affect liquidity and financial condition.

Related to Our Business and Industry

economic conditions, including inflation and supply chain disruptions, could materially and adversely our business, prospects, results

of operations, financial condition, or cash flows.

economic conditions, including global conflicts, inflation and supply chain disruptions, could materially and adversely our

business, prospects, results of operations, financial condition, or cash flows.

business and operations are sensitive to global economic conditions.

General global economic downturns and macroeconomic trends, including

heightened inflation, volatility in the capital markets, interest rate and currency rate fluctuations, the ongoing war in Ukraine, and

economic slowdown or recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate

some of the other risks that affect our business, financial condition and results of operations.

General global economic downturns and macroeconomic trends,

including heightened inflation, volatility in the capital markets, interest rate and currency rate fluctuations, the ongoing war in

Ukraine, recent and ongoing military conflicts between the U.S.-Israel alliance and Iran and its proxies, and economic slowdown or

recession, may result in unfavorable conditions that could negatively affect demand for our products and exacerbate some of the

other risks that affect our business, financial condition and results of operations.

Both domestic and international markets

experienced significant inflationary pressures in 2023 and 2024 and inflation rates in the U.S.

experienced significant inflationary pressures in 2025 and inflation rates in the U.S.

are currently expected to continue at

1 unchanged sentence

In addition, the Federal Reserve has raised, and is expected to continue to raise, interest rates

in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may have

the effect of further increasing economic uncertainty and heightening these risks.

Interest rate increases or other government actions

taken to reduce inflation could also result in an economic recession.

material decline in the economic conditions affecting consumers, which results in a reduction in disposable income for the average consumer,

may change consumption patterns, and may result in a reduction in spending on vaporization products and consumption accessories or a

switch to cheaper products or products obtained through illicit channels.

Many of our products are relatively new to the market and may

be regarded by consumers as a novelty item and expendable.

As such, demand for our vaporizer products may be particularly sensitive to

economic conditions such as inflation, recession, high energy costs, unemployment, changes in interest rates and money supply, changes

in the political environment and other factors beyond our control, any combination of which could result in a material adverse effect

on our business, results of operations and financial condition.

in response to concerns about inflation, which, coupled with reduced government spending and volatility in financial markets, may

have the effect of further increasing economic uncertainty and heightening these risks.

Interest rate increases or other government

actions taken to reduce inflation could also result in an economic recession.

The global economy, including

credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,

declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates and uncertainty

about economic stability.

Global conflicts, such as those described above, have created extreme volatility in the global capital markets

and may continue to have further global economic consequences, including disruptions of the global supply chain and energy markets.

such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely.

If the equity and credit markets

deteriorate, including as a result of geopolitical unrest or war, it may make any necessary debt or equity financing more difficult to

obtain in a timely manner or on favorable terms, more costly or more dilutive.

As such, changes in the political environment and other

factors beyond our control could result in a material adverse effect on our business, results of operations and financial condition.

have incurred significant operating and net losses and anticipate that we will continue to incur significant losses for the foreseeable

The Company has incurred net losses of $85.6 million and $17.7 million

for the years ended December 31, 2025 and 2024, and the Company used $16.3 million and $6.8 million in operating activities, respectively.

ability to continue as a going concern is contingent upon successful execution of management’s intended plan over the next twelve

months to improve our liquidity and profitability, which includes, without limitation:

reducing operating costs expense by taking additional restructuring actions to align cost with revenue ,

revenue by introducing new products and acquiring new customers,

on strategic partnerships accretive to margins and operating cash , and

additional capital through the issuance of equity securities or obtaining debt financing.

can be no assurance that any such measures will be successful.

If we are not successful in improving our liquidity position and the profitability

of our operations, we may need to consider all strategic alternatives, including seeking additional debt or equity capital, reducing

or delaying our business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures,

including receivership or, to the extent available, bankruptcy protection.

In addition, the perception that we may not be able to continue

as a going concern may cause vendors and customers to choose not to do business with us due to concerns about our ability to meet our

contractual obligations.

If we seek additional financing to fund our operations and there remains substantial doubt about our ability

to continue as a going concern, our financing sources may be unwilling to provide additional funding to us on commercially reasonable

terms or at all.

The consolidated financial statements do not include any adjustments that may result from the outcome of this going

concern uncertainty.

Such adjustments could be material.

we are required to seek additional financing sources, they may not be available to us on attractive terms if at all and could restrict

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us to satisfy minimum financial coverage ratios, minimum net worth requirements, maximum leverage ratios, or other financial covenants.

had cash available as of December 31, 2024, of $0.9 million.

In addition, our revenue for the year ended December 31, 2024, was down

from prior years and has declined in recent quarters.

If we are unable to access additional liquidity through successful execution of

our cost cutting strategic initiatives and revenue goals, we may have significant cash constraints, which would have a material adverse

impact on our business, results of operations and ability to pay our debts as they come due.

