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Item 1A. Risk Factors

2026-10-02 compared with 2025-10-09 · 1214 added, 859 removed, 461 unchanged (82% of the section changed)

An investment in our securities involves a

high degree of risk.

You should carefully consider all of the risks described below, together with the other information contained in

this Annual Report, including our financial statements and related notes, before making a decision to invest in our securities.

of the following events occur, our business, financial condition and operating results may be materially adversely affected.

In that event,

the trading price of our securities could decline, and you could lose all or part of your investment.

An investment in our securities involves a high

degree of risk.

You should carefully consider all of the risks described below, together with the other information contained in this

Annual Report, including our financial statements and related notes, before making a decision to invest in our securities.

If any of the

following events occur, our business, financial condition and operating results may be materially adversely affected.

In that event, the

trading price of our securities could decline, and you could lose all or part of your investment.

Risks Related to Our Digital Asset Treasury Strategy

Our DAT Strategy exposes us to various risks, including risks associated

with bitcoin.

Our DAT Strategy exposes us to

various risks, including the following:

Our digital assets are subject

to a first priority security interest and are not freely available for our use or for use by our stockholders.

Our digital assets,

controlled-account cash and related proceeds are subject to a first-priority security interest and are not freely available to us or our

common stockholders.

Substantially all digital assets, cash and other property held in the applicable controlled accounts, together with

related proceeds, are pledged to the Collateral Agent, an affiliate of the Convertible Note Investor, for the benefit of the holders of

the Convertible Notes.

The Collateral Agent has contractual control over the blocked custodial account.

A sale, redemption or conversion

of a digital asset into cash within the account does not release the collateral;

the resulting cash remains pledged.

We may withdraw or

use collateral only if the applicable release conditions are satisfied or the required consent is obtained.

If an Event of Default occurs,

as defined in the Convertible Notes, the Collateral Agent may take control of and dispose of the collateral and apply the proceeds to

the secured obligations before any residual value is available to holders of our common stock.

Accordingly, the gross value of our controlled-account

assets should not be viewed as unrestricted cash or net asset value available to common stockholders.

Bitcoin and other digital assets

are highly volatile assets .

Bitcoin (or BTC) and Ethereum (or ETH) are highly volatile assets.

BTC has traded between approximately

$57,725 and $126,279 per bitcoin on the Coinbase exchange (a principal market for bitcoin) during the 12 months preceding the date of

this Annual Report.

The trading price of bitcoin significantly decreased during prior periods, and such declines may occur again in the

Bitcoin does not pay interest

or dividends .

Bitcoin does not pay interest or other returns and we can only generate cash from our bitcoin holdings if we sell

our bitcoin or implement strategies to create income streams or otherwise generate cash by using our bitcoin holdings.

Even if we pursue

any such strategies, we may be unable to create income streams or otherwise generate cash from our bitcoin holdings, and any such strategies

may subject us to additional risks.

While our DAT Strategy is new,

our bitcoin holdings could significantly impact our financial results and the market price of our listed securities.

holdings we purchase could significantly affect our financial results.

If we continue to invest in bitcoin and increase our overall holdings

of bitcoin in the future, they will have an even greater impact on our financial results and the market price of our listed securities.

We intend to purchase bitcoin

primarily using proceeds from equity and debt financings.

Our ability to achieve the objectives of our DAT Strategy depends in

significant part on our ability to obtain equity and debt financing.

If we are unable to obtain equity or debt financing on favorable

terms or at all, we may not be able to successfully execute on our DAT Strategy .

Our DAT Strategy has not been

tested and we cannot be certain it will be successful.

As we roll out our new DAT Strategy, we will need to continually examine

the risks and rewards of our strategy to acquire and hold BTC and ETH.

This strategy has not been tested over an extended period of time

or under different market conditions.

For example, although we believe BTC, due to its limited supply, has the potential to serve as a

hedge against inflation in the long term, the short-term price of BTC declined in recent periods during which the inflation rate increased.

If BTC or ETH prices were to decrease or our DAT Strategy otherwise proves unsuccessful, our financial condition, results of operations,

and the market price of our listed securities would be materially adversely impacted.

We will be subject to counterparty

risks, including in particular risks relating to our custodians.

Although we will implement various measures that are designed

to mitigate our counterparty risks, including by storing substantially all of the digital assets we own in custody accounts at institutional-grade

custodians and negotiating contractual arrangements intended to establish that our property interest in custodially-held bitcoin is not

subject to claims of our custodians’ creditors, applicable insolvency law is not fully developed with respect to the holding of

digital assets in custodial accounts.

If our custodially-held BTC or ETH were nevertheless considered to be the property of our custodians’

estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated

as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such digital assets,

or delaying or hindering our access to our digital asset holdings, and this may ultimately result in the loss of the value related to

some or all of such bitcoin, which could have a material adverse effect on our financial condition as well as the market price of our

listed securities.

The broader digital

assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of BTC, ETH or

A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other

events relating to companies operating in the digital asset industry have highlighted the counterparty risks applicable to owning

and transacting in digital assets.

Although these bankruptcies, closures, liquidations and other events have not resulted in any

loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our BTC or ETH, they have, in the

short-term, likely negatively impacted the adoption rate and use of bitcoin.

Additional bankruptcies, closures, liquidations,

regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further

negatively impact the adoption rate, price, and use of BTC or ETH, limit the availability to us of financing collateralized by BTC

or ETH or create or expose additional counterparty risks.

Changes in the accounting

treatment of our bitcoin holdings could have significant accounting impacts, including increasing the volatility of our results.

digital asset holdings and related transactions may create significant volatility in our reported results and our historical financial

statements do not reflect all recent developments.

Our financial statements through June 30, 2026 reflected our BTC and ETH acquisitions

and related fair-value changes, along with our June 2026 USDai acquisition and subsequent conversion or staking into sUSDai.

they do not reflect our August 2026 instructions to redeem sUSDai and sell ETH.

We adopted ASU 2023-08 on July 1, 2025 and record qualifying

digital assets at fair value, with realized and unrealized changes recognized in earnings.

As a result, changes in digital asset values

and any sale or redemption may materially increase volatility in our reported earnings.

The accounting and valuation treatment of sUSDai

and related redemption proceeds may involve judgment and may differ from the value displayed by the custodian or protocol dashboard.

The broader digital assets industry,

including the technology associated with digital assets, the rate of adoption and development of, and use cases for, digital assets, market

perception of digital assets, and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing,

and there may be additional risks in the future that are not possible to predict.

Digital assets can be highly volatile assets,

and, in the event we develop significant digital asset holdings, fluctuations in the price are likely to influence our financial results

and the market price of our listed securities.

Digital assets can be highly volatile

assets, and, in the event we develop significant holdings, fluctuations in the price are likely to influence our financial results and

the market price of our listed securities.

Our financial results and the market price of our listed securities would be adversely affected,

and our business and financial condition would be negatively impacted, if we hold substantial digital assets and the price decreased substantially,

including as a result of:

decreased user and investor confidence in our digital asset holdings, including due to the various factors described herein;

investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, miners and investors;

(ii) actual or expected significant dispositions of digital assets by large holders, including the expected liquidation of digital assets associated with entities that have filed for bankruptcy protection and the transfer and sale of digital assets associated with significant hacks, seizures, or forfeitures, such as the transfers of BTC to (a) creditors of the hacked cryptocurrency exchange Mt.

Gox which distribution began in July 2024, (b) claimants following proceedings related to a 2016 hack of Bitfinex—which claims are currently being adjudicated, (c) the German government following the seizure of about 50,000 bitcoin in January 2024 from the operator of Movie2k.to, or (d) the Northern District Court of California granting the U.S.

Department of Justice in January 2025 the right to liquidate 69,370 bitcoin seized from the Silk Road marketplace;

and (iii) actual or perceived manipulation of the spot or derivative markets for bitcoin or spot bitcoin exchange-traded products (“ETPs”);

negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, digital asset or the broader digital assets industry, for example, (i) public perception that bitcoin can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine, or to fund criminal or terrorist activities, such as the purported use of digital assets by Hamas to fund its terrorist attack against Israel in October 2023;

(ii) expected or pending civil, criminal, regulatory enforcement or other high profile actions against major participants in the bitcoin ecosystem, including the SEC’s enforcement actions against Coinbase, Inc.

and Binance Holdings Ltd.;

(iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates;

and (iv) the actual or perceived environmental impact of bitcoin and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the bitcoin mining process;

changes in consumer preferences and the perceived value or prospects of bitcoin;

competition from other digital assets that exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S.

government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;

a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for bitcoin purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of bitcoin or adversely affect investor confidence in digital assets generally;

the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed bitcoin, or the transfer of substantial amounts of bitcoin from bitcoin wallets attributed to Mr.

developments relating to the Bitcoin protocol, including (i) changes to the Bitcoin protocol that impact its security, speed, scalability, usability, or value, such as changes to the cryptographic security protocol underpinning the Bitcoin blockchain, changes to the maximum number of bitcoin outstanding, changes to the mutability of transactions, changes relating to the size of blockchain blocks, and similar changes, (ii) failures to make upgrades to the Bitcoin protocol to adapt to security, technological, legal or other challenges, and (iii) changes to the Bitcoin protocol that introduce software bugs, security risks or other elements that adversely affect bitcoin;

disruptions, failures, unavailability, or interruptions in service of trading venues for bitcoin, such as, for example, the announcement by the digital asset exchange FTX Trading that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the SEC enforcement action brought against Binance Holdings Ltd., which has now been dropped but which initially sought to freeze all of its assets during the pendency of the enforcement action and has since resulted in Binance discontinuing all fiat deposits and withdrawals in the U.S.;

the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry in 2023, and the exit of Binance from the U.S.

market as part of its settlement with the Department of Justice and other federal regulatory agencies;

regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of bitcoin, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry;

further reductions in mining rewards of bitcoin, including due to block reward halving events, which are events that occur after a specific period of time (approximately once every four years, the most recent of which occurred in April 2024) that reduce the block reward earned by “miners” who validate bitcoin transactions;

increases in the costs associated with bitcoin mining, including increases in electricity costs and hardware and software used in mining;

new or enhanced regulation or taxation of bitcoin mining, which could further increase the costs associated with bitcoin mining, any of which may cause a decline in support for the Bitcoin network;

transaction congestion and fees associated with processing transactions on the Bitcoin network;

macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations;

developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the Bitcoin blockchain becoming insecure or ineffective;

changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, the adverse impacts attributable to the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict, and the broadening of the Israel-Hamas conflict to other countries in the Middle East.

Bitcoin and other digital assets are novel assets, and are subject

to significant legal, commercial, regulatory and technical uncertainty.

Bitcoin and other digital assets

are relatively novel and are subject to significant uncertainty, which could adversely impact their price.

The application of state and

federal securities laws and other laws and regulations to digital assets is evolving, and 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 bitcoin

or the ability of individuals or institutions such as us to own or transfer bitcoin.

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 bitcoin or the ability of individuals or institutions such as us to own or

transfer bitcoin.

For example, within the past several years:

President Trump signed an executive order instructing a working group comprised of representatives from key federal agencies to evaluate measures that can be taken to provide regulatory clarity and certainty built on technology-neutral regulations for individuals and firms involved in digital assets, including through well-defined jurisdictional regulatory boundaries and the working group recently released a report outlining a proposed framework for regulating the digital asset market in the U.S.;

the European Union adopted Markets in Crypto Assets Regulation (“MiCA”), a comprehensive digital asset regulatory framework for the issuance and use of digital assets, like bitcoin;

in June 2023, the SEC filed complaints against Binance Holdings Ltd.

(“Binance”) and Coinbase, Inc., and their respective affiliated entities, relating to, among other claims, that each party was operating as an unregistered securities exchange, broker, dealer, and clearing agency;

in November 2023, the SEC filed a complaint against Payward Inc.

and Payward Ventures Inc., together known as Kraken, alleging, among other claims, that Kraken’s crypto trading platform was operating as an unregistered securities exchange, broker, dealer, and clearing agency;

in June 2023, the United Kingdom adopted and implemented the Financial Services and Markets Act 2023 (“FSMA 2023”), which regulates market activities in “cryptoassets”;

in November 2023, Binance and its then chief executive officer reached a settlement with the U.S.

Department of Justice, CFTC, the U.S.

Department of Treasury’s Office of Foreign Asset Control, and the Financial Crimes Enforcement Network to resolve a multi-year investigation by the agencies and a civil suit brought by the CFTC, pursuant to which Binance Holdings Ltd.

agreed to, among other things, pay $4.3 billion in penalties across the four agencies and to discontinue its operations in the United States;

in May 2025, the SEC dismissed its civil enforcement action, which included charges of operating unregistered exchanges, broker-dealers and clearing agencies, as well as charges of the unregistered offer and sale of securities, against Binance, its related entities BAM Trading Services Inc.

and BAM Management US Holdings Inc, and its founder, Changpeng Zhao;

in China, the People’s Bank of China and the National Development and Reform Commission have outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal within the country.

It is not possible to predict

whether, or when, new laws will be enacted that change the legal framework governing digital assets or provide additional authorities

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

It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight

might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide

services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact

the value of digital assets generally and bitcoin specifically.

The consequences of any new law or regulation relating to digital assets

and digital asset activities could adversely affect the market price of bitcoin, as well as our ability to hold or transact in bitcoin,

and in turn adversely affect the market price of our listed securities.

Moreover, the risks of engaging

in the DAT Strategy are relatively novel and have 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.

The growth of the digital assets

industry in general, and the use and acceptance of BTC or ETH in particular, may also impact the price of BTC or ETH and is subject to

a high degree of uncertainty.

The pace of worldwide growth in the adoption and use of BTC, ETH or other cryptocurrency may depend, for

instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to BTC, ETH or other cryptocurrency,

institutional demand for cryptocurrency as an investment asset, the participation of traditional financial institutions in the digital

assets industry, consumer demand for BTC or ETH as a store of value or means of payment, and the availability and popularity of alternatives

to BTC or ETH.

Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue

to grow over the long-term.

Because digital assets have no

physical existence beyond the record of transactions on the Bitcoin or other blockchain, a variety of technical factors related to the

BTC blockchain could also impact the price of BTC.

