What changed in this filing

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Item 1A. Risk Factors

2026-08-07 compared with 2026-05-08 · 31 added, 962 removed, 342 unchanged (74% of the section changed)

13 unchanged sentences

strategy and related exposures.

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

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

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

As a result, and in particular due to our adoption of ASU 2023-08,

volatility in our earnings may be significantly more than what we experienced in prior periods.

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

our ETH holdings.

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

or selling significant amounts of ETH.

ETH 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 ETH 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.

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

a number of ETH trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (our principal market

for ETH) has, to date, not done so.

As a result, our ETH holdings may not be able to serve as a source of liquidity for us to the same

extent as cash and cash equivalents.

Further, ETH we hold with our custodians do 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 ETH or otherwise generate funds using our ETH holdings, including in particular during times of market

instability or when the price of ETH has declined significantly.

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

transactions, including capital raising transactions using ETH as collateral, or otherwise generate funds using our ETH holdings, or

if we are forced to sell our ETH at a significant loss, in order to meet our working capital requirements, our business and financial

condition could be negatively impacted.

the SEC and CFTC have issued joint interpretive guidance identifying ETH as a “digital commodity” rather than a “digital

55 unchanged sentences

under the Investment Company Act, and any of which could adversely affect our business, results of operations, financial condition and

we were deemed to be an investment company under the Investment Company Act, applicable restrictions likely would make it impractical

for us to continue segments of our business as currently contemplated.

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

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

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

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

(exclusive of U.S.

government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and

cash items) on an unconsolidated basis.

Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the Section

3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of

the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S.

government securities, shares of registered

money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of its net income

after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S.

government securities, shares of

registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies,

securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled

primarily by such entity.

We do not believe that we are an “investment company” as such term is defined in either Section

3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act.

we have begun focusing on pursuing opportunities to expand our portfolio into digital assets.

With respect to Section 3(a)(1)(A), following

the PIPE Offering, the proceeds of the PIPE Offering are expected to be used to acquire ETH, which will result in our ownership or holding

of ETH in excess of 40% of our total assets.

Since we believe ETH is not an investment security, we do not hold ourselves out as being

engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning

of Section 3(a)(1)(A) of the Investment Company Act.

respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company

under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C).

that we are not an investment company pursuant to Rule 3a-1 under the Investment Company Act because, on a consolidated basis with respect

to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of the Company’s total assets

(exclusive of U.S.

government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and

cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined)

is derived from, securities other than U.S.

government securities, shares of registered money market funds under Rule 2a-7 of the Investment

Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries

of the Company, and securities issued by qualifying companies that are controlled primarily by the Company.

and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive

questions under the Investment Company Act.

There is a risk that assets or arrangements that we have concluded are not securities could

be deemed to be securities by the SEC or another authority for purposes of the Investment Company Act, which would increase the percentage

of securities held by us for Investment Company Act purposes.

The SEC has requested information from a number of participants in the

digital assets’ ecosystem, regarding the potential application of the Investment Company Act to their businesses.

in an action unrelated to the Company, in February 2022, the SEC issued a cease-and-desist order under the Investment Company Act to

BlockFi Lending LLC, in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities

and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of digital assets made

by BlockFi to institutional borrowers.

we were deemed to be an investment company, Rule 3a-2 under the Investment Company Act is a safe harbor that provides a one-year grace

period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in

any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading

in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors.

The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns

securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis

or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such

issuer’s total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

Accordingly, the grace

period may not be available at the time that we seek to rely on Rule 3a-2;

however, Rule 3a-2 is a safe harbor and we may rely on any

exemption or exclusion from investment company status available to us under the Investment Company Act at any given time.

reliance on Rule 3a-2, Section 3(a)(1) (C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability

to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations.

to be deemed an investment company in the future, restrictions imposed by the Investment Company Act — including limitations on

our ability to issue different classes of stock and equity compensation to directors, officers and employees and restrictions on management,

operations, and transactions with affiliated persons — likely would make it impractical for us to continue our business as contemplated,

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

developments regarding the classification of digital assets as “commodities” or “digital commodities” by the

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

Common Stock may not always trade at a premium to the value of the digital assets we hold, and may trade at a discount thereto.

our common stock, par value $0.0001 per share has, and may in the future trade at a premium to the value of our holdings of Ether (“ETH”),

to the extent investors view our Common Stock as providing exposure to ETH, it is possible that the price of our Common Stock may not

always trade at such a premium, and may trade at a discount thereto.

This may occur due to the rise in other traditional investment vehicles

providing exposure to digital assets, including ETH, as well as the increase in the number of investors who may wish to purchase digital

assets, including ETH, directly, among other reasons.

For example, the Securities and Exchange Commission (the “SEC”) has

recently provided guidance that will allow broker-dealers to custody digital assets on behalf of investors.

The SEC has also rescinded

Staff Accounting Bulletin 121 which, by forcing public companies to include on their balance sheets digital assets custodied on behalf

of third parties, effectively prevented publicly traded banks from providing digital asset custodial services.

Any movement of investor

funds to such other sources, or a change in the market’s perception of digital asset treasury vehicles or in investor sentiment

generally, could result in a decrease in price of our Common Stock and may impair our ability to engage in future financings.

concentration of our ETH holdings enhances the risks inherent in our ETH Treasury Management strategy.

ETH concentration is monitored as the total number of ETH units (including native-staked and liquid-staked ETH) held by us divided by

1,000 assumed diluted shares outstanding and is used to evaluate our capital allocation strategy and digital asset leverage on a per-share

basis, significant swings in the price of ETH may lead to increased risks in our ETH Treasury Management strategy.

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

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

application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, 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 ETH or the ability of individuals or institutions such as us to own or transfer ETH.

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 ETH or the ability of individuals or institutions

such as us to own or transfer ETH.

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 ETH specifically.

The consequences of any new law or regulation relating to digital

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

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

the risks of engaging in an ETH Treasury Management strategy could 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.

growth of the digital assets industry in general, and the use and acceptance of ETH in particular, may also impact the price of ETH and

is subject to a high degree of uncertainty.