We have failed in the past, and fail in the

future to meet the listing standards of Nasdaq, and as a result our Class A common stock could become delisted, which could have a material

adverse effect on the liquidity of our Class A common stock.

we fail to continue to satisfy the continued listing requirements of Nasdaq, such as the corporate governance or public float requirements,

or the minimum closing bid price requirement, Nasdaq will take steps to de-list our Class A common stock.

Such a de-listing would likely have a negative

effect on the price of our Class A common stock and would impair your ability to sell or purchase our Class A common stock when you wish

to do so, as well as adversely affect our ability to issue additional securities and obtain additional financing in the future.

August 21, 2023, we received a letter from the staff of Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1)

because the closing bid price per share for our Class A common stock had closed below $1.00 for the previous 30 consecutive business

days (the “Minimum Bid Price Requirement”).

We were given 180 days, or until February 20, 2024 to regain compliance with

the Minimum Bid Price Requirement.

We also filed an application to transfer the listing of our Class A common stock from the Nasdaq Global

Market to the Nasdaq Capital Market, which transfer was approved and occurred on February 9, 2024.

As a result of the transfer, we became

eligible to request an additional 180-day compliance period.

February 21, 2024, Nasdaq notified us in writing that while we had not regained compliance with the Minimum Bid Price Requirement, we

were eligible for an additional 180-day compliance period, or until August 19, 2024, to regain compliance with the Minimum Bid Price

Nasdaq’s determination was based on us having met the continued listing requirement for market value of publicly held

shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the Minimum Bid

Price Requirement, and on our written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by

effecting a reverse stock split, if necessary.

January 24, 2024, Gina Collins gave notice of her resignation from our Board of Directors and from each committee of the Board, effective

Collins was an independent director, and as a result of her resignation, we no longer comply with the majority independent

board requirement of Nasdaq as set forth in Nasdaq Listing Rule 5605(b)(1) because independent directors do not comprise a majority of

the Board of Directors, and Nasdaq’s audit committee requirements as set forth in Nasdaq Listing Rule 5605(c)(2)(A) because the

Audit Committee of the Board of Directors is not comprised of at least three independent directors.

January 29, 2024, in accordance with Nasdaq Listing Rules, we notified Nasdaq of Ms.

Collins’ resignation and the resulting non-compliance.

On January 30, 2024, we received a notice from Nasdaq acknowledging the fact that we do not meet the requirements of such rules.

In accordance

with Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4), to regain compliance with the Nasdaq Listing Rules .

With the resignation

Snyder, we were notified on July 26, 2024 that we had regained compliance with the Independent Director Rule.

We regained compliance

with the requirement that the Audit Committee of the Board of Directors be comprised of three independent directors on December 31, 2024

with the addition of Mr.

Howe to the Audit Committee.

April 18, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Annual Report on Form 10-K for the fiscal

year ended December 31, 2023, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1).

Nasdaq Listing Rule 5250(c)(1) requires

listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission.

We were notified by Nasdaq that we

had regained compliance on July 26, 2024.

May 21, 2024, we received a notice from Nasdaq stating that because we had not yet filed our Quarterly Report on Form 10-Q for the fiscal

quarter ended March 31, 2024, we were no longer in compliance with Nasdaq Listing Rule 5250(c)(1).

were notified by Nasdaq that we had regained compliance on July 26, 2024.

Company had 60 calendar days from April 18, 2024, or until June 17, 2024, to regain compliance

by filing the Form 10-K and the Form 10-Q or to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules.

timely submitted the plan to regain compliance to Nasdaq and Nasdaq granted us additional time to file the Form 10K and 10Q.

June 26, 2024, we were notified by Nasdaq that a filing extension was granted through July 31, 2024, for our Annual Report on Form 10-K

and Quarterly Report on Form 10-Q.

July 26, 2024, we received a notification by Nasdaq that we had regained compliance with the Independent Director Rule, and due to

the filing of our Annual Report on Form 10-K and Quarterly Report on Form 10-Q was back in compliance with the Nasdaq Filing

August 26, 2024, we received a notice from Nasdaq stating that we had met the minimum bid requirements as of August 23, 2024, and were

back in compliance with Nasdaq minimum bid requirements.

narrow margins may magnify the impact of variations in operating costs and of adverse or unforeseen events on operating results.

are subject to intense price competition.

As a result of this and other factors, our gross and operating margins have historically been

Narrow margins magnify the impact of variations in operating costs and of gross margin and of unforeseen adverse events on operating

Continued increases in costs, such as the cost of merchandise, wage levels, shipping rates, import duties and fuel costs, may

negatively impact our margins and profitability.

We are not always able to raise the sales price to offset cost increases or to effect

increased operating efficiencies in response to increasing costs.