For example, malicious attacks by miners, inadequate mining fees to incentivize validating

of bitcoin transactions, hard “forks” of the Bitcoin blockchain into multiple blockchains, and advances in digital computing,

algebraic geometry, and quantum computing could undercut the integrity of the Bitcoin blockchain and negatively affect the price of bitcoin.

The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were

to deny or limit banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which

could also decrease the price of bitcoin.

Actions by U.S.

banking regulators, such as the issuance in February 2023 by Federal banking

agencies of the “Interagency Liquidity Risk Statement,” which cautioned banks on contagion risks posed by providing services

to digital assets customers, and similar actions, have in the past resulted in or contributed to reductions in access to banking services

for bitcoin-related customers and service providers, or the willingness of traditional financial institution to participate in markets

for digital assets.

The liquidity of bitcoin 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 bitcoin and other digital assets.

From time to time, we may hold

USDai and sUSDai.

Such holdings of USDai and sUSDai would expose us to risks specific to the USD.AI protocol and sUSDai’s yield-bearing

and redemption mechanics.

In addition to the risks associated with our DAT Strategy and digital asset holdings described above, our holdings

of USDai and staked USDai, or sUSDai, will be subject to risks specific to the USD.AI protocol, including risks relating to the protocol’s

reserve, staking, share-pricing, lending and redemption mechanics.

Although USDai is intended to function as a fully backed synthetic

dollar, it is not cash or an insured bank deposit, and its redeemability depends on the continued availability and operation of the protocol’s

supported stablecoin reserves, swap adapters and related processes.

sUSDai is a yield-bearing vault/share token rather than a stablecoin,

and its value, yield and redemption proceeds depend on the performance, valuation and liquidity of underlying lending positions, unallocated

USDai and protocol-administered share-pricing methodology.

Redemptions of sUSDai may be asynchronous, queued, subject to timelocks and

serviced periodically, and the redemption share price may be lower than the deposit share price or the value reflected in accrued yield,

including if underlying loans default, collateral values are impaired, liquidity is unavailable, or the applicable position managers,

administrators or governance-controlled processes do not operate as expected.

Any inability to redeem USDai or sUSDai when needed, any

shortfall between expected and realized redemption value or yield, or any adverse change in the USD.AI protocol, its collateral, loan

performance, reserves or redemption process could reduce the value or liquidity of these holdings and adversely affect our liquidity,

financial condition and results of operations.

Our historical financial statements do not reflect the potential

variability in earnings that we may experience in the future relating to our bitcoin holdings.

We only recently commenced our

DAT Strategy.

As a result, our 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 bitcoin.

The price of bitcoin has historically

been subject to dramatic price fluctuations and is highly volatile.

In December 2023, the FASB issued ASU 2023-08, which we adopted effective

July 1, 2025.

We determine the fair value of our bitcoin based on quoted (unadjusted) prices on the Coinbase exchange (our principal market

for bitcoin).

ASU 2023-08 requires us to measure

our bitcoin holdings at fair value in our statement of financial position, and to recognize gains and losses from changes in the fair

value of our digital assets in net income each reporting period.

ASU 2023-08 also requires us to provide certain interim and annual disclosures

with respect to our digital asset holdings.

ASU 2023-08 does not permit retrospective restatement of prior periods.

Accordingly, changes

in the fair value of our digital assets may significantly affect the carrying value of our digital assets on our balance sheet and our

results of operations from period to period.

As a result of our adoption of

ASU 2023-08, changes in the fair value of our bitcoin and other digital assets are recognized in net income in each reporting period.

Accordingly, due in particular to the volatility in the price of bitcoin and other digital assets, our holdings of digital assets may

increase the volatility of our financial results, and our results for periods following our adoption of ASU 2023-08 may not be directly

comparable to periods prior to our adoption of the guidance.

Because we may purchase additional

bitcoin in future periods and increase our overall holdings of BTC, ETH or other digital assets, we expect that the proportion of our

total assets represented by our DAT holdings will increase in the future.

As a result, due in particular to the fair value accounting

required by ASU 2023-08, volatility in our earnings may be significantly more than what we experienced in prior periods.

The availability of spot exchange traded products

(“ETPs”) for bitcoin and other digital assets may adversely affect the market price of our listed securities.

Although bitcoin and other digital

assets have experienced a surge of investor attention since bitcoin was invented in 2008, until recently investors in the United States

had limited means to gain direct exposure to bitcoin and other digital assets through traditional investment channels, and instead generally

were only able to hold bitcoin or other digital assets through “hosted” wallets provided by digital asset service providers

or through “unhosted” wallets that expose the investor to risks associated with loss or hacking of their private keys.

the relative novelty of digital assets, general lack of familiarity with the processes needed to hold bitcoin directly, as well as the

potential reluctance of financial planners and advisers to recommend direct bitcoin holdings to their retail customers because of the

manner in which such holdings are custodied, some investors have sought exposure to bitcoin through investment vehicles that hold bitcoin

and issue shares representing fractional undivided interests in their underlying bitcoin holdings.

These vehicles, which were previously

offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net

asset value, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to bitcoin.

On January 10, 2024, the SEC approved

the listing and trading of spot bitcoin ETPs, the shares of which can be sold in public offerings and are traded on U.S.

national securities

The approved ETPs commenced trading directly to the public on January 11, 2024, with a trading volume of $4.6 billion on the

first trading day.

Additionally, on May 23, 2024, the SEC approved rule changes permitting the listing and trading of spot ETPs that invest

in ether, the main crypto asset supporting the Ethereum blockchain.

The approved spot ETPs commenced trading directly to the public on

July 23, 2024.

The listing and trading of spot ETPs for ether offers investors another alternative to gain exposure to digital assets,

which could result in a decline in the trading price of bitcoin as well as a decline in the value of our common stock relative to the

value of our bitcoin.

Although we are an operating company,

and we believe we offer a different value proposition than a bitcoin investment vehicle such as a spot bitcoin ETP, investors may nevertheless

view our common stock as an alternative to an investment in an ETP, and choose to purchase shares of a spot bitcoin ETP instead of our

common stock.

They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to

bitcoin that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an

operating business, such as ours.

Additionally, unlike spot bitcoin ETPs, we (i) do not seek for our shares of common stock to track the

value of the underlying bitcoin or other digital asset we hold before payment of expenses and liabilities, (ii) do not benefit from various

exemptions and relief under the Securities Exchange Act of 1934, as amended, including Regulation M, and other securities laws, which

enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and

redemption, (iii) are a Nevada corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would

require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our bitcoin

holdings or our daily net asset value.

Furthermore, recommendations by broker-dealers to buy, hold, or sell complex products and non-traditional

ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable

to broker-dealers making recommendations with respect to our common stock.

Based on how we are viewed in the market relative to ETPs,

and other vehicles which offer economic exposure to bitcoin, such as bitcoin futures exchange-traded funds (“ETFs”), leveraged

bitcoin futures ETFs, and similar vehicles offered on international exchanges, any premium or discount in our common stock relative to

the value of our bitcoin holdings may increase or decrease in different market conditions.

As a result of the foregoing factors,

availability of spot ETPs for bitcoin and other digital assets could have a material adverse effect on the market price of our listed

Our DAT Strategy subjects us to enhanced regulatory oversight.

As noted above, several spot bitcoin

ETPs have received approval from the SEC to list their shares on a U.S.

national securities exchange with continuous share creation and

redemption at net asset value.

Even though we are not, and do not function in the manner of, a spot bitcoin ETP, it is possible that we

nevertheless could face regulatory scrutiny from the SEC or other federal or state agencies due to our bitcoin holdings.

In addition, there has been increasing

focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities,

or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine.

we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering

and sanctions laws and regulations and take care to only acquire our bitcoin through entities subject to anti-money laundering regulation

and related compliance rules in the United States, if we are found to have purchased any of our bitcoin from bad actors that have used

bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or

dealings in bitcoin by us may be restricted or prohibited.

Our bitcoin holdings will serve

as collateral securing our outstanding indebtedness to the Investors.

In addition, we may incur indebtedness or enter into other financial

instruments in the future that may be collateralized by our bitcoin or other digital asset holdings.

We may also consider pursuing strategies

to create income streams or otherwise generate funds using our digital asset holdings.

These types of bitcoin- and cryptocurrency-related

transactions are the subject of enhanced regulatory oversight.

These and any other bitcoin- or cryptocurrency-related transactions we

may enter into, beyond simply acquiring and holding BTC or ETH, may subject us to additional regulatory compliance requirements and scrutiny,

including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities

laws and regulations.

Additional laws, guidance and

policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX, one of the

world’s largest cryptocurrency exchanges, in November 2022, which brought increased regulatory scrutiny to the digital asset industry.

Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of

new or varying regulatory requirements by the government or any new legislation affecting bitcoin, as well as enforcement actions involving

or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold

and transact in bitcoin or other digital assets.

In addition, private actors that

are wary of bitcoin, other digital assets, or the regulatory concerns associated with digital assets in general have in the past taken

and may in the future take further actions that may have an adverse effect on our business or the market price of our listed securities.

Due to the unregulated nature and lack of transparency

surrounding the operations of many bitcoin and digital asset trading venues, such trading venues may experience greater fraud, security

failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence

in bitcoin trading venues and adversely affect the value of our bitcoin.

Bitcoin and other digital asset

trading venues are relatively new and, in many cases, unregulated.

Furthermore, there are many digital asset trading venues which do not

provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory

As a result, the marketplace may lose confidence in BTC, ETH or other digital asset trading venues, including prominent exchanges

that handle a significant volume of digital asset trading and/or are subject to regulatory oversight, in the event one or more bitcoin

trading venues cease or pause for a prolonged period the trading of bitcoin or other digital assets, or experience fraud, significant

volumes of withdrawal, security failures or operational problems.

In 2019 there were reports claiming

that 80-95% of bitcoin trading volume on trading venues was false or non-economic in nature, with specific focus on unregulated exchanges

located outside of the United States.

The SEC also alleged as part of its June 5, 2023 complaint against Binance Holdings Ltd.

committed strategic and targeted “wash trading” through its affiliates to artificially inflate the volume of certain digital

assets traded on its exchange.

The SEC has also brought recent actions against individuals and digital asset market participants alleging

that such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling

of the same assets in fictitious transactions to manipulate their underlying trading price.

Such reports and allegations may indicate

that the bitcoin market is significantly smaller than expected and that the United States makes up a significantly larger percentage of

the bitcoin market than is commonly understood.

Any actual or perceived wash trading in the bitcoin market, and any other fraudulent or

manipulative acts and practices, could adversely affect the value of our bitcoin.

Negative perception, a lack of stability in the broader

bitcoin markets and the closure, temporary shutdown or operational disruption of bitcoin trading venues, lending institutions, institutional

investors, institutional miners, custodians, or other major participants in the bitcoin ecosystem, due to fraud, business failure, cybersecurity

events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in bitcoin and the

broader bitcoin ecosystem and greater volatility in the price of bitcoin.

For example, in 2022, each of Celsius Network, Voyager Digital,

Three Arrows Capital, FTX, and BlockFi filed for bankruptcy, after which the market prices of bitcoin and other digital assets significantly

In addition, in June 2023, the SEC announced enforcement actions against Coinbase, Inc., and Binance Holdings Ltd., two providers

of large trading venues for digital assets, which similarly was followed by a decrease in the market price of bitcoin and other digital

These were followed in November 2023, by an SEC enforcement action against Payward Inc.

and Payward Ventures Inc., together known

as Kraken, another large trading venue for digital assets.

As the price of our listed securities is affected by the value of our bitcoin

holdings, the failure of a major participant in the bitcoin ecosystem could have a material adverse effect on the market price of our

listed securities.

The concentration of our bitcoin holdings enhances the risks inherent

in our DAT Strategy.

While we only just recently began

our acquisition of bitcoin, we anticipate that the concentration of our bitcoin holdings will limit the risk mitigation that we could

achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks

inherent in our DAT Strategy.

Any future significant declines in the price of bitcoin would have a pronounced impact on our financial

condition than if we used our cash to purchase a more diverse portfolio of assets.

The emergence or growth of other digital assets,

including those with significant private or public sector backing, could have a negative impact on the price of bitcoin and adversely

affect our business.

As a result of our DAT Strategy,

our digital assets have been concentrated in BTC and ETH holdings.

Accordingly, the emergence or growth of digital assets other than BTC

or ETH may have a material adverse effect on our financial condition.

However, there are numerous alternative digital assets and many

entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain

platforms or digital assets that do not use proof-of-work mining like the Bitcoin network.

For example, in late 2022, the Ethereum network

transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power

than proof-of-work mining.

The Ethereum network has completed another major upgrade since then and may undertake additional upgrades in

If the mechanisms for validating transactions in Ethereum and other alternative digital assets are perceived as superior to

proof-of-work mining, those digital assets could gain market share relative to bitcoin.

Other alternative digital assets

that compete with bitcoin in certain ways include “stablecoins,” which are designed to maintain a constant price because of,

for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S.

dollar deposits and short-term U.S.

securities) equal to the total value of stablecoins in circulation.

Stablecoins have grown rapidly as an alternative to bitcoin and other

digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms.

Additionally, central banks in

some countries have started to introduce digital forms of legal tender.

For example, China’s CBDC project was made available to

consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing

the potential creation of new CBDCs.

Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing

jurisdiction, could also compete with, or replace, bitcoin and other digital assets as a medium of exchange or store of value.

the emergence or growth of these or other digital assets could cause the market price of bitcoin to decrease, which could have a material

adverse effect on our business, prospects, financial condition, and operating results.

When acquired, our bitcoin holdings will be

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 bitcoin market

has 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.

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

For example, a number of bitcoin trading

venues temporarily halted deposits and withdrawals in 2022.

As a result, our bitcoin holdings may not be able to serve as a source of

liquidity for us to the same extent as cash and cash equivalents.

Further, bitcoin we hold with our custodians and transact with our trade

execution partners 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.

Additionally, we

may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered bitcoin or otherwise generate

funds using our bitcoin holdings, including in particular during times of market instability or when the price of bitcoin has declined

significantly.