The pace of worldwide growth in the adoption and use of ETH may depend, for instance, on

public familiarity with digital assets, ease of buying, accessing or gaining exposure to ETH, institutional demand for ETH as an investment

asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for ETH as a store of

value or means of payment, and the availability and popularity of alternatives to ETH.

Even if growth in ETH adoption occurs in the near

or medium-term, there is no assurance that ETH usage will continue to grow over the long-term.

ETH has no physical existence beyond the record of transactions on the Ethereum blockchain, a variety of technical factors related to

the Ethereum blockchain could also impact the price of ETH.

For example, malicious attacks, inadequate staking fees to incentivize validating

of ETH transactions, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the

Ethereum blockchain and negatively affect the price of ETH.

The liquidity of ETH may also be reduced and damage to the public perception

of ETH may occur if financial institutions were to deny or limit banking services to businesses that hold ETH, provide ETH-related services

or accept ETH as payment, which could also decrease the price of ETH.

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

our ETH holdings.

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

or selling significant amounts of ETH.

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

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

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

As a result, and in particular due to our adoption of ASU 2023-08,

volatility in our earnings may be significantly more than what we experienced in prior periods.

shift towards an ETH-focused treasury strategy requires substantial changes in our day-to-day operations and exposes us to significant

operational risks.

shift towards an ETH-focused treasury strategy, including staking, restaking, liquid staking, and other decentralized finance activities,

exposes us to significant operational risks.

ETH involves holding a certain amount of ETH in a smart contract and running a piece of software known as a “validator node.”

Validators are randomly selected to propose a new block of transactions to be added to the Ethereum blockchain.

When an Ethereum participant

attempts a transaction, that participant is required to pay a minimum “gas” fee.

A participant can opt to pay an additional

fee to ensure that its transaction is added to the blockchain more quickly.

These fees are denominated in ETH.

The validator chosen to

propose a block will (when that block is successfully confirmed by the other validator nodes) receive the gas fees for all transactions

in the block (known as “execution layer rewards”).

In addition, the Ethereum blockchain automatically issues ETH as rewards

to validators who successfully propose a block, known as “consensus layer rewards.” The Ethereum network also automatically

imposes penalties on validators that experience downtime or that propose incorrect blocks.

These penalties are known as “slashing”

and will reduce the number of ETH that are “staked” to the validator node.

we currently do not operate any validators, we may choose to operate our own validator services, or we may seek to continue to “delegate”

our ETH to third party validation service providers.

If we choose to use a third-party validation service, we will have to share our

staking rewards with that third-party validator, but that third-party validator may have more sophisticated technology which would enable

those rewards to be greater.

In either case, staking increases the risk of loss of ETH, including through slashing penalties and through

increasing vulnerabilities to hacking in the staking smart contracts.

Validators also need to maintain uptime to maximize their rewards.

Further, the ETH ecosystem rapidly evolves, with frequent upgrades and protocol changes that may require significant adjustments to our

operational setup.

The upgrades and protocol changes may require that we incur unanticipated costs, and it could cause temporary service

Technical failures or operational errors could impact our ability to obtain ETH rewards or gas fees, which could result

in our failure to meet our financial projections.

ETH is also subject to lock-up periods during which it cannot be withdrawn or sold.

This lack of liquidity could limit our ability to

respond to market changes or our financial needs.

We may seek to mitigate this risk through so-called “liquid staking” arrangements,

where we deposit ETH into a smart contract and receive in exchange a “liquid staking token” which would allow us, or any

person to whom we transfer that liquid staking token, to later withdraw our ETH and associated rewards.

The smart contract would then

automatically delegate our ETH to a third-party staking service provider.

We could engage in other DeFi activities with liquid staking

While we anticipate that the price of liquid staking tokens will correlate to ETH itself, there is a possibility that prices

will diverge.

This could especially happen if the validators deployed by the liquid staking contract are subject to slashing penalties,

in which case we may be able to withdraw fewer ETH than we originally deposited.

of these operational risks could materially and adversely affect our ability to execute our ETH Treasury Management strategy and may

prevent us from realizing positive returns and could severely hurt our financial condition.

is created and transmitted through the operations of the peer-to-peer Ethereum network, a decentralized network of computers running

software following the Ethereum protocol.

If the Ethereum network is disrupted or encounters any unanticipated difficulties, the value

of Ethereum could be negatively impacted.

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

may be disrupted, which in turn may prevent us from depositing or withdrawing ETH from our accounts with our custodian or otherwise effecting

ETH transactions.

Such disruptions could include, for example:

the price volatility of ETH;

the insolvency, business failure, interruption,

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

the closing of ETH trading platforms

due to fraud, failures, security breaches, or otherwise;

or network outages or congestion, power outages, or other problems or disruptions

affecting the Ethereum network.

addition, although we do not currently intend to mine ETH, digital asset validating operations can consume significant amounts of electricity,

which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting,

the use of electricity for validating operations.

Additionally, validators may be forced to cease operations during an electricity shortage

or power outage.

ETH Treasury Management strategy exposes us to various risks, including risks associated with ETH, which include the following:

is a highly volatile asset.

ETH is a highly volatile asset that has traded below $1,500 per ETH and above $4,000 per ETH on the Coinbase

exchange in the 12 months preceding the date of this Quarterly Report on Form 10-Q.

The trading price of ETH decreased following the

launch of our ETH Treasury Management strategy to the end of this quarter, and such declines may occur again in the future.

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

Our ETH holdings could significantly

affect our financial results and if we continue to increase our overall holdings of ETH in the future, they will have an even greater

impact on our financial results and the market price of our listed securities.

assets are concentrated in ETH.

The vast majority of our assets are concentrated in our ETH holdings or receipt tokens (i.e., LsETH)

from liquid staking of ETH.

The concentration of our assets in ETH limits our ability to mitigate risk that could otherwise be achieved

by holding a more diversified portfolio of treasury assets.