If we are unable to maintain our margins in the future, it could have

a material adverse effect on our business, results of operations and financial condition.

If we become subject to increased price competition

in the future, we cannot assure you that we will not lose market share, that we will not be forced to reduce our prices and further reduce

our margins, or that we will be able to compete effectively.

Additionally,

promotional activities can significantly increase net sales in the periods in which they are initiated and net sales can be adversely

impacted in the periods after a promotion.

Accordingly, based upon the timing of our marketing and promotional initiatives, we have and

may continue to experience significant variability in our month-to-month results, which could affect our ability to formulate strategies

that allow us to maintain our market presence across volatile months.

If our monthly sales fluctuations obscure our ability to track

important trends in our key markets, it may have a material adverse effect on our business, results of operations and financial condition.

We had cash and cash equivalents available as of December 31, 2025, of

$32.5 million.

In addition, our revenue for the year ended December 31, 2025, was down from prior years and has declined in recent quarters.

If we are unable to access additional liquidity through successful execution of our cost cutting strategic initiatives and revenue goals,

we may have significant cash constraints, which would have a material adverse impact on our business, results of operations and ability

to pay our debts as they come due.

financial results and the market price of our Common Stock may be affected by the prices of BERA.

part of our capital allocation strategy for assets that are not required to provide working capital for our ongoing operations, we have

invested and will continue to invest in BERA.

As of February 27, 2026, we hold approximately 70.4 million BERA.

The price of BERA has

historically been subject to dramatic price fluctuations and is highly volatile.

In addition, because our Treasury Policy is currently

primarily concentrated in BERA, adverse developments specific to BERA, including protocol-level failures, governance decisions, validator

network instability, or ecosystem contraction, could disproportionately impact our financial condition.

decrease in the fair value of BERA below our carrying value for such assets could require us to incur a loss due to the decrease in fair

market value, and such charge could be material to our financial results for the applicable reporting period, which may create significant

volatility in our reported earnings.

Any decrease in reported earnings or increased volatility of such earnings could have a material

adverse effect on the market price of our Common Stock.

In addition, the application of generally accepted accounting principles in the

United States, with respect to BERA, may change in the future and could have a material adverse effect on our financial results and the

market price of our Common Stock.

addition, if investors view the value of our Common Stock as dependent upon or linked to the value or change in the value of our BERA

holdings, the price of BERA may significantly influence the market price of our Common Stock.

Common Stock may trade at a substantial premium or discount to the value of the BERA tokens we hold, and our stock price may be more

volatile than the price of BERA.

market price of our Common Stock reflects many factors that do not affect the spot price of BERA and may therefore diverge materially

— positively or negatively — from the per-share value of our BERA token holdings (net of cash, other assets and liabilities).

These factors include, among others:

our corporate-level expenses;

the timing, size and pricing of equity or debt financings (including

at-the-market offerings, equity line financings or convertible securities), equity awards and other sources of dilution;

about our future purchases or sales of BERA tokens or our onchain activities, including staking, validator or other DeFi initiatives;

our liquidity and public float;

differences in trading hours and market microstructure between our Common Stock and spot markets for

changes in index inclusion, analyst coverage or investor sentiment toward us as an operating company;

our corporate governance,

financial reporting, and any actual or perceived operational, custody, technology or regulatory risks specific to us;

and broader equity-market

conditions independent of digital asset markets.

As a result, our Common Stock may trade at a premium or discount to the value of our

BERA token holdings for extended periods, and may be more volatile than the price of BERA tokens.

Accordingly, investors could lose all

or a substantial part of their investment even if the market price of BERA does not decline, and may not benefit commensurately from

increases in the market price of BERA tokens.

historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to

our BERA token holdings.

historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding

or selling significant amounts of BERA tokens.

The price of BERA tokens is subject to dramatic price fluctuations

and is highly volatile.

For example, from February 6, 2025 (the date BERA tokens first became available on digital asset trading platforms)

through March 28, 2026, the price of BERA tokens, as reported by CoinGecko.com, ranged from a high of approximately $14.99to a low of

We are required to measure our BERA token holdings at fair value in our statement of financial position, and to recognize gains

and losses from changes in the fair value of our BERA tokens in net income each reporting period, which may create significant volatility

in our reported earnings and decrease the carrying value of our digital assets, which in turn could have a material adverse effect on

the market price of our common stock.

Conversely, any sale of BERA tokens at prices above our carrying value for such assets creates a

gain for financial reporting purposes even if we would otherwise incur an economic or tax loss with respect to such transaction, which

also may result in significant volatility in our reported earnings.

we intend to purchase additional BERA tokens in future periods and increase our overall holdings of BERA tokens, we expect that the proportion

of our total assets represented by our BERA token holdings will increase in the future.

As a result, volatility in our earnings may be

significantly more than what we experienced in prior periods.

many reasons, including those described below, our operating results, revenues, and expenses may vary significantly in the future from

quarter to quarter.