If we are unable to sell our bitcoin, enter into additional capital raising transactions, including capital raising transactions

using bitcoin as collateral, or otherwise generate funds using our bitcoin holdings, or if we are forced to sell our bitcoin at a significant

loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

If we or our third-party service providers experience a security

breach or cyberattack and unauthorized parties obtain access to our bitcoin, or if our private keys are lost or destroyed, or other similar

circumstances or events occur, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially

adversely affected.

Substantially all of the bitcoin

we own is held in custody accounts at institutional-grade digital asset custodians.

Security breaches and cyberattacks are of particular

concern with respect to our bitcoin.

Bitcoin and other blockchain-based cryptocurrencies and the entities that provide services to participants

in the bitcoin ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.

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.

A successful security breach or cyberattack could result in:

a partial or total loss of our bitcoin in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our bitcoin;

harm to our reputation and brand;

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

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

Further, 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 confidence in the broader Bitcoin blockchain ecosystem

or in the use of the Bitcoin network to conduct financial transactions, which could negatively impact us.

Attacks upon systems across a

variety of industries, including industries related to bitcoin, 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.

The 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.

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, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched

against a target and we may not be able to implement adequate preventative measures.

Further, there has been an increase in such activities

due to the increase in work-from-home arrangements since the onset of the COVID-19 pandemic.

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 bitcoin

industry, including third-party services on which we rely, could materially and adversely affect our business.

We face risks relating to the custody of our

bitcoin, including the loss or destruction of private keys required to access our bitcoin and cyberattacks or other data loss relating

to our bitcoin.

We hold, or will hold, our bitcoin

with regulated custodians that have duties to safeguard our private keys.

Our custodial services contracts do not restrict our ability

to reallocate our bitcoin among our custodians, and our bitcoin holdings may be concentrated with a single custodian from time to time.

In light of the significant amount of bitcoin we hold, we continually seek to engage additional custodians to achieve a greater degree

of diversification in the custody of our bitcoin as the extent of potential risk of loss is dependent, in part, on the degree of diversification.

If there is a decrease in the availability of digital asset custodians that we believe can safely custody our bitcoin, for example, due

to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we

may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our bitcoin, and

our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.

The insurance that covers losses

of our bitcoin holdings covers only a small fraction of the value of the entirety of our bitcoin holdings, and there can be no guarantee

that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect

to our bitcoin.

Moreover, our use of custodians exposes us to the risk that the bitcoin our custodians hold on our behalf could be subject

to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise

ownership rights with respect to such bitcoin.

Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance

coverage we maintain related to our bitcoin.

Bitcoin 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 bitcoin is

While the Bitcoin 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 bitcoin held in such wallet.

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, neither we nor our custodians will be able to access the bitcoin held in the related digital wallet.

Furthermore, we cannot

provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a

result of a cyberattack.

The bitcoin and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and

may in the future be, subject to security breaches, cyberattacks, or other malicious activities.

Regulatory change reclassifying bitcoin as a

security could lead to our classification as an “investment company” under the Investment Company Act of 1940 and could adversely

affect the market price of bitcoin and the market price of our listed securities.

While we are only just commencing

our DAT Strategy, in the future our assets may be concentrated in bitcoin holdings.

While senior SEC officials have stated their view

that bitcoin is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead

to our classification as an “investment company” under the Investment Company Act of 1940, which would subject us to significant

additional regulatory controls that could have a material adverse effect on our ability to execute on our DAT Strategy, and our business

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

In addition, if bitcoin is determined

to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination

could adversely affect the market price of bitcoin and in turn adversely affect the market price of our listed securities.

We 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.

bitcoin is determined to be a security for purposes of the federal securities laws, we would take steps to reduce our holdings of bitcoin

as a percentage of our total assets.

These steps may include, among others, selling bitcoin 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 bitcoin 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 bitcoin 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 bitcoin and in turn adversely affect

the market price of our common stock.

We 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.

Mutual funds, ETFs 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 investors.

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 DAT Strategy, our use of leverage, the manner in which our bitcoin 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 DAT Strategy

would require the approval of our board of directors, no shareholder or regulatory approval would be necessary.

Consequently, our board

of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our

bitcoin holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring

and holding bitcoin.

Our DAT Strategy exposes us to risk of non-performance by counterparties.

Our DAT Strategy exposes us to

the risk of non-performance by counterparties, whether contractual or otherwise.

Risk of non-performance includes inability or refusal

of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other

For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of

our agreements with them, which could result in a loss of bitcoin, a loss of the opportunity to generate funds, or other losses.

Our primary counterparty risk

with respect to our bitcoin is custodian performance obligations under the various custody arrangements we have entered into.

of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating

in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital,

FTX Trading and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services

to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Inc., Binance

Holdings Ltd., and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s

Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General

against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted

the perceived and actual counterparty risk applicable to digital asset ownership and trading.

Although these bankruptcies, closures and

liquidations have not resulted in any loss or misappropriation of our bitcoin, nor have such events adversely impacted our access to our

bitcoin, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests

in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or

similar proceedings.

While our custodians are subject

to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding,

no assurance can be provided that our custodially-held bitcoin will not become part of the custodian’s insolvency estate if one

or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.

Additionally, if we pursue any strategies

to create income streams or otherwise generate funds using our bitcoin holdings, we would become subject to additional counterparty risks.

Any significant non-performance by counterparties, including in particular the custodians with which we custody substantially all of our

bitcoin, could have a material adverse effect on our business, prospects, financial condition, and operating results.

Our financial results and the market price of our common stock may

be affected by the price of Bitcoin.

As part of our capital allocation

strategy for assets that are not required to provide working capital for our ongoing operations, we have invested and may continue to

invest in bitcoin.

After closing on the sale of Series A Convertible Notes and Series B Convertibles, we purchased and sold digital assets,

which will remain in a controlled account.

The price of bitcoin has historically been subject to dramatic price fluctuations and is highly

Moreover, digital assets, such as bitcoin, are relatively novel and the application of securities laws and other regulations

to such assets is unclear in many respects.

It is possible that regulators may interpret laws in a manner that adversely affects the

liquidity or value of bitcoin.

Any decrease in the fair value of bitcoin would result in a loss recognized in our net income for the applicable

reporting period, which could be material to our financial results, 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, accounting guidance applicable to digital assets may continue to evolve, and any future changes in the

manner in which we account for our bitcoin assets could have a material adverse effect on our financial results and the market price

of our common stock.

In 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 bitcoin holdings, the price of bitcoin

may significantly influence the market price of our common stock.

The price of our common stock has been and may continue to be volatile

and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.

Our stock price has been and is

likely to continue to be volatile.

The stock market in general has experienced extreme volatility that has often been unrelated to the

operating performance of particular companies.

With the adoption of our new bitcoin treasury strategy, we expect to see additional volatility.

As a result of this volatility, you may not be able to sell your common stock.

The market price for our common stock may be influenced

by many factors, including:

our bitcoin treasury strategy;

the success of competitive products, services or technologies;

regulatory or legal developments in the United States and other countries;

the recruitment or departure of key personnel;

actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

variations in our financial results or those of companies that are perceived to be similar to us;

general economic, industry and market conditions;

the other factors described in this “ Risk Factors ’’ section.

Our bitcoin 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 crypto 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.

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

Further, bitcoin we hold with our custodians

and transact with our trade execution partners 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

Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our digital

assets or otherwise generate funds using our bitcoin holdings, including in particular during times of market instability or when the

price of bitcoin has declined significantly.

If we are unable to sell our bitcoin, enter into additional capital raising transactions

using bitcoin as collateral, or otherwise generate funds using our bitcoin holdings, or if we are forced to sell our bitcoin at a significant

loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

We 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.

Mutual 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 investors.

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 DAT Strategy, our use of leverage, the manner in which our bitcoin 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 of directors, no stockholder or regulatory approval would be necessary.

Consequently,

our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect

of our bitcoin holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of

acquiring and holding digital assets.

We face other risks related to our DAT Strategy.

Our DAT Strategy exposes us to

various risks, including the following:

bitcoin and other digital assets are subject to significant legal, commercial, regulatory, and technical uncertainty, and our DAT Strategy could subject us to enhanced regulatory oversight;

regulatory changes could impact our ability to operate validators or receive rewards;

regulatory scrutiny of the Company’s activities may increase, potentially limiting our operations;

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

uncertainty around bitcoin’s regulatory status may impact our ability to list on certain exchanges;

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

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

Risks Related to Our Business and Products

We sell proprietary brand offerings, as

well as third party brands, which could expose us to various risks.

We sell proprietary brand offerings, as well

as third party brands, which could expose us to various risks.

We rely on different intellectual

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or other reasons, our brand and reputation could be damaged, and our business may be harmed.

Although we believe that our

proprietary brand products offer significant value to our customers at each price point and provide us with higher gross margins than

sales of comparable third-party branded products, expanding our proprietary brand offerings subjects us to certain specific risks in addition

to those discussed elsewhere in this section, such as:

Although we believe that our proprietary

brand products offer significant value to our customers at each price point and provide us with higher gross margins than sales of comparable

third-party branded products, expanding our proprietary brand offerings subjects us to certain specific risks in addition to those discussed

elsewhere in this section, such as:

potential mandatory or voluntary product recalls in the event of product defects or other issues;

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our ability to successfully navigate and avoid claims related to the intellectual property and proprietary rights of third parties, which, if successful, could force us to modify or discontinue products, pay significant damages or enter into expensive licensing arrangements with the prevailing party, in addition to other harm, including to our reputation or financial results.

An increase in sales of our

proprietary brands may also adversely affect our sales of the products of certain of our vendors which may, in turn, adversely affect

our relationship with such vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect

on our business, results of operations and financial condition.

Our competitors and potential competitors

may develop products and technologies that are more effective or commercially attractive than our products.

Our products compete against

national and regional products and in-house branded products produced by various suppliers, many of which are established companies that

provide products that perform functions similar to our products.

Our competitors may develop or market products that are more effective

or commercially attractive than our current or future products.

Some of our competitors have substantially greater financial, operational,

marketing, and technical resources than we do.

Moreover, some of these competitors may offer a broader array of products and sell their

products at prices lower than ours and may have greater name recognition.

In addition, if demand for our specialty indoor gardening supplies

and products continues to grow, we may face competition from new entrants into our field.

Due to this competition, there is no assurance

that we will not encounter difficulties in generating or increasing revenues and capturing market share.

An increase in sales of our proprietary

brands may also adversely affect our sales of the products of certain of our vendors which may, in turn, adversely affect our relationship

with such vendors.

Our failure to adequately address some or all of these risks could have a material adverse effect on our business,

results of operations and financial condition.

Our competitors and potential competitors may

develop products and technologies that are more effective or commercially attractive than our products.

Our products compete against national

and regional products and in-house branded products produced by various suppliers, many of which are established companies that provide

products that perform functions similar to our products.

Our competitors may develop or market products that are more effective or commercially

attractive than our current or future products.

Some of our competitors have substantially greater financial, operational, marketing,

and technical resources than we do.

Moreover, some of these competitors may offer a broader array of products and sell their products

at prices lower than ours and may have greater name recognition.

In addition, if demand for our specialty indoor gardening supplies and

products continues to grow, we may face competition from new entrants into our field.

Due to this competition, there is no assurance that

we will not encounter difficulties in generating or increasing revenues and capturing market share.

In addition, increased competition

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technical expertise or marketing, distribution, or support capabilities to compete successfully in the future.

We may not be able to successfully develop

new products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.

Our future success depends,

in part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer

We may not be able to successfully develop new

products or improve existing products or maintain our effectiveness in reaching consumers through rapidly evolving communication vehicles.

Our future success depends, in

part, upon our ability to improve our existing products and to develop, manufacture and market new products to meet evolving consumer

We cannot be certain that we will be successful in developing, manufacturing and marketing new products or product innovations

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effect on our business, results of operations, financial condition and cash flows.

Further, an increase in the selling prices for

our products resulting from a pass-through of increased freight costs could also have an adverse impact on the volume of products

we sell, and as a result, our business, financial condition, and operating results may suffer.

The ongoing conflict between Russia and

Ukraine may adversely affect our business, financial condition, or results of operations .

On February 24, 2022, Russia

initiated a military offensive in Ukraine.

While neither Ukraine nor Russia is a key supplier of ours, the scope, intensity, duration

and outcome of the ongoing war is uncertain and its continuation or escalation could have a material adverse effect on iPower due to the

general impact on the global supply chain and prices of certain commodities.

While we presently have no business or direct trade relationships

with entities located in Russia or Ukraine, the ongoing conflict between Russia and Ukraine could potentially cause supply chain disruptions

that could disrupt our business should any of our end-suppliers rely on supplies, products or shipments from those regions.

In response to the war, the

United States, other North Atlantic Treaty Organization (“NATO”) member states, as well as non-member states, have announced

targeted economic sanctions on Russia, certain Russian citizens and enterprises.

Any continuation or escalation of the war may trigger

a series of additional economic and other sanctions.

Certain companies have experienced negative reactions from their investors, employees,

customers, or other stakeholders as a result of their action or inaction related to the war between Russia and Ukraine.

We continue to

monitor the reactions of our investors, employees, customers and other stakeholders and, as of the date of this report, have neither experienced

any material adverse financial impacts nor suffered from the loss of key customers or employees.

Further, an increase in the selling prices for our

products resulting from a pass-through of increased freight costs could also have an adverse impact on the volume of products we sell,

and as a result, our business, financial condition, and operating results may suffer.

The ongoing conflict between Russia and Ukraine

may adversely affect our business, financial condition, or results of operations .

On February 24, 2022, Russia initiated

a military offensive in Ukraine.

While neither Ukraine nor Russia is a key supplier of ours, the scope, intensity, duration and outcome

of the ongoing war is uncertain and its continuation or escalation could have a material adverse effect on iPower due to the general impact

on the global supply chain and prices of certain commodities.

While we presently have no business or direct trade relationships with entities

located in Russia or Ukraine, the ongoing conflict between Russia and Ukraine could potentially cause supply chain disruptions that could

disrupt our business should any of our end-suppliers rely on supplies, products or shipments from those regions.