If there is a significant decrease in the price of ETH, we may experience

a more pronounced impact on our financial condition than if we invested our cash in a more diverse portfolio of treasury assets.

primarily purchase ETH using proceeds from equity financings.

Our ability to achieve the growth objectives of our ETH Treasury Management

strategy depends in significant part on our ability to continue raising capital to purchase ETH.

If we are unable to obtain equity, equity-linked

or debt financing on favorable terms or at all, we may not be able to successfully execute on our ETH Treasury Management strategy.

ETH Treasury Management strategy has not been tested over an extended period of time or under different market conditions.

continually examining the risks and rewards of our strategy to acquire and hold ETH and to stake such ETH to generate staking rewards.

This strategy has not been tested over an extended period of time or under different market conditions.

For example, although we believe

ETH has the potential to serve as a hedge against inflation in the long term, the short-term price of ETH declined in recent periods

during which the inflation rate increased.

If ETH prices were to decrease or our ETH Treasury Management strategy otherwise proves unsuccessful,

our financial condition, results of operations, and the market price of our listed securities would be materially adversely impacted.

ETH staking activities could result in “slashing risks” and loss of staked ETH.

ETH staking exposes us to slashing risks,

defined as a punitive mechanism built into the Ethereum network, designed to penalize validators and their delegators for misbehavior

or failing to follow network rules, which could result in the loss of our staked ETH.

are subject to provider and counterparty risks, including risks relating to our custodians.

Although we have implemented various

measures that are designed to mitigate our counterparty risks, including by storing substantially all of the ETH and LsETH we own in

custody accounts at U.S.-based, institutional-grade custodians and negotiating contractual arrangements intended to establish that our

property interest in custodially-held ETH and LsETH 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 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 ETH, or delaying or hindering our access to our ETH holdings or LsETH holdings, and this

may ultimately result in the loss of the value related to some or all of such ETH and LsETH, which could have a material adverse effect

on our financial condition as well as the market price of our listed securities.

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

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 ETH or

LsETH, nor have such events adversely impacted our access to our ETH or LsETH, they have, in the short-term, likely negatively impacted

the adoption rate and use of ETH.

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 ETH, limit

the availability to us of financing collateralized by ETH, or create or expose additional counterparty risks.

in the accounting treatment of our ETH holdings or LsETH holdings could have significant accounting impacts, including increasing the

volatility of our results.

We have adopted ASU 2023-08 as of January 1, 2025, which requires us to measure our ETH holdings at fair

value in our statement of financial position, and to recognize gains and losses from changes in the fair value of our ETH in net income

each reporting period beginning January 1, 2025.

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

respect to our ETH holdings.

Due in particular to the volatility in the price of ETH, we expect the measurement at fair value to have

a material impact on our financial results in future periods, increase the volatility of our financial results, and affect the carrying

value of our ETH on our balance sheet.

ASU 2023-08 could also have adverse tax consequences.

In addition, on September 30, 2025, the

Treasury and the IRS issued interim guidance (the “Interim Guidance”) which, in relevant part, clarifies that a corporation

may disregard unrealized gains and losses on its digital asset holdings when computing AFSI for purposes of determining whether it is

subject to the 15% CAMT under the Inflation Reduction Act.

The Treasury and IRS intend to issue revised proposed regulations similar

to this Interim Guidance.

These impacts could in turn have a material adverse effect on our financial results and the market price of

our listed securities.

Additionally, our LsETH holdings as of December 31, 2025 are accounted for at cost-less-impairment.

declines in the price of LsETH may result in material impairment within our financial results.

is a highly volatile asset, and fluctuations in the price of ETH are likely to influence our financial results and the market price of

our listed securities.

is a highly volatile asset, and fluctuations in the price of ETH 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 the price of ETH decreased substantially (as it has in the past), including

as a result of:

user and investor confidence in ETH, including due to the various factors described herein;

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 ETH 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 ETH

associated with significant hacks, seizures, or forfeitures;

and (iii) actual or perceived

manipulation of the spot or derivative markets for ETH or spot ETH exchange-traded products

publicity, media or social media coverage, or sentiment due to events in or relating to,

or perception of, ETH or the broader digital assets industry, for example, (i) public perception

that ETH 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 ETH ecosystem;

(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;

(iv) the actual or perceived environmental impact of ETH 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 ETH related processes, and (v) changes in government regulations ;

in consumer preferences and the perceived value or prospects of ETH;

● 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

government, or reserves of fiat currencies, or that represent ownership or security

interests in physical assets;

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 ETH purchase and sale transactions

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 ETH or adversely affect investor

confidence in digital assets generally;

● developments

relating to the ETH protocol that may impact (i) its security, speed, scalability, usability,

or value, (b) failures to upgrade the protocol to adapt to security, technological, legal

or other challenges, and (iii) changes to the ETH protocol that introduce software bugs,

security risks or other elements that adversely affect ETH;

● disruptions,

failures, unavailability, or interruptions in service of trading venues for ETH;

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;

● regulatory,

legislative, enforcement and judicial actions that adversely affect the price, ownership,

transferability, trading volumes, legality or public perception of ETH, 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;

in staking rewards of ETH, or increases in the costs associated with ETH staking, including

increases in electricity costs and hardware and software used in staking, or new or enhanced

regulation or taxation of ETH staking, which could further increase the costs associated

with ETH staking, any of which may cause a decline in support for the Ethereum protocol;

● transaction

congestion and fees associated with processing transactions of ETH or lengthened periods

to exit ETH staking or other delays to unstaking or withdrawing ETH from staking protocols;

staking exposes us to slashing risks, defined as a punitive mechanism built into the Ethereum

network, designed to penalize validators and their delegators for misbehavior or failing

to follow network rules, which could result in the loss of our staked ETH;

● 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;

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;

● developments

in mathematics or technology, including in digital computing, algebraic geometry and quantum

computing, that could result in the cryptography used by the ETH blockchain becoming insecure

or ineffective

Ethereum network operates using open-source protocols, meaning that any user can become a node by downloading the Ethereum Client and

participating in the Ethereum network, and no permission of a central authority or body is needed to do so.

