Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Other than the additional risk factors herein, we are not aware of any material changes to the risk factors set forth under the caption “Risk Factors” in Part I, Item 1A of our Annual Report, which are incorporated herein by reference. The risks described in our Annual Report are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity and future prospects.
Our bitcoin lending arrangements expose us to risks of nonrepayment by borrowers, operational failures and cybersecurity threats, and a material portion of our bitcoin holdings is subject to these risks.
We generate income through bitcoin lending arrangements. As of June 30, 2025, approximately 7,877 bitcoin were loaned to third parties under such arrangements, representing a material portion of our total bitcoin holdings. Lending bitcoin involves risk of default, particularly in a highly volatile market. Borrowers may fail to repay their loans due to market downturns, fraud or other financial challenges. As our bitcoin loans are unsecured, they would rank subordinate to a borrower’s secured loans if the borrower becomes insolvent. Accordingly, we may be unable to recover part or all of the loaned bitcoin, which could result in substantial financial losses.
Additionally, digital asset lending platforms are vulnerable to operational and cybersecurity risks. Technical failures, software bugs or system outages could disrupt lending activities, cause transaction errors or result in inaccurate record-keeping. Cybersecurity threats, including hacking, phishing, social engineering and other malicious attacks, pose further risks, potentially leading to the loss, theft or misappropriation of our loaned bitcoin. A successful cyberattack or security breach involving our loaned bitcoin could materially and adversely impact our financial position, reputation and ability to conduct future lending activities.
Our use of a separately managed account to actively manage a portion of our bitcoin holdings exposes us to significant risks, including market losses, loss of control, counterparty failure and the potential loss of part or all of our investment.
As of June 30, 2025, we held approximately 2,004 bitcoin in a separately managed account with a third-party manager that exercises discretionary authority to actively trade the bitcoin. This structure exposes us to numerous risks beyond those associated with passive holding, including losses resulting from poor investment decisions, trading errors, leverage, concentration or unfavorable market movements.
We do not control the day-to-day management of the account, and we may have limited visibility into the specific strategies, counterparties, or risk exposures involved. The third-party manager or custodian may suffer from operational failures, cybersecurity incidents, mismanagement, fraud or insolvency, any of which could impair our ability to recover some or all of the bitcoin held in the account.
In the event of a material adverse event affecting the manager, custodian or the trading strategy, we could lose a significant portion, or the entirety, of our investment in the account. Such a loss could materially and adversely affect our business, financial condition and results of operations.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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