In response to the war, the United

States, other North Atlantic Treaty Organization (“NATO”) member states, as well as non-member states, have announced targeted

economic sanctions on Russia, certain Russian citizens and enterprises.

Any continuation or escalation of the war may trigger a series

of additional economic and other sanctions.

Certain companies have experienced negative reactions from their investors, employees, customers,

or other stakeholders as a result of their action or inaction related to the war between Russia and Ukraine.

We continue to monitor the

reactions of our investors, employees, customers and other stakeholders and, as of the date of this report, have neither experienced any

material adverse financial impacts nor suffered from the loss of key customers or employees.

In addition, the risk of cybersecurity

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support of Ukraine, could also adversely affect our operations.

We insure ourselves against

many types of risks;

We insure ourselves against many

types of risks;

however, while this insurance may mitigate certain of the risks associated with the ongoing war, our level of insurance

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to contain its spread and mitigate its effects.

Furthermore, even after an

epidemic or pandemic subsides, we may continue to experience adverse effects to our business as a result of a pandemic’s overall

global economic impact, including any recession, economic downturn or increased unemployment that has occurred or may occur in the future.

Furthermore, even after an epidemic

or pandemic subsides, we may continue to experience adverse effects to our business as a result of a pandemic’s overall global economic

impact, including any recession, economic downturn or increased unemployment that has occurred or may occur in the future.

We have a limited operating history on which

stockholders and potential investors can evaluate our business or base an investment decision.

Our business prospects are

difficult to predict given our limited operating history and unproven business strategy.

While we inherited in 2018 the business of our

predecessor entity, BizRight LLC, an entity through which we acquired certain assets and assumed certain liabilities, we did not begin

operations under iPower Inc.

Our business prospects are difficult

to predict given our limited operating history and unproven business strategy.

While we inherited in 2018 the business of our predecessor

entity, BizRight LLC, an entity through which we acquired certain assets and assumed certain liabilities, we did not begin operations

under iPower Inc.

(formerly BZRTH Inc.) until our formation in April 2018.

Thereafter, we launched our e-commerce platforms,

www.Zenhydro.com and www.simpledeluxe.com, where we sell our own in-house branded products, marketed under the iPower and Simple Deluxe

brands, and provide distribution for hundreds of other brands manufactured by a number of third-party vendors.

Accordingly, the operation

of our e-commerce platform, branding and marketing of our own in-house branded products, and our relationships with third-party vendors

and suppliers have been limited.

If we are unable to effectively maintain our relationships with third-party vendors and suppliers, manage

our e-commerce operations, as well as other sales platforms/distribution network, our business is unlikely to succeed.

Our business should

be viewed in light of these risks, challenges and uncertainties.

In addition, our board of directors only authorized our commencement

of the Digital Treasury Strategy in June 17, 2025, so, in the event we launch such strategy, we have only limited experience in that area

and cannot assure investors that we will be successful in executing on a Digital Treasury Strategy.

Almost all of our

sales are carried out through third-party platforms, including Amazon, Temu, Walmart and eBay;

any disruption in our selling efforts on

such third party platforms could substantially disrupt our business.

we maintain our own websites, Zenhydro.com and simpledeluxe.com , as well as our offline wholesale department,

almost all of our sales occurred on third party platforms such as Amazon, Temu, Walmart and other platforms.

As such, should

we experience a disruption in our sales on third party platforms, or should such third party platforms somehow come to rank us

unfavorably or fail to list our products, this could negatively affect our overall sales and, thus, negatively impact our overall

Poor economic conditions could adversely

affect our business.

Uncertain global economic

conditions, particularly in light of the COVID-19 pandemic, could adversely affect our business.

During the COVID-19 pandemic, some of

the effects of which are still ongoing, there have been ongoing negative global economic trends, such as decreased consumer and business

spending, higher than normal unemployment levels and declining consumer and business confidence.

All of these issues have posed challenges

to our business and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources

to support our brands, unfavorable economic conditions may negatively affect demand for our products.

If we are unable to effectively maintain our relationships

with third-party vendors and suppliers, manage our e-commerce supply chain operations, as well as other sales platforms/distribution network,

our business is unlikely to succeed.

Our business should be viewed in light of these risks, challenges and uncertainties.

we only began implementing our DAT strategy in December 2025, so, we have only limited experience in that area and cannot assure investors

that we will be successful in executing on this strategy.

Poor economic conditions could adversely affect

our business.

Uncertain global economic conditions,

particularly in light of the COVID-19 pandemic, could adversely affect our business.

During the COVID-19 pandemic, some of the effects

of which are still ongoing, there have been ongoing negative global economic trends, such as decreased consumer and business spending,

higher than normal unemployment levels and declining consumer and business confidence.

All of these issues have posed challenges to our

business and could result in declining revenues, profitability and cash flow.

Although we continue to devote significant resources to

support our brands, unfavorable economic conditions may negatively affect demand for our products.

Our most price-sensitive customers

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our competitors’ products or result in a shift in our product mix from higher margin to lower margin products.

Heightened inflation, increased interest

rates and other economic conditions including potential recession and credit market disruptions could negatively impact our business.

Heightened inflation, increased interest rates

and other economic conditions including potential recession and credit market disruptions could negatively impact our business.

Customer demand for our products

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financial condition and results of operation may be adversely impacted.

Volatile or weakened economic conditions

Volatile or weakened economic conditions in

and globally may adversely affect our business and operating results.

Moreover, while the recent banking crisis involving

the closure of Silicon Valley Bank (“SVB”) and other small banks did not have a material direct impact on our business, continued

Moreover, while the recent banking crisis involving the

closure of Silicon Valley Bank (“SVB”) and other small banks did not have a material direct impact on our business, continued

instability in the global banking system may result in additional bank failures, as well as volatility of global financial markets, either

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additional bank failures, as well as volatility of global financial markets, either of which may adversely impact our business and financial

Government efforts to combat inflation,

along with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs.

Government efforts to combat inflation, along

with other interest rate pressures arising from an inflationary economic environment, could lead to higher financing costs.

Inflation has risen on a global

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of operations.

We rely heavily on our access to the China

markets for the production of our products;

and China trade relations further deteriorate, and should the ongoing trade war

continue, our supply chain, and thus our operations and revenues, could be subject to deleterious effects.

We are heavily reliant on

manufacturers in China to produce many of the goods we sell.

Approximately 96% of the products we purchased for resale during the fiscal

year ended June 30, 2025 were manufactured in and imported from China.

At present, we have 7 suppliers in the U.S.

and more than 144 suppliers

However, all of the goods sourced in China were purchased through our VIE, DHS.

We rely heavily on our access to the China markets

for the production of our products;

and China trade relations further deteriorate, and should the ongoing trade war continue,

our supply chain, and thus our operations and revenues, could be subject to deleterious effects.

We are heavily reliant on manufacturers

in China to produce many of the goods we sell.

Most of products we purchased for resale during the fiscal year ended June 30, 2026 were

manufactured in and imported from China while others are domestically sourced.

and China have been involved in ongoing

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to increased tariffs.

However, should we be unable to continue to absorb such costs, or should we need to pass all such costs on to consumers,

such increase could cut into our competitive advantage and our volume of sales activity in the United States could be materially reduced.

Any such reduction may materially and adversely affect our sales and our business.

Our China-based subsidiary, Dayourenzi (Shenzhen)

Technology Co., Ltd., through which we have historically procured much of our inventory and overseas logistical support, is owned through

contractual agreements, as required by the laws of the PRC.

As a result, the Chinese government could potentially exercise significant

oversight and/or discretion over the business and operations of our China-based subsidiary and could potentially intervene in or influence

the operations of those businesses at any time.

We recently acquired two

China-based subsidiaries, Dayourenzi (Shenzhen) Technology Co., Ltd.

(“DYRZ”) and Daheshou (Shenzhen) Information Technology

(DYRZ and DHS together are referred to as our “China-based Subsidiary”).

The Operating Company

DYRZ, in conjunction with our since disposed variable interest entity, DHS, has historically provided the bulk of our China-based procurement

and logistical needs and we believe it will help streamline our procurement of goods and shipping, as well as reduce costs by bringing

these services in house.

Our China-based subsidiary is owned by us through contractual arrangements with our Hong Kong subsidiary, Fly

Elephant Limited, and its parent company, Anivia Limited, a British Virgin Islands company.

In addition, our China-based subsidiary may

be at risk of influence by the PRC government as it is subject to the laws, rules and regulations of the PRC, which can be complex and

evolve rapidly.

The PRC government has the power to exercise significant oversight and discretion over the conduct of our China-based

Subsidiary, and the regulations to which they are subject may change rapidly and with little notice to us or our shareholders.

the application, interpretation, and enforcement of new and existing laws and regulations in the PRC are often uncertain.

these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities, and inconsistently with

our own policies and practices.

New laws, regulations and other government directives in the PRC may also be costly to comply with, and

such compliance or any associated inquiries or investigations or any other government actions may, as regards our China-based Subsidiary:

Delay or impede development,

Result in negative publicity or increase our operating costs,

Require significant management time and attention, and

Subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical operations, or demands or orders that we modify or even cease our China-based business practices.

The promulgation of new laws

or regulations, or the new interpretation of existing laws and regulations, could restrict or otherwise unfavorably impact the ability

or manner in which we conduct the business of our China based subsidiaries and could require us to change certain aspects of their business

to ensure compliance, which could delay our procurement of goods, reduce revenues, increase costs, or subject us to additional liabilities.

To the extent any new or more stringent measures are required to be implemented in the PRC, our business, financial condition, and results

of operations could be adversely affected.

We also passed some costs on to consumers, such increase could cut into our competitive advantage and our volume

of sales activity in the United States could be materially reduced.

Any such reduction may materially and adversely affect our sales and

our business.

We face intense competition that could prohibit

us from developing or increasing our customer base.

The specialty gardening and

hydroponic product industry is highly competitive.

The industry is highly competitive.

We may compete with companies that have greater capital resources and facilities.

More established gardening companies with much greater financial resources which do not currently compete with us may be able to easily

adapt their existing operations to sell hydroponic growing equipment.

Our competitors may also introduce new hydroponic growing equipment,

and manufacturers may sell equipment direct to consumers.

Due to this competition, there is no assurance that we will not encounter difficulties

in increasing revenues and maintaining and/or increasing market share.

In addition, increased competition may lead to reduced prices

and/or margins for products we sell.

If we need additional capital to fund the

expansion of our operations, we may not be able to obtain sufficient capital on terms favorable to us and may be forced to limit the expansion

of our operations.

More established companies with much greater financial

resources which do not currently compete with us may be able to easily adapt their existing operations to sell similar products.

Our competitors

may also introduce new, and manufacturers may sell equipment direct to consumers.

Due to this competition, there is no assurance that

we will not encounter difficulties in increasing revenues and maintaining and/or increasing market share.

In addition, increased competition

may lead to reduced prices and/or margins for products we sell.

If we need additional capital to fund the expansion

of our operations, we may not be able to obtain sufficient capital on terms favorable to us and may be forced to limit the expansion of

our operations.

In connection with our growth

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our acquisitions and growth prospects.

Our business depends substantially on the

continuing efforts of our executive officers and our business may be severely disrupted if we lose their services.

Our future success depends

substantially on the continued services of our executive officers, especially our Chairman, Chief Executive Officer, President and Interim

Chief Financial Officer, Chenlong Tan.

We do not presently maintain key man life insurance on any of our executive officers or directors,

although we intend to obtain such insurance in the near future.

If one or more of our executive officers are unable or unwilling to continue

in their present positions, we may not be able to replace them readily, if at all.

The loss of any of our executive officers could cause

our business to be disrupted, and we may incur additional and unforeseen expenses to recruit and retain new officers.

If we are not successful in attracting and

retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in

the highly competitive hydroponics and gardening industry depends in large part upon our ability to attract highly qualified managerial

and sales personnel.

In order to induce valuable employees to come and work for us and to remain with us, we may provide employees with

stock options, restricted stock, restricted stock units that vest over time.

The value to employees of such incentive stock and stock

options that vest over time will be significantly affected by movements in our stock price that we will not be able to control and may

at any time be insufficient to counteract more lucrative offers our employees may receive from other companies.

Our success also depends

on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior personnel.

Certain of our executive

officers have employment agreements but these agreements do not guarantee us the continued services of such employees.

Further, we do

not currently offer any health care or retirement benefits to any of our employees, and many of our more established competitors may offer

more competitive compensation packages for the kind of personnel that is critical to our company’s survival and success.

difficulty identifying, attracting, hiring, training and retaining such qualified personnel, or incur significant costs in order to do

so, our business and financial results could be negatively impacted.

For example, offering competitive compensation packages may significantly

increase our operating expenses and negatively impact our gross profits.

Further, the loss of our executive officers or our other key

personnel, particularly with little or no notice, could cause delays on business developments and projects and could have an adverse impact

on our customers and industry relationships, our business, operating results, or financial condition.

Our business depends substantially on the continuing

efforts of our executive officers and our business may be severely disrupted if we lose their services.

Our future success depends substantially

on the continued services of our executive officers, especially our Chairman, Chief Executive Officer, President and Interim Chief Financial

Officer, Chenlong Tan.

We do not presently maintain key man life insurance on any of our executive officers or directors, although we

intend to obtain such insurance in the near future.

If one or more of our executive officers are unable or unwilling to continue in their

present positions, we may not be able to replace them readily, if at all.

The loss of any of our executive officers could cause our business

to be disrupted, and we may incur additional and unforeseen expenses to recruit and retain new officers.

If we are not successful in attracting and retaining

highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the

highly competitive industry depends in large part upon our ability to attract highly qualified managerial and sales personnel.

to induce valuable employees to come and work for us and to remain with us, we may provide employees with stock options, restricted stock,

restricted stock units that vest over time.

The value to employees of such incentive stock and stock options that vest over time will

be significantly affected by movements in our stock price that we will not be able to control and may at any time be insufficient to counteract

more lucrative offers our employees may receive from other companies.

Our success also depends on our ability to continue to attract,

retain and motivate highly skilled junior, mid-level and senior personnel.

Certain of our executive officers have employment agreements

but these agreements do not guarantee us the continued services of such employees.