In addition, anyone can propose

a modification to the Ethereum network’s source code and then propose that the Ethereum network community support the modification.

These proposed modifications to the Ethereum network’s source code, if adopted, can lead to forks.

“fork” in the Ethereum protocol could adversely affect the value of the Company’s shares.

in the Ethereum protocol may lead to disruptions, security risks or declines in ETH value and therefore the value of the Company’s

common stock.

A “fork” occurs when a change to the Ethereum network’s source code creates two incompatible versions

of the blockchain, resulting in separate networks.

Forks may be planned (e.g., upgrades to the Ethereum protocol like the Merge or Dencun)

or unplanned (e.g., due to software bugs or validator disagreement).

Planned forks are designed to improve performance or introduce new

features, but they may introduce bugs, security vulnerabilities, or unexpected economic consequences.

Unplanned forks can arise from

client software inconsistencies or protocol failures, causing network instability or fragmentation.

In either case, forks may result

in operational outages, user confusion, replay attacks and reduced validator participation, all of which could undermine confidence in

the Ethereum network and adversely affect the price of ETH.

Our ETH holdings, staking activities and related treasury strategy could

be materially negatively impacted in the event of such a fork.

ETH 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 ETH 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.

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

a number of ETH trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (our principal market

for ETH) has, to date, not done so.

As a result, our ETH holdings may not be able to serve as a source of liquidity for us to the same

extent as cash and cash equivalents.

Further, ETH we hold with our custodians do 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 ETH or otherwise generate funds using our ETH holdings, including in particular during times of market

instability or when the price of ETH has declined significantly.

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

transactions, including capital raising transactions using ETH as collateral, or otherwise generate funds using our ETH holdings, or

if we are forced to sell our ETH at a significant loss, in order to meet our working capital requirements, our business and financial

condition could be negatively impacted.

plan to purchase additional digital assets using primarily proceeds from equity and debt financings, but we may be unable to obtain such

financings on favorable terms.

ability to achieve the objectives of our digital asset acquisition strategy depends in significant part on our ability to obtain equity

and debt financing.

The terms of debt or equity securities that we issue may require us to make periodic payments to the holders of those

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 digital asset acquisition strategy.

ability to obtain equity or debt financing may in turn depend on, among other factors, the value of our digital asset holdings, investor

sentiment and the public perception of ETH and other digital assets, our strategy and our value proposition.

Accordingly, a significant

decline in the market value of our digital asset holdings, our inability to monetize our ETH through staking, decentralized finance or

other yield-generating activities, or a negative shift in these other factors may create liquidity and credit risks, as such a decline

or such shifts may adversely impact our ability to secure sufficient equity or debt financing.

constitutes the vast bulk of assets on our balance sheet.

If we are unable to secure equity or debt financing in a timely manner, on

favorable terms, or at all, we may be required to sell ETH to satisfy our financial obligations, and we may be required to make such

sales at prices below our cost basis or that are otherwise unfavorable.

Any such sale of ETH may have a material adverse effect on our

operating results and financial condition and could impair our ability to secure additional equity or debt financing in the future.

inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our ETH in amounts

and at prices sufficient to satisfy our financial obligations, including any debt service and cash dividend obligations, could cause

us to default under such obligations.

Any default on our future indebtedness or any newly issued preferred stock could have a material

adverse effect on our financial condition.

Such actions could cause significant variation in our operating results in any quarter.

are also volatility risks related to stablecoins, which are designed to have a relatively stable price relative to an underlying physical

asset, most commonly a fiat currency, such as U.S.

dollars, or an exchange-traded commodity.

The stability of a stablecoin results from

the underlying assets backing the stablecoin that are held by the stablecoin’s issuer in reserve accounts, among other factors

such as the ability of a holder to redeem the stablecoin from its issuer at par.

The issuers of certain stablecoins currently retain

broad discretion to determine the composition and amounts of assets held in the issuers’ accounts backing those stablecoins, and

to substitute assets other than the fiat currency that is initially deposited.

The composition of backing assets varies considerably

across popular stablecoins, with some stablecoins backed entirely by off-chain assets including cash or short-term, highly liquid assets,

and others backed by assets significantly less liquid than cash or cash equivalents.

For example, Circle, which issues USDC, reports

that it holds cash and short-term cash equivalents to back its USDC stablecoins.

We regularly transact in and hold stablecoins;

December 31, 2025, USDC is the only stablecoin that we held.

A lack of applicable law and regulation has afforded discretion to certain

stablecoin issuers to determine the composition and amounts of assets backing those stablecoins.

There is a risk that an issuer may be

unable to liquidate enough backing assets if it were to face mass redemptions of its stablecoin, which could cause the price of the stablecoin

to deviate from the price of the underlying fiat currency or other asset with which the stablecoin is designed to align in price.

extreme cases, such as a request to immediately redeem all or substantially all of a particular stablecoin in circulation, even stablecoins

backed by reserves comprised primarily of cash and cash equivalents may be subject to instability or an inability of the stablecoin issuer

to meet all redemption requests, as the market for short-dated U.S.

government obligations might not be sufficiently price stable.

participants have increasingly shown concern about the actual underlying liquidity and reserves for dollar stablecoins such as USDC.

For example, according to reports, Circle had more than $3 billion of its USDC reserve funds on deposit at SVB which became temporarily

inaccessible when SVB was placed into FDIC receivership in March 2023.

Although these funds were ultimately made available, concerns

related to Circle’s access to these funds caused USDC to temporarily fall below its $1.00 peg, and the total market capitalization

of USDC decreased following this temporary depegging.