These fluctuations could have an adverse effect on the market price of our Common Stock.

trading prices of many digital assets, including BERA, have experienced extreme volatility in recent periods and may continue to do so.

Extreme volatility in the future, including further declines in the trading prices of BERA, could have a material adverse effect on the

value of the Common Stock.

trading prices of many digital assets, including BERA, have experienced extreme volatility in recent periods and may continue to do so,

including as a result of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions, and regulatory

announcements.

Digital asset trading markets, including the BERA network, are relatively new, largely unregulated, and, at times, subject

to limited liquidity.

As a result, trading activity on or reported by these digital asset trading platforms, including BERA, is generally

significantly less regulated than trading in regulated U.S.

securities and commodities markets and may reflect behavior that would be

prohibited in regulated U.S.

trading venues.

Furthermore, many digital asset trading platforms lack certain safeguards put in place by

more traditional exchanges to enhance the stability of trading on the platform.

The digital asset markets may also be experiencing a

bubble or may experience a bubble in the future, which may undermine confidence and affect liquidity of the digital asset markets.

rapid decrease in the price of BERA —whether as a result of negative perception, a lack of stability in the digital asset trading

platforms, market manipulation of cryptocurrency trading platforms by customers, a cyber-security incident, regulatory action, or other

factors—could materially reduce the value of any BERA we hold, force us to recognize impairment charges, trigger defaults or covenant

breaches in any future financing arrangements, and could have a material adverse effect on the value of our Common Stock that may result

in the loss of all or substantially all of its value.

we fail to manage our business and growth effectively, we may be unable to execute our business plan, maintain high levels of service

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health crises, embargoes, and sanctions.

may enter into new markets or lines of business that offer new products and services, or may expand existing lines of business, which

may subject us to additional risks.

time to time, we may enter into new markets or lines of business that entail offering new products and services, or may expand existing

lines of business.

For example, our merger with KushCo significantly expanded our exposure to the leading MSOs and LPs, as well as a

presence on the west coast.

Our historical experience in these markets does not ensure that we will be able to successfully operate expended

lines of business or will be successful in launching new products or entering new markets.

In addition, external factors, such as competitive

alternatives, potential conflicts of interest, either real or perceived, and shifting market preferences, in addition to our lack of

experience with or knowledge of new lines of business or markets may impact our implementation, expansion and operation of new and existing

lines of business.

Other related risks include:

potential diversion of management’s attention, available cash, and other resources from our existing businesses;

unanticipated

liabilities or contingencies;

with additional regulatory burdens;

damage to existing customer relationships, lack of customer acceptance or an inability to attract new customers;

inability to compete effectively in the new line or expanded line of business or in a new market.

to successfully manage these risks in the implementation, expansion or operation of new and existing lines of business and markets or

the offering of new products or services could have a material adverse effect on our reputation, business, results of operations and

financial condition.

is uncertainty related to the regulation of vaporization products and certain other consumption accessories.

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timing of procurement cycles by our customers;

● seasonality

in customer spending and demand for products we provide;

● variability

in supplier programs;

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show attendance;

● promotions;

loss or consolidation of significant suppliers or customers;

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condition of our industry in general and our customers specifically;

developments that limit or expand the products we may sell, or the manner in which those products may be transported;

developments that limit or expand the products we may sell, or the manner in which those

products may be transported;

inability on our part to obtain adequate quantities of products;

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expenditures on new business ventures and acquisitions;

● performance

of acquired businesses;

weather conditions, natural disasters, pandemics, or other events that affect supply or customer response;

weather conditions, natural disasters, pandemics, or other events that affect supply or customer

● distribution

or shipping to our customers;

● geopolitical

planned operating expenditures each quarter are based on sales forecasts for the quarter.

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We face the following risks with respect to our insurance coverage:

we may not be able to continue to obtain insurance on commercially reasonable terms;

we may incur losses from interruption of our business that exceed our insurance coverage;

we may be faced with types of liabilities that will not be covered adequately or at all by our insurance;

our insurance carriers may not be able to meet their obligations under the policies;

the dollar amount of any liabilities may exceed our policy limits.

may not be able to continue to obtain insurance on commercially reasonable terms;

may incur losses from interruption of our business that exceed our insurance coverage;

may be faced with types of liabilities that will not be covered adequately or at all by our insurance;

insurance carriers may not be able to meet their obligations under the policies;

dollar amount of any liabilities may exceed our policy limits.

a partially uninsured claim, if successful and of significant size, could have a material adverse effect on us.

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Neither we, nor our stockholders will have any rights in these ventures or their income or profits.

Specifically, we sold $0.0

million and $0.0 million in products and supplies to Blum Holdings, Inc.

(“Blum”) in the years ended December 31, 2024 and

2023, respectively.