Further, we do not currently offer any health care

or retirement benefits to any of our employees, and many of our more established competitors may offer more competitive compensation packages

for the kind of personnel that is critical to our company’s survival and success.

If we have difficulty identifying, attracting,

hiring, training and retaining such qualified personnel, or incur significant costs in order to do so, our business and financial results

could be negatively impacted.

For example, offering competitive compensation packages may significantly increase our operating expenses

and negatively impact our gross profits.

Further, the loss of our executive officers or our other key personnel, particularly with little

or no notice, could cause delays on business developments and projects and could have an adverse impact on our customers and industry

relationships, our business, operating results, or financial condition.

In order to increase our sales and marketing

infrastructure, we will need to grow the size of our organization, and we may experience difficulties in managing this growth.

As we continue to work to

increase our presence across the hydroponics market, we will need to expand the size of our employee base for managerial, operational,

sales, marketing, financial, human resources, and other areas of specialization.

Future growth would impose significant added responsibilities

on members of management, including the need to identify, recruit, maintain, motivate, and integrate additional employees.

our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial

amount of time to managing these growth activities.

Our future financial performance and our ability to continue to grow our operation

and effectively compete in the hydroponics industry will depend in part on our ability to effectively manage any future growth.

Certain of our products may be purchased

for use in the cannabis industry and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices,

enforcement approaches, judicial interpretations, and consumer perceptions.

Our hydroponic gardening products

are multi-purpose products designed and intended for growing a wide range of plants and are generally purchased from retailers by end

users who may grow any variety of vegetables and plants, including cannabis.

As such, we sell hydroponic gardening products that end users

may purchase for use in a variety of industries or segments, including the growing of cannabis.

The cannabis industry is subject to varying,

inconsistent and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer

For example, certain countries and a total of 46 U.S.

states plus the District of Columbia have adopted frameworks that authorize,

regulate and tax the cultivation, processing, sale and use of cannabis for medicinal and/or non-medicinal use, including legalization

of hemp and CBD, while the U.S.

Controlled Substances Act and the laws of U.S.

states prohibit growing cannabis.

We act solely as a supplier

and distributor of hydroponics equipment and supplies, and at no time do we engage in the cultivation, sale, distribution or dispensing

of cannabis or any cannabis products or accessories.

In addition, we believe that none of our hydroponic equipment and supplies or any

other products we sell would be considered paraphernalia under federal drug paraphernalia laws.

Similar to Amazon and eBay, we do not

advertise or promote our products on our website for use in growing cannabis, nor do we screen or otherwise track how our customers use

our products – whether it is to grow flowers, fruits, vegetables or cannabis.

We are unaware of any threatened

or actual law enforcement activity against manufacturers, distributors or retailers of hydroponic supplies that could potentially be used

by participants in the cannabis industry, and do not believe that our operations directly or indirectly violate aid and abet violations

of the Controlled Substances Act (including Section 856) or other federal laws (including conspiracy laws, money laundering laws, or RICO.

Nevertheless, a theoretical risk exists that our activities could be deemed to be facilitating the selling or distribution of cannabis

in violation of the Federal Controlled Substances Act, or to constitute aiding or abetting, or being an accessory to, a violation of that

Federal authorities have not focused their resources on such tangential or secondary violations of the Act, nor have they threatened

to do so, with respect to the sale of equipment that might be used by cannabis gardeners, or with respect to any supplies marketed to

participants in the emerging medical cannabis industry.

We are unaware of such a broad application of the Controlled Substances Act by

federal authorities.

If the federal government

were to change its practices, or were to expend its resources attacking providers of equipment that could be usable by participants in

the medical or recreational cannabis industry, such action could have a materially adverse effect on our operations, our customers, or

the sale of our products.

In addition, we could be faced with or required to expend substantial resources in an effort to comply with

new and changing laws and regulations.

Such necessary capital expenditures could negatively affect our earnings and competitive position.

Although the demand for our

products may be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations

and consumer perceptions develop, we cannot reasonably predict the nature of such developments or the effect, if any, that such developments

could have on our business.

Continued federal intervention in certain

segments of the cannabis industry may have a negative impact on us.

Although we expect minimal

impact on the Company from any federal government crackdown on cannabis providers, a disruption to the cannabis industry could cause some

potential customers to be more reluctant to invest in growing equipment, including equipment we sell.

Moreover, the federal government’s

tactics may change or have unforeseen effects, which could be detrimental to our business.

Acquisitions, other strategic alliances,

and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business

and results of operations.

As we continue to work to increase

our presence across the market, we will need to expand the size of our employee base for managerial, operational, sales, marketing, financial,

human resources, and other areas of specialization.

Future growth would impose significant added responsibilities on members of management,

including the need to identify, recruit, maintain, motivate, and integrate additional employees.

In addition, our management may have

to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing

these growth activities.

Our future financial performance and our ability to continue to grow our operation and effectively compete in

the industry will depend in part on our ability to effectively manage any future growth.

Acquisitions, other strategic alliances, and

investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and

results of operations.

Acquisitions are an important

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business generally.

Our acquisitions could also

result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment

Our acquisitions could also result

in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or impairment

of goodwill and purchased long-lived assets, and restructuring charges, any of which could harm our financial condition or results of

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In addition, the anticipated benefits and synergies of many of our acquisitions may not materialize.

Our ongoing investment in and development

of our new in-house branded product line is inherently risky and could disrupt our ongoing businesses.

We have invested and expect

to continue to invest in our own in-house branded product lines.

Our ongoing investment in and development of

our new in-house branded product line is inherently risky and could disrupt our ongoing businesses.

We have invested and expect to

continue to invest in our own in-house branded product lines.

Such endeavors may involve significant risks and uncertainties, including

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condition, and operating results.

If we are unable to effectively execute

our e-commerce business, our reputation and operating results may be harmed.

We sell certain of our products

over the internet through our e-commerce platforms, www.Zenhydro.com and www.simpledeluxe.com.

The success of our e-commerce business

depends on our investment in this platform, consumer preferences and buying trends relating to e-commerce, and our ability to both maintain

the continuous operation of our online store and our fulfillment operations and provide a shopping experience that will generate orders

and return visits to our online store.

We are also vulnerable to

certain additional risks and uncertainties associated with our e-commerce business, including:

changes in required technology interfaces;

website downtime and other technical failures;

costs and technical issues associated with website software, systems and technology investments

and upgrades;

data and system security;

system failures, disruptions and breaches and the costs to address and remedy such failures, disruptions

computer viruses;

and changes in and compliance with applicable federal and state regulations.

In addition, our efforts to

remain competitive with technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce

marketing tools such as paid search and mobile applications, among others, may increase our costs and may not increase sales or attract

Our failure to successfully respond to these risks and uncertainties might adversely affect the sales of our e-commerce business,

as well as damage our reputation and brands.

In addition, the success of

our e-commerce business and the satisfaction of our customers depends on their timely receipt of our products and their ability to pick

up their desired products from one of our garden centers.

The efficient delivery and/or pick up of our products requires that our garden

and distribution centers have adequate capacity to support the current level of e-commerce operations and any anticipated increased levels

that may occur as a result of the growth of our e-commerce business.

If we encounter difficulties with our garden and distribution centers,

or if any garden and distribution centers shut down for any reason, including as a result of fire or other natural disaster, or pursuant

to expanded stay-at-home orders or other restrictions due to any potential pandemic, we could face shortages of inventory, which would

result in our inability to properly our online store.

Such a situation could cause us to incur significantly higher costs and lead to

longer lead times associated with distributing products to our customers, which could cause us to lose customers.

Experiencing any of

these issues could have a material adverse effect on our business and harm our reputation.

A substantial proportion of our sales occur

on Amazon and, as such, should our Company experience any negative actions by Amazon, our sales could be significantly affected.

A significant proportion

of our sales occur on the Amazon.com platform.

For the years ended June 30, 2025 and 2024, Amazon Vendor and Amazon Seller customers

accounted for 82% and 90% of the Company's total revenues, respectively, and as of June 30, 2025 and 2024, accounts receivable from Amazon

Vendor and Amazon Seller accounted for 72% and 91% of the Company’s total accounts receivable, respectively.

Any disruption in

our sales or accessibility to Amazon, or any negative action taken by Amazon related to our sales, could negatively affect our business.

Our reliance on third-party manufacturers could harm our business.

We rely on third parties to

manufacture certain of our products.

This reliance generates a number of risks, including decreased control over the production process,

which could lead to production delays or interruptions and inferior product quality control.

In addition, performance problems at these

third-party manufacturers could lead to cost overruns, shortages, or other problems, which could increase our costs of production or result

in delivery delays to our customers.

In addition, if one or more

of our third-party manufacturers becomes insolvent or unwilling to continue to manufacture products of acceptable quality, at acceptable

We rely on third parties to manufacture

certain of our products.

This reliance generates a number of risks, including decreased control over the production process, which could

lead to production delays or interruptions and inferior product quality control.

In addition, performance problems at these third-party

manufacturers could lead to cost overruns, shortages, or other problems, which could increase our costs of production or result in delivery

delays to our customers.

In addition, if one or more of

our third-party manufacturers becomes insolvent or unwilling to continue to manufacture products of acceptable quality, at acceptable

costs and in a timely manner, our ability to deliver products to our retail customers could be significantly impaired.

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Our reliance on a limited base of suppliers

for certain products, such as light ballasts, may result in disruptions to our business and adversely affect our financial results.

We rely on a limited number

of suppliers for certain of our products and supplies.

For the years ended June 30, 2025 and 2024, one supplier accounted for 14% and

10% of the Company's total purchases, respectively.

for certain products may result in disruptions to our business and adversely affect our financial results.

We rely on a limited number of

suppliers for certain of our products and supplies.

Such reliance on a limited number of suppliers may increase our risk of experiencing

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affect revenues and earnings.

Operations at our and our

suppliers’ facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters, disease

outbreaks or pandemics, acts of war, terrorism, government shut-downs and work stoppages.

A significant interruption in the operation

of our or our suppliers’ facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer

and liquid products, could significantly impact our capacity to sell products and service our customers in a timely manner, which could

have a material adverse effect on our customer relationships, revenues, earnings, and financial position.

If our suppliers are unable to source raw

materials in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed.

The manufacture of some of

our products is complex and requires precise high-quality manufacturing that is difficult to achieve.

We have in the past, and may in

the future, experience difficulties in manufacturing our products on a timely basis and in sufficient quantities.

Operations at our and our suppliers’

facilities are subject to disruption for a variety of reasons, including fire, flooding or other natural disasters, disease outbreaks

or pandemics, acts of war, terrorism, government shut-downs and work stoppages.

A significant interruption in the operation of our or

our suppliers’ facilities, especially for those products manufactured at a limited number of facilities, such as fertilizer and

liquid products, could significantly impact our capacity to sell products and service our customers in a timely manner, which could have

a material adverse effect on our customer relationships, revenues, earnings, and financial position.

If our suppliers are unable to source raw materials

in sufficient quantities, on a timely basis, and at acceptable costs, our ability to sell our products may be harmed.

The manufacture of some of our

products is complex and requires precise high-quality manufacturing that is difficult to achieve.

We have in the past, and may in the

future, experience difficulties in manufacturing our products on a timely basis and in sufficient quantities.

These difficulties have

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costs or other problems that could harm our business and prospects.

In determining the required

quantities of our products and the manufacturing schedule, we must make significant judgments and estimates based on historical experience,

inventory levels, current market trends and other related factors.

Because of the inherent nature of estimates, there could be significant

differences between our estimates and the actual amounts of products we require, which could harm our business and results of operations.

Disruptions in availability or increases

in the prices of raw materials sourced by suppliers could adversely affect our results of operations.

In determining the required quantities

of our products and the manufacturing schedule, we must make significant judgments and estimates based on historical experience, inventory

levels, current market trends and other related factors.

Because of the inherent nature of estimates, there could be significant differences

between our estimates and the actual amounts of products we require, which could harm our business and results of operations.

Disruptions in availability or increases in

the prices of raw materials sourced by suppliers could adversely affect our results of operations.

We source many of our product

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which can require additional investment and delay bringing a product to market.

If our suppliers that currently, or in the

future, sell directly to the retail market in which we conduct our current or future business, enhance these efforts and cease or decrease

their sales through us, our ability to sell certain products could be harmed.

Our distribution and sales

and marketing capabilities provide significant value to our suppliers.

Distributed brand suppliers sell through us in order to access

thousands of retail and commercial customers across the United States with short order lead times, no minimum order quantity on individual

items, free or minimal freight expense and trade credit terms.

Based on our knowledge and communication with our suppliers, we believe

some of our suppliers sell directly to the retail market.

If these suppliers were to cease working with us or proceed to enhance their

direct-to-customer efforts, our product offerings, reputation, operation and business could be materially adversely affected.

If our suppliers that currently, or in the future,

sell directly to the retail market in which we conduct our current or future business, enhance these efforts and cease or decrease their

sales through us, our ability to sell certain products could be harmed.

Our distribution and sales and

marketing capabilities provide significant value to our suppliers.

Distributed brand suppliers sell through us in order to access thousands

of retail and commercial customers across the United States with short order lead times, no minimum order quantity on individual items,

free or minimal freight expense and trade credit terms.

Based on our knowledge and communication with our suppliers, we believe some of

our suppliers sell directly to the retail market.

If these suppliers were to cease working with us or proceed to enhance their direct-to-customer

efforts, our product offerings, reputation, operation and business could be materially adversely affected.

Our operations may be impaired if our information

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as with our retail customers could be significantly impaired, which may adversely impact our business.

Additionally, in the normal

course of our business, we collect, store, and transmit proprietary and confidential information regarding our customers, employees, suppliers

Additionally, in the normal course

of our business, we collect, store, and transmit proprietary and confidential information regarding our customers, employees, suppliers

and others, including personal information.

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sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

Any such attacks or precautionary measures taken

to prevent anticipated attacks may result in increasing costs, including costs for additional technologies, training, and third-party

The losses incurred from a breach of data security and operational failures as well as the precautionary measures required

to address this evolving risk may adversely impact our financial condition, results of operations and cash flows.

We collect, process, store, use, and share

information collected from or about purchasers and users of our website and products.