If a stablecoin issuer were to fail to honor its redemption obligations, this could

undermine public confidence in stablecoins and in digital assets more broadly, which could have a widespread impact on the crypto economy,

causing the prices of other stablecoins and digital assets to become more volatile.

in stablecoins, operational issues with stablecoins (for example, technical issues that prevent settlement), concerns about the sufficiency

of any reserves that support stablecoins, or regulatory concerns about stablecoin issuers or intermediaries , such as crypto asset spot

markets, that support stablecoins, could have a significant impact on the global crypto market and may adversely affect our business.

stablecoins purport to be backed by underlying reserve assets, a fundamental issue in the event of the bankruptcy or insolvency of the

issuer of a given stablecoin is which party possesses beneficial ownership of the underlying reserve assets:

the holder of the stablecoin,

or the issuer.

If a particular stablecoin were structured in a manner that entitles its holder only to a contractual right to payment

from the issuer (even if such payments are to be derived from the underlying assets), then the assets underlying the stablecoins may

be considered to be the property of the issuer’s bankruptcy estate, such that all of the issuer’s creditors would be entitled

to their pro rata share of such assets, with the stablecoin holder being treated as an unsecured creditor of the issuer.

In such an event,

if the issuer were to have insufficient funds or assets to satisfy the claims of its

then the holder of a stablecoin would likely receive only a partial recovery, and not the full purported value of its stablecoin holdings.

Conversely, if a particular stablecoin were structured in a manner that entitles its holder to absolute beneficial ownership of the underlying

reserve assets, whereby the issuer holds bare legal title to the underlying assets but has no beneficial interest or property rights

in such assets, then the holders would likely have a stronger claim on the underlying assets in the event of a bankruptcy or insolvency

of the issuer.

However, due to the novelty of stablecoins, courts have not yet considered the treatment of underlying reserve assets

in the context of a bankruptcy or insolvency of a stablecoin issuer, and there can be no certainty as to a court’s determination

in such circumstances.

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

and anti-money laundering laws and regulations.

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

Department of the Treasury (“ OFAC ”),

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

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

We are also prohibited

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

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

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

sanctions such as Venezuela, Russia, and Belarus.

sanctions compliance obligations apply to all U.S.

persons and cover transactions in digital assets.

sanctions authorities and law

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

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

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

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

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

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

sanctions regulations, especially when

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

OFAC may impose civil

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

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

sanctions regulations.

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

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

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

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

economic sanctions laws

and regulations.

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

operational or compliance challenges.

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

sanctions regulations,

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

and investigations.

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

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

or financial condition.

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

or fund criminal or terrorist activities.

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

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

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

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

and regulations and take care to only acquire our ETH 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 ETH from bad actors that have used ETH to launder money or otherwise

engage in illicit financial activity, we may be subject to regulatory proceedings and further transactions or dealings in ETH may be

restricted or prohibited.

launch of central bank digital currencies (“CBDCs”) may adversely impact our business.

introduction of a government-issued digital currency could eliminate or reduce the need or demand for private-sector issued crypto currencies,

or significantly limit their utility.

National governments around the world could introduce CBDCs, which could in turn limit the size

of the market opportunity for cryptocurrencies, including ETH.

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

costs or operational shutdowns.

Financial Crimes Enforcement Network, a division of the U.S.

Treasury Department (“FinCEN”) regulates providers of certain

services with respect to “convertible virtual currency,” including ETH.

Businesses engaged in the transfer of convertible

virtual currencies are subject to registration and licensure requirements at the U.S.

federal level and also under U.S.

FinCEN has issued guidance that cryptocurrency mining, without engagement in other activities, does not require registration and licensure

with FinCEN, FinCEN has not made similar pronouncements with respect to the operation of Ethereum validators.

In addition, our engaging

in decentralized finance activities could expose us to further risk in this regard.

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

Bank Secrecy Act,

or as a money transmitter under state laws, we may be subject to extensive regulatory requirements—including those that would mandate

us to implement anti-money laundering programs meeting certain requirements, make certain reports to FinCEN or state regulators, and

maintain certain records—resulting in significant compliance costs and operational burdens.

may incur extraordinary expenses to meet these requirements or, alternatively, may determine that continued operations are not viable.

Further, we may not be capable of complying with certain federal or state regulatory obligations applicable to “money services

businesses” and “money transmitters,” such as monitoring transactions and blocking transactions, because of the nature

of the Ethereum blockchain.

If we are deemed to be subject to and determine not to comply with such additional regulatory and registration

requirements, we may act to dissolve and liquidate.

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

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

may engage in decentralized finance transactions and deploy ETH using liquid staking and liquid restaking protocols, which present additional

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do not function as intended or as we anticipate, our ETH and any LsETH, weETH or similar tokens we hold may be exposed.

the digital asset award or transaction fees for recording transactions on the Ethereum Network are not sufficiently high to incentivize

validators, or if certain jurisdictions continue to limit or otherwise regulate validating activities, validators may cease expanding

validating power or demand high transaction fees, which could negatively impact the value of Ether and the value of our Common Stock.

2021, the Ethereum Network implemented the EIP-1559 upgrade.

EIP-1559 changed the methodology used to calculate transaction fees paid

to Ether validators (then called “miners”) in such a manner that reduced the total net issuance of Ether fees paid to miners.

If the digital asset awards for validating blocks or the transaction fees for recording transactions on the Ethereum Network are not

sufficiently high to incentivize validators, validators may cease validating blocks and confirmations of transactions on the Ethereum

Network could be slowed.

For example, the realization of one or more of the following risks could materially adversely affect the value

of our Common Stock:

the profit margins of digital asset validating operations are not sufficiently high, digital

asset validators are more likely to immediately sell digital assets earned by validating,

resulting in an increase in liquid supply of that digital asset, which would generally tend

to reduce that digital asset’s market price.

reduction in digital assets staked by validators on the Ethereum Network could increase the

likelihood of a malicious actor or botnet obtaining control.

See “ -If a malicious

actor or botnet obtains control of more than 33% of the validating power on the Ethereum

Network, or otherwise obtains control over the Ethereum Network through its influence over

core developers or otherwise, such actor or botnet could manipulate the Ethereum Network

to adversely affect the value of our Common Stock .”

have historically accepted relatively low transaction confirmation fees on most digital asset

If validators demand higher transaction fees for recording transactions on the

Ethereum Network or a software upgrade automatically charges fees for all transactions on

the Ethereum Network, the cost of using ETH may increase and the demand for ETH may correspondingly

Alternatively, validators could collude in an anti-competitive manner to reject

low transaction fees on the Ethereum Network and force users to pay higher fees, thus reducing

the attractiveness of the Ethereum Network.