Total gross accounts receivable due from Blum were approximately $0.4 million and $0.4 million as of December 31,

2024 and 2023, respectively.

Nicholas Kovacevich, our former Chief Corporate Development Officer, and a member of our Board until January

6, 2023 is an investor in Blum and a member of its board of directors.

we are not aware of any conflict that has arisen or any transaction that has not been conducted on an arm’s length basis to date,

during the year, Mr.

Kovacevich may have had conflicting fiduciary duties between us, Blum and his own personal financial interests,

for which he must recuse himself from certain of our decision-making processes.

October 24, 2025, the Company appointed its Chief Investment Officer to manage digital-asset treasury activities.

The Chief Investment

Officer has relationships within the Berachain ecosystem.

As of December 31, 2025, there were no related-party transactions to disclose.

do not allow a conflicted shareholder, director or executive officer to vote on matters wherein a conflict may be perceived.

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are required to comply with laws and regulations in other countries and are exposed to business risks associated with our international

the years ended December 31, 2024 and 2023, we derived 17.9% and 7.1%, respectively, of our net sales from outside the United States,

primarily in Canada and certain European countries.

As a result, we are subject to numerous evolving and complex laws and regulations

which apply, among other things, to financial reporting standards, corporate governance, data privacy, tax, trade regulations, export

controls, competitive practices, labor, health and safety laws, laws regarding controlled substances, laws regarding drug paraphernalia,

For the year ended December 31, 2025, we derived 0.11% of our net sales

from outside the United States, primarily in Canada.

For the year ended December 31, 2024, we derived 17.9% of our net sales from outside

the United States, primarily in Canada and certain European countries.

As a result, we are subject to numerous evolving and complex laws

and regulations which apply, among other things, to financial reporting standards, corporate governance, data privacy, tax, trade regulations,

export controls, competitive practices, labor, health and safety laws, laws regarding controlled substances, laws regarding drug paraphernalia,

and regulations in each jurisdiction in which we operate.

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Many of the products we sell, including without limitation, certain vaporizer products, aluminum grinders, paper

products and plastic products, are subject to the 25 percent tariff and such tariff, along with resultant price increases, may negatively

impact our pricing and customer demand for these products.

A “trade war” between the United States, China and other nations

or other governmental action related to tariffs or international trade agreements or policies has the potential to adversely impact demand

for our products, our costs, customers, suppliers and/or the United States economy or certain sectors thereof and, thus, to adversely

impact our businesses and results of operations.

products and plastic products, are subject to tariffs and such tariffs, along with resultant price increases, may negatively impact our

pricing and customer demand for these products.

In March and April 2025, the US announced a series of additional special tariffs.

additional special tariffs coupled with tariffs already in effect as of the date of this filing include at least a 145% tariff on substantially

all products of Chinese origin.

Some of these special tariffs on products of Chinese origin have been temporarily paused at 30%.

war” between the United States and China or other governmental action related to tariffs or international trade agreements or policies

has the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the United States economy or certain

sectors thereof and, thus, to adversely impact our businesses and results of operations.

failure to comply with certain environmental, health and safety regulations could materially and adversely affect our business.

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these audits could have an adverse effect on our operating results and financial condition.

we were deemed to be an investment company under the U.S.

Investment Company Act of 1940, as amended (the “1940 Act”), as

a result of our ownership of the Operating Company, applicable restrictions could make it impractical for us to continue our business

as contemplated and could have a material adverse effect on our business.

Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes

of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing,

reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding

or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total

assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

We do not believe that we are an “investment

company,” as such term is defined in either of those sections of the 1940 Act.

the sole manager of the Operating Company, we control and operate the Operating Company.

On that basis, we believe that our interest

in the Operating Company is not an “investment security” as that term is used in the 1940 Act.

However, if we were to cease

participation in the management of the Operating Company, our interest in The Operating Company could be deemed an “investment

security” for purposes of the 1940 Act.

and the Operating Company intend to continue to conduct our operations so that we will not be deemed an investment company.

if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and

our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material

adverse effect on our business.

Related to Ownership of Our Class A Common Stock

Our failure to meet the continued listing requirements

of the Nasdaq Capital Market could result in a delisting of our Class A common stock.

If we fail to satisfy the continued

listing requirements of Nasdaq, such as the corporate governance or public float requirements, or the minimum closing bid price requirement,

Nasdaq will take steps to de-list our Class A common stock.

As a result of several factors, including but not limited to our financial

performance, volatility in cryptocurrency, volatility in the financial markets generally due to the tightening of monetary policy by the

Board of Governors of the United States Federal Reserve Bank (the “Federal Reserve”) and other geopolitical events, events

such as the ongoing wars around the world, the per share price of our Class A common stock has declined below the minimum bid price threshold

required for continued listing.