The collection and use of personal information,

and analysis and sharing of user data and unique identifiers to inform advertising subject us to legislative and regulatory burdens, may

expose us to liability, and our actual or perceived failure to adequately protect consumer data could harm our brand, our reputation in

the marketplace and our business.

Any such attacks or precautionary measures taken to prevent

anticipated attacks may result in increasing costs, including costs for additional technologies, training, and third-party consultants.

The losses incurred from a breach of data security and operational failures as well as the precautionary measures required to address

this evolving risk may adversely impact our financial condition, results of operations and cash flows.

We collect, process, store, use, and share information

collected from or about purchasers and users of our website and products.

The collection and use of personal information, and analysis

and sharing of user data and unique identifiers to inform advertising subject us to legislative and regulatory burdens, may expose us

to liability, and our actual or perceived failure to adequately protect consumer data could harm our brand, our reputation in the marketplace

and our business.

A wide variety of provincial,

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to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to increase penalties.

We engage in interest-based

advertising on our e-commerce website.

and foreign governments have enacted or are considering legislation related to digital advertising

and we expect to see an increase in legislation and regulation related to digital advertising, the collection and use of user data and

unique device identifiers, such as IP address, and other data protection and privacy regulation.

Such laws and legislation could affect

our costs of doing business.

Further, while we strive to

publish and prominently display privacy policies that are accurate, comprehensive, and fully implemented, we cannot assure you that our

privacy policies and other statements regarding our practices will be sufficient to protect us from liability or adverse publicity relating

to the privacy and security of information about consumers or their devices.

Any failure or perceived failure by us to comply with our

privacy policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, including

laws and regulations regulating privacy, data security, or consumer protection, or any compromise of security that results in the unauthorized

We engage in interest-based advertising

on our e-commerce website.

and foreign governments have enacted or are considering legislation related to digital advertising and

we expect to see an increase in legislation and regulation related to digital advertising, the collection and use of user data and unique

device identifiers, such as IP address, and other data protection and privacy regulation.

Such laws and legislation could affect our costs

of doing business.

Further, while we strive to publish

and prominently display privacy policies that are accurate, comprehensive, and fully implemented, we cannot assure you that our privacy

policies and other statements regarding our practices will be sufficient to protect us from liability or adverse publicity relating to

the privacy and security of information about consumers or their devices.

Any failure or perceived failure by us to comply with our privacy

policies, our privacy-related obligations to consumers or other third parties, or our privacy-related legal obligations, including laws

and regulations regulating privacy, data security, or consumer protection, or any compromise of security that results in the unauthorized

release or transfer of personal information, may result in proceedings or actions against us, legal liability, governmental enforcement

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or inadvertent or unauthorized use or disclosure of data that we store or handle as part of providing our products.

We may not be able to adequately protect

our intellectual property and other proprietary rights that are material to our business.

We may not be able to adequately protect our

intellectual property and other proprietary rights that are material to our business.

Our ability to compete effectively

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In addition, we may be required to license additional intellectual property and technology from third parties, which may be expensive.

Litigation may be necessary

to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that

our products or services infringe their intellectual property rights.

Any litigation or claims brought by or against us could result

in substantial costs and diversion of our resources.

A successful claim of intellectual property infringement against us, or any other

successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products

or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition,

and results of operations.

We may not be able to develop, license or

acquire new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements,

Litigation may be necessary to

enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our

products or services infringe their intellectual property rights.

Any litigation or claims brought by or against us could result in substantial

costs and diversion of our resources.

A successful claim of intellectual property infringement against us, or any other successful challenge

to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using

certain of our recognized brand names, which could have a material adverse effect on our business, financial condition, and results of

We may not be able to develop, license or acquire

new products, enhance the capabilities of our existing products to keep pace with rapidly changing technology and customer requirements,

or successfully manage the transition to new product offerings, any of which could have a material adverse effect on our business, financial

condition, and results of operations.

Our success depends on our

ability to develop, license, or acquire and commercialize additional products and to develop new applications for our technologies in

existing and new markets, while improving the performance and cost-effectiveness of our existing products, in each case in ways that address

current and anticipated customer requirements.

Our success depends on our ability

to develop, license, or acquire and commercialize additional products and to develop new applications for our technologies in existing

and new markets, while improving the performance and cost-effectiveness of our existing products, in each case in ways that address current

and anticipated customer requirements.

We intend to develop and commercialize additional products through our research and development

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select and acquire the rights to products and technologies on terms that are acceptable to us.

The hydroponics industry is

characterized by rapid technological change and innovation.

New technologies, techniques or products may emerge that might offer better

combinations of price and performance or better address customer requirements as compared to our current or future products, as well as

those products of third-party vendors that we make available for sale.

Competitors who have greater financial, marketing and sales resources

than we do may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards,

or customer requirements.

Any new product we identify for internal development, licensing or acquisition may require additional development

efforts prior to commercial sale.

Due to the significant lead time and complexity involved in bringing a new product to the market, we

are required to make a number of assumptions and estimates regarding the commercial feasibility of a new product.

These assumptions and

estimates may prove incorrect, resulting in our introduction of a product that is not competitive at the time of launch.

We anticipate

that we will face increased competition in the future as existing companies and competitors develop new or improved products and as new

companies enter the market with new technologies and sales mechanisms which we may be unable to adopt or offer for sale.

Our ability to

mitigate downward pressure on the prices of the products that we offer for sale will be dependent on our ability to maintain and/or increase

the value we offer to suppliers, vendors, strategic partners, and consumers.

All new products are prone to risks of failure inherent in

hydroponic technology development.

In addition, we cannot assure you that any such products that we develop or offer for sale will be

manufactured or produced economically, successfully commercialized or widely accepted in the marketplace.

The expenses or losses associated

with unsuccessful product development or launch activities, or a lack of market acceptance of new products, could adversely affect our

business, financial condition, and results of operation.

Our ability to attract new

customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our own products, maintain

relationships with other vendors and suppliers, and to make compelling new products available for sale through our enterprise.

product that we develop or offer for sale may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve

the marketplace acceptance necessary to generate significant revenue.

If we are unable to successfully develop, license or acquire new

products to make available for sale, enhance our existing inventory offerings to meet customer requirements, or otherwise gain market

acceptance, our business and financial condition and results of operation would be harmed.

The industry is characterized

by rapid technological change and innovation.

New technologies, techniques or products may emerge that might offer better combinations

of price and performance or better address customer requirements as compared to our current or future products, as well as those products

of third-party vendors that we make available for sale.

Competitors who have greater financial, marketing and sales resources than we

do may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer

requirements.

Any new product we identify for internal development, licensing or acquisition may require additional development efforts

prior to commercial sale.

Due to the significant lead time and complexity involved in bringing a new product to the market, we are required

to make a number of assumptions and estimates regarding the commercial feasibility of a new product.

These assumptions and estimates may

prove incorrect, resulting in our introduction of a product that is not competitive at the time of launch.

We anticipate that we will

face increased competition in the future as existing companies and competitors develop new or improved products and as new companies enter

the market with new technologies and sales mechanisms which we may be unable to adopt or offer for sale.

Our ability to mitigate downward

pressure on the prices of the products that we offer for sale will be dependent on our ability to maintain and/or increase the value we

offer to suppliers, vendors, strategic partners, and consumers.

In addition, we cannot assure you that any such products that we develop

or offer for sale will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace.

expenses or losses associated with unsuccessful product development or launch activities, or a lack of market acceptance of new products,

could adversely affect our business, financial condition, and results of operation.

Our ability to attract new customers

and increase revenue from existing customers depends in large part on our ability to enhance and improve our own products, maintain relationships

with other vendors and suppliers, and to make compelling new products available for sale through our enterprise.

Any new product that

we develop or offer for sale may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the marketplace

acceptance necessary to generate significant revenue.

If we are unable to successfully develop, license or acquire new products to make

available for sale, enhance our existing inventory offerings to meet customer requirements, or otherwise gain market acceptance, our business

and financial condition and results of operation would be harmed.

We have identified certain material weaknesses

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or results of operations which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Effective internal controls

over financial reporting are necessary for us to provide reliable financial reports.

Effective internal controls over

financial reporting are necessary for us to provide reliable financial reports.

If we cannot maintain effective controls and reliable

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and consultants and implementing controls and procedures over financial reporting process.

We cannot assure you that

there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition

We cannot assure you that there

will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition

or results of operations.

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the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.

Our management and independent

registered public accounting firm has not performed an evaluation of our internal control over financial reporting during any period in

accordance with the provisions under Section 404(b) of Sarbanes-Oxley Act.

Had we performed an evaluation and had our independent

registered public accounting firm performed an audit of our internal control over financial reporting in accordance with the provisions

of Sarbanes-Oxley Act, additional control deficiencies amounting to material weaknesses may have been identified.

If we fail to remedy

any material weakness, our financial statements may be inaccurate, our access to the capital markets may be restricted and the trading

price of our common stock may suffer.

and international trade policies, particularly with respect to China, could materially and adversely impact our business and results

of operations.

of our products are manufactured and supplied by unaffiliated third parties, most of which are located in China.

Our independent registered public

accounting firm has not performed an audit of, or expressed an opinion on, the effectiveness of our internal control over financial reporting

pursuant to Section 404(b) of Sarbanes-Oxley Act.

Had our independent registered public accounting firm performed an audit of our internal

control over financial reporting in accordance with the provisions of Sarbanes-Oxley Act, additional control deficiencies amounting to

material weaknesses may have been identified.

If we fail to remedy any material weakness, our financial statements may be inaccurate,

our access to the capital markets may be restricted and the trading price of our common stock may suffer.

Changes in U.S.

and international trade

policies, particularly with respect to China, could materially and adversely impact our business and results of operations.

our products are manufactured and supplied by unaffiliated third parties, most of which are located in China.

In addition, two of our

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to international commerce, or other trade matters.

are closely monitoring the changes in international trade policy, which may be subject to rapid changes and fluctuation, and are assessing

closely monitoring the changes in international trade policy, which may be subject to rapid changes and fluctuation, and are assessing

the potential impact of these and other trade policy changes on our business operations and financial performance.

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exports to China.

As of the date of this filing, the U.S.

and China have agreed to lower the

tariffs for a period of 90 days, with the U.S.

lowering the base tariff rate on most Chinese goods to 30% from 145% and China lowering

the base tariff rate to 10% from 125%, with the goal of negotiating a more permanent trade agreement during the 90 day period.

Any unfavorable

government policies on international trade, such as capital controls or tariffs, and any uncertainty resulting from the changing nature

of such policies, may affect the demand for our products and services, impact the competitive position of our products or prevent us from

selling products in certain countries.

If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements

are renegotiated or, in particular, if the U.S.

government takes additional retaliatory trade actions due to the recent U.S.-China trade

tension, such changes could have an adverse effect on our business, financial condition and results of operations.

extent and duration of any tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend

on various factors, such as negotiations between the United States and China and/or other countries, the response of such countries, exemptions

or exclusions that may be granted, availability and cost of alternative sources of supply of materials we purchase from companies

in China or other countries targeted with tariffs.

We have announced

that we may adopt a digital treasury strategy which, if adopted and effectuated, would expose us to various risks, including risks associated

with holding Bitcoin and other cryptocurrency assets.

While we have only announced that we may adopt

a Digital Treasury Strategy, and we have not yet effectuated such strategy, such strategy, if adopted and effectuated, would expose us

to various risks, including risks associated with holding Bitcoin and other cryptocurrency assets, including the following:

Bitcoin and other digital assets are highly volatile assets.

Bitcoin does not pay interest or dividends.

Our Bitcoin and other digital asset holdings could significantly impact our financial results and the market price of our listed securities.

Should we purchase Bitcoin or other digital assets, such acquisition would be completed primarily using proceeds from equity and debt financings.

Any Digital Treasury Strategy is new to our business, has not been tested and we will be unable to assure its success or successful implementation.

We would be subject to counterparty risks, including in particular risks relating to our custodians.

The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price, and use of Bitcoin and other cryptocurrency or digital assets.

Changes in the accounting treatment of our Bitcoin or other digital currency holdings could have significant accounting impacts, including increasing the volatility of our results.

Any unfavorable government policies on international trade, such as capital

controls or tariffs, and any uncertainty resulting from the changing nature of such policies, may affect the demand for our products and

services, impact the competitive position of our products or prevent us from selling products in certain countries.

If any new tariffs,

legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S.

takes additional retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our

business, financial condition and results of operations.

and duration of any tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various

factors, such as negotiations between the United States and China and/or other countries, the response of such countries, exemptions or

exclusions that may be granted, availability and cost of alternative sources of supply of materials we purchase from companies in China

or other countries targeted with tariffs.

Our business is dependent, in part, on our

ongoing commercial relationship with GPM, and any deterioration of that relationship could materially adversely affect our business.

February 1, 2026, the Company transferred certain software assets from GPM to the Company and subsequently sold all of its equity interests

in GPM and its underlying entities to ETTS AI in exchange for a $2.3 million promissory note.

Concurrently, the parties entered into a

Supply and Distribution Agreement pursuant to which the Company continued to supply products to GPM following the divestiture.

30, 2026, the Company, GPM and ETTS AI entered into a supplement to the Supply and Distribution Agreement pursuant to which GPM assumed

approximately $2.0 million of supplier accounts payable in exchange for acquiring an equal amount of inventory from the Company.

The supplement

also terminated the exclusive sourcing and distribution arrangements between the Company and GPM.

the sale of GPM, we continue to maintain a significant commercial relationship with GPM pursuant to the Supply and Distribution Agreement

and other related arrangements.

As a result, a significant portion of our current and future revenues, cash flows and business activities

may be dependent upon purchases made by GPM, GPM’s ability to market and distribute products, and GPM’s continued demand for

the products and services we provide.

reduction in orders from GPM, deterioration in GPM’s financial condition, inability of GPM to satisfy its payment obligations, operational

disruptions, changes in GPM’s business strategy, loss of key customers by GPM, regulatory issues affecting GPM, or termination,

modification or non-renewal of the Supply and Distribution Agreement or other related arrangements could reduce our revenue and profitability

and adversely affect our business, financial condition and results of operations.