Higher transaction confirmation fees resulting

through collusion or otherwise may adversely affect the attractiveness of the Ethereum Network,

the value of ETH and the value of our Common Stock.

the extent that any validators cease to record transactions that do not include the payment

of a transaction fee in validated blocks or do not record a transaction because the transaction

fee is too low, such transactions will not be recorded on the Ethereum blockchain until a

block is validated by a validator who does not require the payment of transaction fees or

is willing to accept a lower fee.

Any widespread delays in the recording of transactions

could result in a loss of confidence in the Ethereum Network.

the course of ordering transactions and validating blocks, validators may be able to prioritize

certain transactions in return for increased transaction fees, an incentive system known

as “Maximal Extractable Value” or MEV.

For example, in blockchain networks that

facilitate DeFi protocols in particular, such as the Ethereum Network, users may attempt

to gain an advantage over other users by increasing offered transaction fees.

Certain software

solutions have been developed which facilitate validators in capturing MEV produced by these

increased fees.

The MEV incentive system may lead to an increase in transaction fees on the

Ethereum Network, which may diminish its use.

Users or other stakeholders on the Ethereum

Network could also view the existence of MEV as unfair manipulation of decentralized digital

asset networks, and refrain from using DeFi protocols or the Ethereum Network generally.

In addition, it’s possible regulators or legislators could enact rules which restrict

the use of MEV, which could diminish the popularity of the Ethereum Network among users and

Any of these or other outcomes related to MEV may adversely affect the value

of Ether and the value of our Common Stock.

Custodians’ digital asset insurance may not be sufficient to make us whole in the event of any loss of ETH.

of the date of this filing, the insurance that covers losses of our ETH holdings may cover none or only a small fraction of the value

of the entirety of our ETH 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 ETH.

The insurance policies maintained by our custodians are shared

among all of such custodian’s customers and are not specific to us and may not be available or sufficient to protect us as a result.

Moreover, our use of custodians exposes us to the risk that the ETH 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 ETH.

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

maintain related to our ETH.

The legal framework governing digital asset ownership and rights in custodial or insolvency contexts remains

uncertain and continues to evolve, which could result in unexpected losses, protracted recovery processes or adverse treatment in insolvency

asset networks face significant scaling challenges and efforts to increase the volume and speed of transactions may not be successful.

digital asset networks face significant scaling challenges due to the fact that public, permissionless blockchains generally face a tradeoff

between security and scalability.

One means through which digital asset networks that utilize public, permissionless blockchains achieve

security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems.

For example, a

greater degree of decentralization of a public, permissionless blockchain generally means a given digital asset network is less susceptible

to manipulation or capture.

In practice, this typically means that every single node on a given digital asset network is responsible

for securing the system by processing every transaction and maintaining a copy of the entire state of the network.

As a result, a digital

asset network that utilizes a public, permissionless blockchain may be limited in the number of transactions it can process by the computing

capabilities of each single fully participating node.

As of March 31, 2025, the Ethereum Network handled approximately 18 transactions

In an effort to increase the volume of transactions that can be processed on a given digital asset network, many digital

assets are being upgraded with various features to increase the speed and throughput of digital asset transactions.

developers are actively researching and testing scalability solutions for public blockchains that do not necessarily result in lower

levels of security or decentralization, such as off-chain payment channels and Layer 2 networks.

Off-chain payment channels would allow

parties to transact without requiring the full processing power of a blockchain.

Layer 2 networks can increase the scalability of a blockchain

by allowing users to transact on a second blockchain deployed on top of a “Layer 1” network.

However, such off-chain channels

and Layer 2 networks only periodically use the Ethereum Network, reducing the demand for ETH as gas fees.

corresponding increases in throughput lag behind growth in the use of digital asset networks, average transaction fees and settlement

times may increase considerably.

For example, the Ethereum Network has been, at times, at capacity, which has led to transaction fees

as high as $200.27 per transaction, on May 1, 2022.

Transaction fees in 2024 have ranged from a high of $12.11 on January 19 to below

$1.00 throughout much of the year.

Increased transaction fees and decreased settlement speeds could preclude certain uses for Ether (e.g.,

micropayments), and could reduce demand for, and the price of, ETH, which could adversely impact the value of our Common Stock.

reduced gas fees could signal lower demand for ETH.

is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement or throughput of Ethereum

Network transactions will be effective, or how long these mechanisms will take to become effective, which could adversely impact the

value of our Common Stock.

AI industry is subject to developing and evolving regulatory frameworks globally, which are expected to become increasingly complex as

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affect our business, financial condition and results of operations.

Cybersecurity

incidents and other issues related to our information systems, technology and data may affect us materially and adversely

Cybersecurity

incidents and cyberattacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency

in the future.

The digital asset industry are a particular target for cybersecurity incidents, which may occur through intentional or

unintentional acts by individuals or groups having authorized or unauthorized access to our systems or our clients’ or counterparties’

information, which may include confidential information.

These individuals or groups include employees, vendors and customers, as well

The information and technology systems used by us and our service providers, and other third parties, are vulnerable to damage

or interruption from, among other things:

hacking, ransomware, malware and other computer viruses;

denial of service attacks;

computer and telecommunication failures;

phishing attacks;

infiltration by unauthorized persons;

security breaches;

by their respective professionals;

power outages;

and catastrophic events such as fires, tornadoes, floods, hurricanes and

It is difficult or impossible to defend against every risk being posed by changing technologies, as well as criminals’

intent to commit cybercrime, and these efforts may not be successful in anticipating, preventing, detecting or stopping attacks, or reacting

in a timely manner.

The increasing sophistication and resources of cybercriminals and other non-state threat actors and increased actions

by nation-state actors make it difficult to keep up with new threats and could result in a breach of security.