Such a de-listing would likely have a negative effect on the price of our Class A common stock and would

impair your ability to sell or purchase our Class A common stock when you wish to do so, as well as adversely affect our ability to issue

additional securities and obtain additional financing in the future.

March 25, 2026, we received a notification letter from the Listing Qualifications Department of Nasdaq (the “Delisting Notice”),

stating that based on its review of the Company’s public filings with the SEC, its staff has determined to delist our securities

pursuant to its discretionary authority under Listing Rule 5550(a)(2).

Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company

that fails to meet the Minimum Bid Price Requirement and has effected a reverse stock split over the prior one-year period, or has effected

one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, will not be eligible

for an automatic 180-day grace compliance period and the Nasdaq Listing Qualifications Department is obligated to immediately issue a

delisting determination.

Due to having effected a 1-for-11 reverse stock split on August 5, 2024,

and a 1-for-750 reverse stock split on June 27, 2025, resulting in a cumulative 1-for-8,250 reverse stock split ratio over the last two

years , we are not eligible for the 180-day period to regain compliance under Rule 4810(c)(3)(A).

Pursuant to the Delisting Notice,

we plan to appeal this determination before a Nasdaq Hearings Panel, staying the suspension of our common stock.

Such a delisting would

likely have a negative effect on the price of our Class A common stock and would impair your ability to sell or purchase our Class A

common stock when you wish to do so, as well as adversely affect our ability to issue additional securities and obtain additional financing

in the future.

can be no assurances that the Nasdaq Hearings Panel will grant our request for reconsideration, that any appeal will be successful with

the Panel, or that we will be able meet the continued listing requirements if we are permitted to continue trading on Nasdaq.

In connection

with the Delisting Notice, Nasdaq will complete the delisting by filing a Notification of Removal from Listing and/or Registration on

Form 25 with the SEC after applicable appeal periods have lapsed.

Even if the Panel approves our appeal and we meet all parameters of

any compliance plan afforded by the Panel, there can be no assurance that we will meet continued listing requirements in the future.

In determining whether to afford a company a cure period prior to commencing suspension or delisting procedures, Nasdaq analyzes all

relevant facts including any past history of bid price compliance issues, and our repeated bid price compliance issues in 2025 and 2026

could be used as a factor by Nasdaq in any future decision to delist our securities from trading on its exchange.

Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities

exchange, we expect our securities could be quoted on an over-the-counter market.

If this were to occur, we could face significant material

adverse consequences, including:

limited availability of market quotations for our securities;

liquidity for our securities;

determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common

stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market

for our securities;

limited amount of news and analyst coverage;

decreased ability to issue additional securities or obtain additional financing in the future.

There are risks related to Nasdaq’s proposed

rule regarding minimum market value of listed securities.

In January 2026, Nasdaq proposed

to strengthen its continued listing standards by requiring all companies listed on the Nasdaq Global or Capital Markets to maintain a

minimum Market Value of Listed Securities (“MVLS”) of at least $5 million.

If a company’s MVLS falls below this threshold

for 30 consecutive business days, Nasdaq will immediately suspend trading and delist the company’s securities, with no compliance

or cure period.

While companies may request a hearing to challenge a delisting determination, trading will remain suspended throughout

the appeals process, and the hearing panel can only reverse the decision if Nasdaq staff made a factual error.

If this proposed rule is

approved and adopted, any sustained decline in our MVLS below $5 million could result in the immediate suspension and delisting of our

securities from Nasdaq, which would materially and adversely affect the liquidity and market price of our shares and could negatively

impact our ability to raise capital or attract investors.

Our MVLS over the 30 consecutive business days as of March 31, 2026 has been

under $5 million.

market price of our Class A common stock has been volatile and has declined significantly since our initial public offering and may face

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securities issuances could result in significant dilution to our stockholders and impair the market price of our common stock.

Future issuances

of shares of our common stock could depress the market price of our common stock and result in dilution to existing holders of our common

Also, to the extent outstanding options and warrants to purchase our shares of our common stock are exercised or options or other

equity-based awards are issued or become vested, there will be further dilution.

The amount of dilution could be substantial depending

upon the size of the issuances or exercises.

Furthermore, we may issue additional equity securities that could have rights senior to those

issuances of shares of our common stock could depress the market price of our common stock and result in dilution to existing holders

of our common stock.

Also, to the extent outstanding options and warrants to purchase our shares of our common stock are exercised or

options or other equity-based awards are issued or become vested, there will be further dilution.

The amount of dilution could be substantial

depending upon the size of the issuances or exercises.

Furthermore, we may issue additional equity securities that could have rights

senior to those of our common stock.

We have a significant number of pre-funded and advisory warrants that are or will be exercisable into shares of our Class A common stock.