In addition, because GPM is no longer a wholly owned

subsidiary of the Company, we do not control GPM’s management, strategic decisions or operational activities and may be unable to

influence decisions that could adversely impact our business relationship with GPM.

if our business becomes increasingly dependent on GPM or a limited number of customers or distribution partners, our customer concentration

risk may increase.

The loss of GPM or a significant reduction in business conducted through GPM may require us to identify and develop

alternative customers, distribution channels or business relationships, which may not be available on favorable terms, if at all, and

may require substantial time, cost and management attention.

Any failure to successfully replace revenues generated through GPM could

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

General Risk Factors Related to Our Business

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Legal Proceedings” for additional

If product liability lawsuits are brought

against us, we may incur substantial liabilities.

We face a potential risk of

product liability resulting from the sale of our products.

For example, we may be sued if any product we sell allegedly causes injury

or is found to be otherwise unsuitable during product testing, manufacturing, marketing, or sale.

Any such product liability claim may

include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,

strict liability, and a breach of warranties.

If product liability lawsuits are brought against

us, we may incur substantial liabilities.

We face a potential risk of product

liability resulting from the sale of our products.

For example, we may be sued if any product we sell allegedly causes injury or is found

to be otherwise unsuitable during product testing, manufacturing, marketing, or sale.

Any such product liability claim may include allegations

of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and

a breach of warranties.

Claims could also be asserted under state consumer protection acts.

If we cannot successfully

defend ourselves against product liability claims, we may incur substantial liabilities.

Even successful defense would require significant

financial and management resources.

If we cannot successfully defend ourselves

against product liability claims, we may incur substantial liabilities.

Even successful defense would require significant financial and

management resources.

Regardless of the merits or eventual outcome, liability claims may result in:

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a diversion of management’s time and our resources;

substantial monetary awards to trial participants or patients;

substantial monetary awards to customers, product users, or other claimants;

product recalls, withdrawals or labeling, marketing or promotional restrictions;

a decline in the value of our stock.

Our inability to obtain and

retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent

or inhibit the commercialization of products we develop.

Our inability to obtain and retain

sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit

the commercialization of products we develop.

We do not maintain any product liability insurance.

Even if we obtain product

liability insurance in the future, we may have to pay amounts awarded by a court or negotiated in a settlement that exceed our coverage

limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Even if we obtain product liability

insurance in the future, we may have to pay amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations

or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

We may not be able to obtain insurance coverage

adequate to cover all significant risk exposures.

During the ordinary course

of business, we anticipate that we will be exposed to certain liabilities that are unique to the products we provide.

During the ordinary course of

business, we anticipate that we will be exposed to certain liabilities that are unique to the products we provide.

We currently maintain

only general liability, umbrella liability, business personal property and business income insurance policies and there can be no assurance

that we will acquire or maintain insurance for certain risks, that the amount of our insurance coverage will be adequate to cover all

claims or liabilities, or that we will not be forced to bear substantial costs resulting from risks and uncertainties of business.

is also not possible to obtain insurance to protect against all operational risks and liabilities.

The failure to obtain and maintain

adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition,

and results of operations.

various insurance policies, including general liability, umbrella liability, business personal property and business income, and directors

and officers liability insurance policies, but there can be no assurance that we will acquire or maintain insurance for certain risks,

that the amount of our insurance coverage will be adequate to cover all claims or liabilities, or that we will not be forced to bear substantial

costs resulting from risks and uncertainties of business.

It is also not possible to obtain insurance to protect against all operational

risks and liabilities.

The failure to obtain and maintain adequate insurance coverage on terms favorable to us, or at all, could have

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

Unanticipated changes in our tax provisions,

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Such additional tax liabilities could have an effect on our net income and profit margins.

Certain of our products sell on a seasonal

basis, resulting in fluctuations in our cash flow, inventory, and accounts payable.

Certain of our products sell on a seasonal basis,

resulting in fluctuations in our cash flow, inventory, and accounts payable.

As a result of the seasonality

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or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.

Inventory levels in excess

of customer demand, including as a result of our introduction of product enhancements, may result in a portion of our inventory becoming

Inventory levels in excess of

customer demand, including as a result of our introduction of product enhancements, may result in a portion of our inventory becoming

obsolete or expiring, as well as inventory write-downs or write-offs, which could have a material adverse effect on our business, financial

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results of operations.

The failure of third parties to meet their

contractual, regulatory, and other obligations could adversely affect our business.

The failure of third parties to meet their contractual,

regulatory, and other obligations could adversely affect our business.

We rely on suppliers, vendors,

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condition and results of operations.

The sizes of the markets for our current

and future products have not been established with precision and may be smaller than we estimate.

Our estimates of the total

addressable markets for our current products, products under development and third-party products that we offer for sale are based on

a number of internal and third party estimates and the assumed prices at which we can sell such products in markets that have not been

established or that we have not yet entered.

While we believe our assumptions and the data underlying our estimates are reasonable, these

assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby

reducing the predictive accuracy of these estimates.

As a result, our estimates of the total addressable market for our current or future

products may prove to be incorrect.

If the actual number of consumers who would benefit from the products we offer, the price at which

we can sell such products, or the total addressable market for such products is smaller than we have estimated, it may impair our sales

growth and have an adverse impact on our business.

The conflict between Russia and

Ukraine and the war in the Middle East may have the effect of heightening many of the other risks described in this “Risk

Factors” section.

To the extent the conflict

between Russia and Ukraine and the war in the Middle East may adversely affect our business and financial results, it may also have the

effect of heightening many of the other risks described in this “Risk Factors” section, as well as other risks which we may

not be currently aware of.

Risks Related to Doing Business with the Cannabis

While our business includes both the hobbyist

gardener, and is not exclusively reliant on the cannabis grower, our growth is nonetheless substantially dependent on the growth

and stabilization of the U.S.

cannabis market.

New California regulations caused licensing shortages and future regulations may create

other limitations that decrease the demand for our products.

State level regulations adopted in the future may adversely impact our business.

The base of growers in the

has grown over the past 20 years since the legalization of cannabis for medical uses in states such as California, Colorado,

Michigan, Nevada, New Jersey, Oregon, and Washington, with a large number of those growers depending on products similar to those we distribute.

cannabis market is still in its infancy and early adopter states such as California, Colorado and Washington represent a large

portion of historical industry revenues.

cannabis cultivation market does not grow as expected, our business, financial condition

and results of operations could be adversely impacted.

Cannabis remains illegal under

federal law, with it listed as a Schedule I substance under the Controlled Substances Act (CSA).

Notwithstanding laws in various

states permitting certain cannabis activities, all activities, including possession, distribution, processing and manufacturing of cannabis

and investment in, and financial services or transactions involving proceeds of, or promoting such activities remain illegal under various

federal criminal and civil laws and regulations, including the CSA, as well as laws and regulations of several states that have not

legalized some or any cannabis activities to date.

Compliance with applicable state laws regarding cannabis activities does not protect

us from federal prosecution or other enforcement action, such as seizure or forfeiture remedies, nor does it provide any defense to such

prosecution or action.

Cannabis activities conducted in or related to conduct in multiple states may potentially face a higher level of

scrutiny from federal authorities.

Penalties for violating federal drug, conspiracy, aiding, abetting, bank fraud and/or money laundering

laws may include prison, fines, and seizure/forfeiture of property used in connection with cannabis activities, including proceeds derived

from such activities.

In addition to sales through

our own platforms, www.Zenhydro.com and www.simpledeluxe.com, we sell our products through third-party retailers and resellers.

it is evident to us that the movement towards the legalization of cannabis in the U.S.

and its legalization in Canada has ultimately had

a significant and positive impact on our industry.

We are not currently subject directly to any state laws or regulations controlling

participants in the legal cannabis industry.

However, regulation of the cannabis industry does impact those that we believe represent

many end-users for our products and, accordingly, there can be no assurance that changes in regulation of the industry and more rigorous

enforcement by federal authorities will not have a material adverse effect on us.

Legislation and regulations pertaining to

the use and cultivation of cannabis are enacted on both the state and federal government level within the United States.

the laws governing the cultivation and use of cannabis may be subject to change.

Any new laws and regulations limiting the use or cultivation

of cannabis and any enforcement actions by state and federal governments could indirectly reduce demand for our products and may impact

our current and planned future operations.

Individual state laws regarding

the cultivation and possession of cannabis for adult and medical uses conflict with federal laws prohibiting the cultivation, possession

and use of cannabis for any purpose.

A number of states have passed legislation legalizing or decriminalizing cannabis for adult-use,

other states have enacted legislation specifically permitting the cultivation and use of cannabis for medicinal purposes, and several

states have enacted legislation permitting cannabis cultivation and use for both adult and medicinal purposes.

Evolving federal and state

laws and regulations pertaining to the use or cultivation of cannabis, as well active enforcement by federal or state authorities of the

laws and regulations governing the use and cultivation of cannabis may indirectly and adversely affect our business, our revenues, and

Certain of our products may be purchased

for use in new and emerging industries and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative

practices, enforcement approaches, judicial interpretations, future scientific research and public perception.

In addition to selling our

products through our own online platforms, www.Zenhydro.com and www.simpledeluxe.com, we sell products, including hydroponic gardening

products, through third-party retailers and resellers.

End users may purchase these products for use in new and emerging industries that

may not achieve market acceptance in a manner that we can predict.

The demand for these products is dependent on the growth of these industries,

which is uncertain, as well as the laws governing the growth, possession, and use of cannabis by adults for both adult and medical use.

Laws and regulations affecting

cannabis industry are continually changing, which could detrimentally affect our growth, revenues, results of operations and

success generally.

Local, state, and federal cannabis laws and regulations are broad in scope and subject to evolving interpretations,

which could require the end users of certain of our products or us to incur substantial costs associated with compliance or to alter our

respective business plans.

In addition, violations of these laws, or allegations of such violations, could disrupt our business and result

in a material adverse effect on our results of operation and financial condition.

Scientific research related

to the benefits of cannabis remains in its early stages, is subject to a number of important assumptions, and may prove to be inaccurate.

Future research studies and clinical trials may reach negative conclusions regarding the viability, safety, efficacy, dosing, social acceptance

or other facts and perceptions related to medical cannabis, which could materially impact the demand for our products.

The public’s perception

of cannabis may significantly impact the cannabis industry’s success.

Both the medical and adult-use of cannabis are controversial

topics, and there is no guarantee that future scientific research, publicity, regulations, medical opinion, and public opinion relating

to cannabis will be favorable.

The cannabis industry is an early-stage business that is constantly evolving with no guarantee of viability.

The market for medical and adult-use of cannabis is uncertain, and any adverse or negative publicity, scientific research, limiting regulations,

medical opinion and public opinion (whether or not accurate or with merit) relating to the consumption of cannabis, whether in the United

States or internationally, may have a material adverse effect on our operational results, consumer base, and financial results.

other things, such a shift in public opinion could cause state jurisdictions to abandon initiatives or proposals to legalize medical or

adult cannabis or adopt new laws or regulations restricting or prohibiting the medical or adult-use of cannabis where it is now legal,

thereby limiting the Cannabis Industry Participants.

Demand for our products may

be negatively impacted depending on how laws, regulations, administrative practices, enforcement approaches, judicial interpretations,

and consumer perceptions develop.

We cannot predict the nature of such developments or the effect, if any, that such developments could

have on our business.

Our indirect involvement in the cannabis

industry could affect the public’s perception of us and be detrimental to our reputation.

Damage to our reputation can

be the result of the actual or perceived occurrence of any number of events, and could include any negative publicity, whether true or

Cannabis has often been associated with various other narcotics, violence and criminal activities, the risk of which is that our

retailers and resellers that transact with those businesses might attract negative publicity.

There is also risk that the action(s) of

other participants, companies and service providers in the cannabis industry may negatively affect the reputation of the industry as a

whole and thereby negatively impact our reputation.

The increased use of social media and other web-based tools used to generate, publish

and discuss user-generated content and to connect with other users has made it increasingly easier for individuals and groups to communicate

and share opinions and views with regard to cannabis companies and their activities, whether true or not and the cannabis industry in

general, whether true or not.

We do not ultimately have direct control over how the cannabis industry is perceived by others.

loss may result in decreased investor confidence, increased challenges in developing and maintaining community relations and an impediment

to our overall ability to advance our business strategy and realize our growth prospects, thereby having a material adverse impact on

our business.

In addition, third parties

with whom we may do business could perceive that they are exposed to reputational risk as a result of the involvement of some of our customers

in the cannabis business.

Failure to establish or maintain business relationships due to reputational risk arising in connection with

the nature of our business could have a material adverse effect on our business, financial condition and results of operations.

Businesses involved in the cannabis industry,

and investments in such businesses, are subject to a variety of laws and regulations related to money laundering, financial recordkeeping,

and proceeds of crimes.

We sell our products through

our websites, www.Zenhydro.com and www.simpledeluxe.com, as well as through online third-party retail platforms which do not exclusively

sell to customers operating in the cannabis industry.

Nonetheless, some of our customers may be using our products for purposes of cultivating

Investments in the U.S.

cannabis industry are subject to a variety of laws and regulations that involve money laundering, financial

recordkeeping and proceeds of crime, including the BSA, as amended by the U.S.

PATRIOT Act, other anti-money laundering laws, and any

related or similar rules, regulations or guidelines, issued, administered or enforced by governmental authorities in the United States.

In February 2014, the Financial Crimes Enforcement Network of the Treasury Department (“FinCEN”) issued a memorandum

(the “FinCEN Memo”) providing guidance to banks seeking to provide services to cannabis businesses.

The FinCEN Memo outlines

circumstances under which banks may provide services to cannabis businesses without risking prosecution for violation of U.S.

money laundering laws.

It refers to supplementary guidance that Deputy Attorney General Cole issued to U.S.

federal prosecutors relating

to the prosecution of U.S.

money laundering offenses predicated on cannabis violations of the CSA and outlines extensive due diligence

and reporting requirements, which most banks have viewed as onerous.