Such threats may see their

frequency increased, and effectiveness enhanced, by the use of artificial intelligence.

Further, cybersecurity risks may be heightened

as a result of ongoing global conflicts such as the Russia-Ukraine conflict or the ongoing Israel-Hamas conflict.

Additionally, we cannot

guarantee that our insurance coverage would be sufficient to cover any such losses.

the extent the operation of our systems relies on our third-party service providers, through either a connection to, or an integration

with, third parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication

of our information or the confidential information and personal data of customers and employees may increase.

Third-party risks may include

insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws,

security measures or other controls may be inadequate or in which there are uncertainties regarding governmental intervention and use

of such data, and our ability to monitor our third-party service providers’ data security practices are limited.

Although we generally

have agreements relating to cybersecurity and data privacy in place with our third-party service providers, they are limited in nature

and we cannot guarantee that such agreements will prevent the accidental or unauthorized access to or disclosure, loss, destruction,

disablement or encryption of, use or misuse of or modification of data (including personal data) or enable us to obtain adequate or any

reimbursement from our third-party service providers in the event we should suffer any such incidents.

Due to applicable laws and regulations

or contractual obligations, we may be held responsible for any information security failure or cybersecurity attack attributed to our

vendors as they relate to the information we share with them.

A vulnerability in or related to a third-party service provider’s

software or systems, a failure of our third-party service providers’ safeguards, policies or procedures, or a breach of a third-party

service provider’s software or systems could result in the compromise of the confidentiality, integrity or availability of our

systems or the data housed in our third-party solutions.

security of the information and technology systems used by us and our service providers may continue to be subjected to cybersecurity

threats that could result in material failures or disruptions in our business.

If these systems are compromised, become inoperable for

extended periods of time or cease to function properly, we or a service provider may have to make a significant investment to fix or

replace them.

The failure of these systems or of disaster recovery plans for any reason could cause significant interruptions in operations

and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating

to stockholders (and the beneficial owners of stockholders).

Such a failure could harm our reputation, subject us to legal claims and

otherwise materially and adversely affect our investment and trading strategies and our value.

a malicious actor or botnet obtains control of more than 33% of the validating power on the Ethereum Network, or otherwise obtains control

over the Ethereum Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Ethereum

Network to adversely affect the value of our Common Stock.

networked systems are vulnerable to various types of attacks.

As with any computer network, the Ethereum Network could be attacked.

example, following the “Merge” to transition the Ethereum Network from a proof-of-work consensus mechanism to a proof-of-stake

consensus mechanism and the switch to proof-of-stake validation, the Ethereum Network is currently vulnerable to several types of attacks,

attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection

of computers controlled by networked software coordinating the actions of the computers)

or group of validators acting in concert were to gain control of more than 33% of the total

staked Ether on the Ethereum Network, a malicious actor could temporarily impede or delay

block confirmation or even cause a temporary fork in the blockchain.

This is designed to

be a temporary risk, as the Ethereum Network’s inactivity leak would be expected to

eventually penalize the attacker enough for the chain to finalize again (i.e., the honest

majority would be expected to reclaim 2/3rd stake as the attacker’s stake is penalized).

Moreover, it is not believed that a 33% attack would allow a malicious actor to engage in

double-spending or fraudulent block propagation.

Even without 33% control, a malicious actor

or botnet could create a flood of transactions in order to slow down the Ethereum Network.

attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection

of computers controlled by networked software coordinating the actions of the computers)

or group of validators acting in concert were to gain control of more than 50% of the total

staked Ether on the Ethereum Network, a malicious actor would be able to manipulate transactions

on the blockchain, including censoring transactions, double-spending and fraudulent block

propagation, potentially for an extended period or even permanently.

In theory, the minority

non-attackers might reach social consensus to reject blocks proposed by the malicious majority

attacker, reducing the attacker’s ability to engage in malicious activity, but there

can be no assurance this would happen or that non-attackers would be able to coordinate effectively.

To the extent that such malicious actor or botnet did not yield its control of the validating

power on the Ethereum Network or the Ethereum community did not reject the fraudulent blocks

as malicious, reversing any changes made to the blockchain may not be possible.

attack” where, if a malicious actor, validator, botnet (a volunteer or hacked collection

of computers controlled by networked software coordinating the actions of the computers)

or group of validators acting in concert were to gain control of more than 66% of the total

staked Ether on the Ethereum Network, a malicious actor could permanently and irreversibly

manipulate the blockchain, including censorship, double-spending and fraudulent block propagation.

Although the malicious actor or botnet may not be able to generate new tokens or transactions

using such control, it could “double-spend” its own tokens (i.e., spend the same

tokens in more than one transaction) and prevent the confirmation of other users’ transactions

for so long as it maintained control (over 50%).

The attacker could finalize their preferred

chain without any consideration for the votes of other stakers and could also revert finalized

an example from another network, in August 2020, the Ethereum Classic Network, a proof-of-work network, was the target of two double-spend

attacks by an unknown actor or actors that gained more than 50% of the processing power of the Ethereum Classic Network.

resulted in reorganizations of the Ethereum Classic Blockchain that allowed the attacker or attackers to reverse previously recorded

transactions in excess of over $5.0 million and $1.0 million.

addition, in May 2019, the Bitcoin Cash network, a proof-of-work network, experienced a >50% attack when two large mining pools

reversed a series of transactions in order to stop an unknown miner from taking advantage of a flaw in a recent Bitcoin Cash protocol

Although this particular attack was arguably benevolent, the fact that such coordinated activity was able to occur may negatively

impact perceptions of the Bitcoin Cash network.

Although the two attacks described above took place on proof-of-work-based networks,

it is possible that a similar attack may occur on the Ethereum Network, which could negatively impact the value of Ether and the value

of our Common Stock.

there are no known reports of malicious control of the Ethereum Network, if groups of coordinating or connected Ether holders that together

have more than 33% of outstanding Ether were to stake that Ether and run validators, they could exert authority over the validation of

Ether transactions.