As of March 27, 2026, there were Cryptocurrency Pre-Funded Warrants exercisable for 25,084,068 shares of Class A common stock, with certain

Cryptocurrency Pre-Funded Warrants becoming exercisable on April 18, 2026, and Advisory Warrants exercisable for 5,264,752 shares of Class

A common stock, which become exercisable on April 23, 2026.

As of March 27, 2026, we had 5,039,563 shares of Class A common stock issued

and outstanding.

Accordingly, upon the exercise of some or all of the pre-funded warrants or advisory warrants, as well as the exercise

of stock options and other equity-based awards that have been or will be issued and/or granted by us, the percentage ownership and voting

power held by our existing stockholders will be significantly reduced and our stockholders could experience significant dilution.

sales and issuances of our Class A common stock have and may continue to occur, or may be anticipated, which have and could continue

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qualified executive officers.

we are no longer an “emerging growth company” as defined in the JOBS Act, we must now comply with various reporting

requirements.

With these new requirements, we expect to incur additional expenses and devote increased management effort toward

ensuring compliance with them.

We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a

public company or the timing of such costs.

a public reporting company, we are subject to rules and regulations established from time to time by the SEC regarding our internal control

over financial reporting.

In connection with our assessment of the effectiveness of our disclosure controls and procedures, we identified

certain material weaknesses in our internal control over financial reporting, which caused our Chief Executive Officer and Chief Financial

Officer to determine that our internal control over financial reporting, as well as our disclosure controls and procedures, were not

effective as of December 31, 2020 and these material weaknesses have not yet been fully remediated as of December 31, 2024

we are no longer an “emerging growth company” as defined in the JOBS Act, we must now comply with various reporting requirements.

With these new requirements, we expect to incur additional expenses and devote increased management effort toward ensuring compliance

We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the

timing of such costs.

As a public reporting company, we are subject

to rules and regulations established from time to time by the SEC regarding our internal control over financial reporting.

In connection

with our assessment of the effectiveness of our disclosure controls and procedures, we identified material weaknesses in our internal

control over financial reporting as of December 31, 2025, which caused our Chief Executive Officer and Chief Financial Officer to determine

that our internal control over financial reporting, as well as our disclosure controls and procedures, were not effective as of December

a public reporting company, we are subject to the rules and regulations established from time to time by the SEC.

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processes and controls, as well as on our personnel.

management, including our Chief Executive Officer and Chief Financial and Legal Officer, is responsible for establishing and maintaining

management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining

adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

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detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted

an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020.

Based on this evaluation,

our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2020, the Company had not maintained effective

internal control over financial reporting as a result of the existence of material weaknesses.

Consequently, management, with the participation

of our Chief Executive Officer and Chief Financial Officer, also concluded that our disclosure controls and procedures were not effective

as of December 31, 2020 to provide reasonable assurance that information required to be disclosed by the Company in the reports filed

or submitted by it under the Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the

SEC’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports

was accumulated and communicated to the Company’s management, including, our Chief Executive Officer and our Chief Financial Officer,

as appropriate to allow timely decisions regarding required disclosure.

“material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that

there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely

Although we are implementing measures to remediate the material weaknesses, we cannot give any assurances that the identified

material weaknesses will be remediated on a timely basis or at all or that additional material weaknesses will not be identified in the

future in connection with our compliance with the provisions of Section 404 of SOX.

Our management may be required to devote significant

time and expense to remediate these material weaknesses and any other material weaknesses that may be discovered in the future and may

not be able to remediate such material weaknesses in a timely manner.

The existence of any future material weakness in our internal control

over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements,

cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our reported financial information, any

of which could lead to a decline in the per share trading price of our common stock.

Under the supervision and with the participation of our management,

including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control

over financial reporting as of December 31, 2025.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded

that as of December 31, 2025, the Company had not maintained effective internal control over financial reporting as a result of the existence

of material weaknesses.

Consequently, management, with the participation of our Chief Executive Officer and Chief Financial Officer, also

concluded that our disclosure controls and procedures were not effective as of December 31, 2025 to provide reasonable assurance that

information required to be disclosed by the Company in the reports filed or submitted by it under the Exchange Act were recorded, processed,

summarized, and reported within the time periods specified in the SEC’s rules and forms, and to provide reasonable assurance that

information required to be disclosed by the Company in such reports was accumulated and communicated to the Company’s management,

including, our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

A “material weakness” is a deficiency, or combination of

deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of

our financial statements will not be prevented or detected on a timely basis.

Although we are implementing measures to remediate the material

weaknesses, we cannot give any assurances that the identified material weaknesses will be remediated on a timely basis or at all or that

additional material weaknesses will not be identified in the future in connection with our compliance with the provisions of Section 404

Our management has devoted and expects to continue to devote significant time and expense to remediate these material weaknesses

and any other material weaknesses that may be discovered in the future and may not be able to remediate such material weaknesses in a

timely manner.