On June 29, 2020, FinCEN issued additional guidance for financial

institutions conducting due diligence and filing suspicious activity reports in connection with hemp-related business customers.

these guidelines clarify that financial institutions are not required to file suspicious activity reports solely based on a customer’s

hemp-related business operations, which must be operating lawfully under applicable state law and regulations, these requirements can

still present challenges for certain end users of our products to establish and maintain banking connections, and restrictions on cannabis-related

banking activities remain.

In September 2019, the United States House of Representatives passed the SAFE Banking Act, which would

permit commercial banks to offer services to cannabis companies that are in compliance with state law, but the Senate has not taken up

the SAFE Banking Act or other similar legislation.

The sizes of the markets for our current and

future products have not been established with precision and may be smaller than we estimate.

Our estimates of the total addressable

markets for our current products, products under development and third-party products that we offer for sale are based on a number of

internal and third party estimates and the assumed prices at which we can sell such products in markets that have not been established

or that we have not yet entered.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions

and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the

predictive accuracy of these estimates.

As a result, our estimates of the total addressable market for our current or future products

may prove to be incorrect.

If the actual number of consumers who would benefit from the products we offer, the price at which we can sell

such products, or the total addressable market for such products is smaller than we have estimated, it may impair our sales growth and

have an adverse impact on our business.

The conflict between Russia and Ukraine and

the war in the Middle East may have the effect of heightening many of the other risks described in this “Risk Factors” section.

To the extent the conflict between

Russia and Ukraine and the war in the Middle East may adversely affect our business and financial results, it may also have the effect

of heightening many of the other risks described in this “Risk Factors” section, as well as other risks which we may not be

currently aware of.

Risks Related to Our Common Stock

If we fail to comply with the continued

listing requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the

market price and liquidity of our securities and could have other adverse effects.

January 2, 2025, the Company received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”)

If we fail to comply with the continued listing

requirements of the Nasdaq Stock Market, it could result in our common stock being delisted, which could adversely affect the market price

and liquidity of our securities and could have other adverse effects.

2, 2025, the Company received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”)

stating that for the 30 consecutive business day period between November 15, 2024 to December 31, 2024, the Company’s common stock

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$1.00 per share for a minimum of ten consecutive trading days, unless such period is extended by Nasdaq.

In accordance with Nasdaq

Rules, the Company was provided with an initial period of 180 calendar days, or until July 1, 2025 (the “Initial Grace Period”),

In accordance with Nasdaq Rules,

the Company was provided with an initial period of 180 calendar days, or until July 1, 2025 (the “Initial Grace Period”),

to regain compliance with the Bid Price Requirement.

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effectuating a reverse split of its common stock, if deemed necessary.

On July 2, 2025, the

Company received formal approval from Nasdaq granting it an additional 180 days, or until December 29, 2025 (the “Compliance Date”),

to regain compliance with the Bid Price Requirement.

at any time before the Compliance Date the closing bid price for the Company’s Common Stock is at least $1.00 for a minimum of 10

consecutive business days, the Staff will provide the Company written confirmation that it has regained compliance with the Bid Price

If the Company does not regain compliance with the Bid Price Requirement by the Compliance Date, the Staff will provide written

notification to the Company that its Common Stock will be subject to delisting.

At that time, the Company may appeal the Staff’s

delisting determination to a Nasdaq Hearings Panel.

There can be no assurance that the Company will regain compliance or otherwise maintain

compliance with any of the other listing requirements.

Nonetheless, the Company intends to monitor the closing bid price of its Common

Stock and will, if necessary, consider available options to regain compliance with the Bid Price Requirement prior to the Compliance Date.

Our founders, officers and directors may

control, and may continue to control, our company for the foreseeable future, including the outcome of matters requiring stockholder approval.

Our founders, officers and

directors collectively beneficially own approximately 51% of our outstanding shares of common stock.

As a result, such individuals may,

for the foreseeable future, have the ability, acting together, to control the election of our directors and the outcome of corporate actions

requiring stockholder approval, such as:

(i) a merger or a sale of our company, (ii) a sale of all or substantially all of our assets,

and (iii) amendments to our articles of incorporation and bylaws.

This concentration of voting power and control could have a significant

effect in delaying, deferring, or preventing an action that might otherwise be beneficial to our other stockholders and be disadvantageous

to our stockholders with interests different from those entities and individuals.

Certain of these individuals also have significant control

over our business, policies and affairs as officers or directors of our company.

Therefore, you should not invest in reliance on your

ability to have any control over our company.

See “Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters” for further discussion of the stockholding of our founders and principal stockholders.

Future sales of our common stock in the

public market could cause the market price of our common stock to decline.

As a public company, sales

of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress

On July 2, 2025, the Company received formal approval from Nasdaq

granting it an additional 180 days, or until December 29, 2025 (the “Compliance Date”), to regain compliance with the Bid

Price Requirement.

As of the Compliance Date, the Company had regained compliance with the Bid Price Requirement.

There can be no assurance that

the Company will continue to satisfy the minimum bid price requirement or any other applicable continued listing standards and requirements

of Nasdaq, including, without limitation, requirements relating to stockholders’ equity, market value of publicly held shares, minimum

number of public stockholders, or governance standards.

If the Company fails to maintain compliance with any such continued listing requirements,

its securities could be subject to delisting, which would severely impact the market price and liquidity of its common stock, limit the

Company’s ability to issue additional securities or secure financing, and have a material adverse effect on its business, financial

condition, and operating results.

Future sales of our common stock in the public

market could cause the market price of our common stock to decline.

As a public company, sales of

a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress

the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

Sales of substantial amounts of our common

stock by the selling stockholder in the Private Placement (as defined below) or the perception that these sales could occur, could adversely

affect the price of our common stock.

On June 18, 2024, we closed

on a registered direct offering (the “Registered Direct”) of 2,083,334 shares of common stock (the “Shares”) and

a concurrent private placement (“Private Placement,” and together with the Registered Direct, the “Offering”)

of warrants (the “Warrants”) to purchase 2,083,334 shares of common stock (the “Warrant Shares”), which were sold

for gross aggregate proceeds of $5,000,002.

According to the stock purchase agreement entered into by the Company and investor thereof

during the Offering, on July 9, 2024, we filed a Form S-1 to register the resale, from time to time, of up to an aggregate of 2,083,334

Warrant Shares, issuable upon the exercise of the Warrants issued in the Private Placement by the selling stockholder named thereto (the

“Resale Prospectus”).

The sale by the selling stockholder

of a significant number of shares of common stock could have a material adverse effect on the market price of our common stock.

the perception in the public markets that the selling stockholder may sell all or a portion of its shares as a result of the registration

of such shares for resale pursuant to the Resale Prospectus could also in and of itself have a material adverse effect on the market price

of our common stock.

We cannot predict the effect, if any, that market sales of those shares of common stock or the availability of those

shares of common stock for resale will have on the market price of our common stock.

Sales of substantial amounts of our common stock

in the public market, or the perception that such sales could occur, could depress the market price of our common stock.

We have previously issued, or

may in the future issue, shares of our common stock, warrants to purchase shares of our common stock, or other securities convertible

into or exchangeable for common stock in connection with private placements, registered direct offerings, or other financing transactions.

Pursuant to registration rights granted to certain investors, we have filed or may be required to file one or more registration statements,

including resale prospectuses, with the SEC to register the resale of such shares from time to time.

The sale of a significant number

of shares of our common stock by selling stockholders in the public market, or the accumulation of such shares, could materially and adversely

affect the market price of our common stock.

In addition, the perception in the public markets that these sales may occur—whether

or not driven by the registration of such shares for resale—could in and of itself cause the market price of our common stock to

We cannot predict the timing, amount, or effect, if any, that future sales of these shares of common stock, or the availability

of these shares for resale, will have on the trading price of our securities.

General Risk Factors Related to our Common Stock

There are risks, including stock market

volatility, inherent in owning our common stock.

The market price and volume

of our common stock have been, and may continue to be, subject to significant fluctuations.

These fluctuations may arise from general

stock market conditions, the impact of risk factors described herein on our results of operations and financial position, or a change

in opinion in the market regarding our business prospects or other factors, many of which may be outside our immediate control.

We do not intend to pay dividends for the

foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our

common stock .

There are risks, including stock market volatility,

inherent in owning our common stock.

The market price and volume of

our common stock have been, and may continue to be, subject to significant fluctuations.

These fluctuations may arise from general stock

market conditions, the impact of risk factors described herein on our results of operations and financial position, or a change in opinion

in the market regarding our business prospects or other factors, many of which may be outside our immediate control.

We do not intend to pay dividends for the foreseeable

future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock .

The decision to pay cash dividends

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on the appreciation of our common stock to earn a return on their investment.

We may require additional capital to support the growth of our

business, and this capital might not be available on acceptable terms, if at all.

We cannot be certain when

or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business.

We may require additional capital to support the growth of our business,

and this capital might not be available on acceptable terms, if at all.

We cannot be certain when or if

our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business.

We intend to continue

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to compliance with our public company reporting responsibilities and corporate governance practices.

As a Nasdaq-listed public

company, we face significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further

increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and

Consumer Protection Act, the listing requirements of the Nasdaq Stock Market, and other applicable securities rules and regulations impose

various requirements on public companies.

Our management and other personnel devote a substantial amount of time to ensuring compliance

with these requirements.

Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities

more time-consuming and costly as compared to when we were operating as a private company.

As a newly public company, we are unable to

predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.

As a result of being a public company, we

are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the

adequacy of these internal controls may adversely affect investor confidence in our Company and, as a result, the value of our common

We are required, pursuant

to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on the effectiveness of our internal

control over financial reporting for the fiscal year ending June 30, 2025.

This assessment needs to include disclosure of any material

weaknesses identified by our management in our internal control over financial reporting.

In addition, our independent registered public

accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report

required to be filed with the SEC following the date we are no longer an “emerging growth company.” We have recently commenced

the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to

comply with Section 404, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion

once initiated.

Our compliance with Section 404 requires that we incur substantial accounting expenses and expend significant management

We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate

public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the

evaluation needed to comply with Section 404.

During the evaluation and

testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting,

we will be unable to certify that our internal control over financial reporting is effective.

We cannot assure you that there will not

be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

As a Nasdaq-listed public company,

we face significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase

now that we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer

Protection Act, the listing requirements of the Nasdaq Stock Market, and other applicable securities rules and regulations impose various

requirements on public companies.

Our management and other personnel devote a substantial amount of time to ensuring compliance with these

requirements.

Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming

and costly as compared to when we were operating as a private company.

As a newly public company, we are unable to predict or estimate

the amount of additional costs we will incur as a public company or the specific timing of such costs.

As a result of being a public company, we are

obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy

of these internal controls may adversely affect investor confidence in our Company and, as a result, the value of our common stock.

We are required, pursuant to Section

404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on the effectiveness of our internal control

over financial reporting for the fiscal year ending June 30, 2026.

This assessment needs to include disclosure of any material weaknesses

identified by our management in our internal control over financial reporting.

In addition, our independent registered public accounting

firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required

to be filed with the SEC following the date we are no longer a “smaller reporting company.” We have recently commenced the

costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply

with Section 404, but we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated.

Our compliance with Section 404 requires that we incur substantial accounting expenses and expend significant management efforts.

do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company

experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed

to comply with Section 404.

During the evaluation and testing

process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we

will be unable to certify that our internal control over financial reporting is effective.

We cannot assure you that there will not be

material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain

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systems required of public companies, could also restrict our future access to the capital markets.

We are an emerging growth company and a

smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements

available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less

attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging

growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, and, for as long as we continue to

be an “emerging growth company,” we intend to take advantage of certain exemptions from various reporting requirements applicable

to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply

with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive

compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote

on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We could be an “emerging

growth company” for up to five years following the effectiveness of the Company’s initial registration statement, or until

the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date that

we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value

of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second

fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year

Additionally, we are a “smaller

reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain

reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain

a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates

exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the

market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.

To the extent we take advantage

of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult

or impossible.

After we are no longer an “emerging growth company,” we expect to incur additional management time and cost

to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated

filers, including complying with the auditor attestation requirements of Section 404.

We cannot predict or estimate the amount of additional

costs we may incur or the timing of such costs.

Our stockholders will experience further

dilution if we issue additional equity or equity-linked securities in the future.

We are a smaller reporting company within the

meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “smaller

reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our

performance with other public companies.

We are a “smaller reporting

company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced disclosure

obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting

company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million

as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our

common stock held by non-affiliates exceeds $700 million as of the prior June 30.

To the extent we take advantage of such reduced disclosure

obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

no longer a “smaller reporting company,” we expect to incur additional management time and cost to comply with the more stringent

reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with

the auditor attestation requirements of Section 404.

We cannot predict or estimate the amount of additional costs we may incur or the

timing of such costs.

Our stockholders will experience further dilution

if we issue additional equity or equity-linked securities in the future.

If we issue additional shares

of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders, including

investors who purchase shares of common stock in this offering, will experience additional dilution, and any such issuances may result

in downward pressure on the price of our common stock.

As a result, investors purchasing shares or other securities in the future could

have rights superior to existing stockholders.

If securities or industry analysts do not

publish research or reports about our business, or if they adversely change their recommendations regarding our common stock, the market

price for our common stock and trading volume could decline.

The trading market for our

common stock is influenced by research or reports that industry or securities analysts publish about our business.

of common stock, or securities convertible into or exchangeable or exercisable for shares of common stock, our stockholders will experience

additional dilution, and any such issuances may result in downward pressure on the price of our common stock.

As a result, investors who

may purchase shares or other securities in the future could have rights superior to existing stockholders.

If securities or industry analysts do not publish

research or reports about our business, or if they adversely change their recommendations regarding our common stock, the market price

for our common stock and trading volume could decline.

The trading market for our common

stock is influenced by research or reports that industry or securities analysts publish about our business.

If industry or securities

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general economic or political conditions in the United States and elsewhere.

The securities market has

from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular

The securities market has from

time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.

These market fluctuations may also materially and adversely affect the market price of shares of our common stock.

In the event of liquidation or dissolution

of our company, stockholders may not recoup all or any portion of their investment.

In the event of liquidation or dissolution of

our company, stockholders may not recoup all or any portion of their investment.

In the event of a liquidation,

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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