The existence of any future material weakness in our internal control over financial reporting could also result in errors

in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations,

and cause investors to lose confidence in our reported financial information, any of which could lead to a decline in the per share trading

price of our common stock.

described in Item 9A of Part II of this Annual Report on Form 10-K, we are continuing to implement our remediation plan to address the

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through testing, that these controls are operating effectively.

previously disclosed, in 2020, we began a multi-year implementation of a new ERP system, which we completed in 2023.

The ERP system serves

as our existing core financial system.

Concurrently, in 2023, the re-design of the user access roles and permissions in the new ERP system

were completed, and new controls were put into place.

These previously reported material weaknesses related to ineffective user access

controls were not yet remediated as of 12/31/2024.

The identified material weaknesses primarily relate to deficiencies

in the Company’s control environment, including limitations in personnel and segregation of duties, ineffective information technology

general controls, including user access controls, insufficient review and approval controls over financial reporting processes, and controls

over digital asset transactions, valuation, and reconciliation.

These material weaknesses were not yet remediated as of December 31, 2025.

have not paid dividends in the past and have no current plans to pay dividends in the future, and any return on investment may be limited

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Class A common stock.

August 9, 2022 and June 5, 2023, we effected reverse stock splits.

On August 5, 2024 and June 26, 2025, we effected reverse stock splits.

The reverse stock splits did not change the par value of our Class

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31, 2025, our amended and restated certificate of incorporation provides for 1,800,000,000 shares of authorized Class A common stock,

shares of authorized Class B common stock and 10,000,000 shares of authorized preferred stock and we have approximately 3,726,926 shares

of Class A common stock outstanding, 11,860,201 shares reserved for exercise or vesting

of outstanding warrants and options to purchase shares of Class A common stock and 203,022 shares of Class A common stock reserved for

future grant under the Company’s equity incentive plan.

30,000,000 shares of authorized Class B common stock and 10,000,000 shares of authorized preferred stock and we have approximately 5,039,563

shares of Class A common stock outstanding, 30,380,354 shares reserved for exercise or vesting of outstanding warrants and options to

purchase shares of Class A common stock and 3,000,000 shares of Class A common stock reserved for future grant under the Company’s

equity incentive plan.

No shares of Class B common stock or preferred stock are outstanding.

June 18, 2024, the Board unanimously approved and declared advisable, and recommended that our stockholders approve at a Special Meeting

that took place on July 29, 2024, the adoption of the 2024 Amendment to effect a reverse stock split of our Common Stock at any whole

number between, and inclusive of, one-for-two to one-for-twenty.

Approval of the Proposed 2024 Reverse Stock Split at the 2024 Special

Meeting granted the Board the authority, but not the obligation, to file the 2024 Amendment to effect the Proposed 2024 Reverse Stock

Split no later than August 5, 2024, with the exact ratio and timing of the Proposed 2024 Reverse Stock Split to be determined at the

discretion of the Board.

On July 23, 2024, the Board approved the reverse split at a ratio of one-for-11 and the Amendment has been filed

with the Secretary of State of the State of Delaware, that became effective on August 5, 2024 at 12:01 AM Eastern Time, before the opening

of trading on the Nasdaq.

For additional information about the July 29, 2024 Special Meeting and the 2024 Reverse Stock Split, see the

Company’s Definitive Proxy Statement filed with the SEC on June 28, 2024 and Form 8-K filed with the SEC on July 31, 2024.

respect to authorized but unissued and unreserved shares, we could also use such shares to oppose a hostile takeover attempt or delay

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shares and thwart a takeover attempt;

advance notice requirements

applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to the form and content

of a stockholder’s notice;

restrictions on the transfer

of our outstanding shares of Class B common stock;

a supermajority stockholder

vote requirement for amending certain provisions of our amended and restated certificate of incorporation and amended and restated

the inability of our stockholders

to act by written consent;

a requirement that the

authorized number of directors may be changed only by resolution of the Board;

allowing all vacancies,

including newly created directorships, to be filled by the affirmative vote of a majority of directors then in office, even if less

than a quorum, except as otherwise required by law;

limiting the forum for

certain litigation against us to Delaware;

limiting the persons that

can call special meetings of our stockholders to our Board or the chairperson of our Board.

notice requirements applicable to stockholders for matters to be brought before a meeting of stockholders and requirements as to

the form and content of a stockholder’s notice;

on the transfer of our outstanding shares of Class B common stock;

supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation

and amended and restated bylaws;

inability of our stockholders to act by written consent;

requirement that the authorized number of directors may be changed only by resolution of the Board;

all vacancies, including newly created directorships, to be filled by the affirmative vote of a majority of directors then in office,

even if less than a quorum, except as otherwise required by law;

the forum for certain litigation against us to Delaware;

the persons that can call special meetings of our stockholders to our Board or the chairperson of our Board.

provisions might discourage, delay or prevent a change in control of our company or a change in our Board.

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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