This risk is heightened if a substantial amount of the validating power on the network falls within the jurisdiction

of a single governmental authority and is significantly heightened if over 66% falls within such a jurisdiction.

If network participants,

including the core developers and the administrators of validating pools, do not act to ensure greater decentralization of Ethereum Network

validators, the feasibility of a malicious actor obtaining control of the validating power on the Ethereum Network will increase, which

may adversely affect the value of our Common Stock.

malicious actor may also obtain control over the Ethereum Network through its influence over core developers by gaining direct control

over a core developer or an otherwise influential programmer.

The less that the Ethereum ecosystem grows, the greater the possibility

that a malicious actor may be able to maliciously influence the Ethereum Network in this manner.

Moreover, it is possible that a group

of Ether holders that together control more than a substantial amount of outstanding Ether are in fact part of the initial or current

core developer group, or are otherwise influential members of the Ethereum community.

To the extent that the initial or current core

developer groups also control higher than a threshold of outstanding Ether necessary for an attack, as some believe, the risk of this

particular group of users causing the Ethereum Network to adopt updates to the core protocol that this particular group wants to be implemented

will be even greater, and should this materialize, it may adversely affect the value of our Common Stock.

asset networks are developed by a diverse set of contributors and the perception that certain high-profile contributors will no longer

contribute to the network could have an adverse effect on the market price of the related digital asset.

asset networks and related protocols are often developed by a diverse set of contributors, but are also often developed by identifiable

and high-profile contributors.

The perception that certain high-profile contributors may no longer contribute to the applicable digital

asset network or protocol may have an adverse effect on the market price of any related digital assets.

For example, in June 2017, an

unfounded rumor circulated that Ethereum protocol developer Vitalik Buterin had died.

Following the rumor, the price of Ether decreased

approximately 20% before recovering after Buterin himself dispelled the rumor.

Some have speculated that the rumor led to the decrease

in the price of Ether.

In the event a high-profile contributor to the Ethereum Network, such as Vitalik Buterin, is perceived as no longer

contributing to the Ethereum Network due to death, retirement, withdrawal, incapacity, or otherwise, whether or not such perception is

valid, it could negatively affect the price of Ether, which could adversely impact the value of our Common Stock.

availability of spot ETPs for ETH and other digital assets may adversely affect the market price of our listed securities.

ETH and other digital assets have experienced a surge of investor attention since ETH was invented in 2015, until recently investors

in the United States had limited means to gain direct exposure to ETH through traditional investment channels, and instead generally

were only able to hold ETH 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.

Given the relative novelty of digital

assets, general lack of familiarity with the processes needed to hold ETH directly, as well as the potential reluctance of financial

planners and advisers to recommend direct ETH holdings to their retail customers because of the manner in which such holdings are custodied,

some investors have sought exposure to ETH through investment vehicles that hold ETH and issue shares representing fractional undivided

interests in their underlying ETH 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 ETH.

we are an operating company, and we believe we offer a different value proposition than a ETH investment vehicle such as a spot ETH 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

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 ETH 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.

a result of the foregoing factors, availability of spot ETPs for ETH and other digital assets could have a material adverse effect on

the market price of our listed securities.

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 ETH and adversely affect our business.

a result of our ETH Treasury Management strategy, our assets are concentrated in our ETH holdings.

Accordingly, the emergence or growth

of digital assets other than ETH may have a material adverse effect on our financial condition.

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.

Additionally, the Ethereum network has completed multiple major upgrades since then and may undertake

additional upgrades in the future.

If the mechanisms for validating transactions in other alternative digital assets are perceived as

superior to the Ethereum network, those digital assets could gain market share relative to ETH.

alternative digital assets that compete with ETH 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.

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

Stablecoins have grown rapidly as an

alternative to ETH 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, ETH and other digital assets as a medium of exchange

or store of value.

As a result, the emergence or growth of these or other digital assets could cause the market price of ETH to decrease,

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

we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our ETH,

or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our ETH and

our financial condition and results of operations could be materially adversely affected.

Substantially

all of the ETH and LsETH 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 ETH.

ETH and other blockchain-based cryptocurrencies and the entities that provide services

to participants in the ETH ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious

A successful security breach or cyberattack could result in:

partial or total loss of our ETH in a manner that may not be covered by insurance or the

liability provisions of the custody agreements with the custodians who hold our ETH;

to our reputation and brand;

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.

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

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

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

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

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

disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized

or detected until after they have been launched against a target.

These attacks may occur on our systems or those of our third-party

service providers or partners.

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

system errors or vulnerabilities or other irregularities.

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.

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

face risks relating to the custody of our ETH, including the loss or destruction of private keys required to access our ETH and cyberattacks

43 unchanged sentences

protocol flaws, have occurred in the past and may occur in the future.

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

or to obligations applicable to investment advisers.

funds, 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.

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 ETH Treasury Management strategy, the manner in which our ETH 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.

Our board of directors has broad discretion over the investment,

leverage and cash management policies it authorizes, whether in respect of our ETH holdings or other activities we may pursue, and has

the power to change our current policies, including our strategy of acquiring and holding ETH.

to the unregulated nature and lack of transparency surrounding the operations of many ETH trading venues, ETH 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 ETH trading venues and adversely affect the value of our ETH.

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

Furthermore, there are many ETH trading venues which do not provide

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

As a result, the marketplace may lose confidence in ETH trading venues, including prominent exchanges that handle a significant volume

of ETH trading and/or are subject to regulatory oversight, in the event one or more ETH trading venues cease or pause for a prolonged

period the trading of ETH or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational

ETH Treasury Management strategy exposes us to risk of non-performance by providers and counterparties.

ETH Treasury Management strategy exposes us to the risk of non-performance by providers and counterparties, whether contractual or otherwise.

Risk of non-performance includes inability or refusal of a provider or counterparty to perform because of a deterioration in the counterparty’s

financial condition and liquidity or for any other reason.

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 ETH, a loss of the opportunity

to generate funds, or other losses.

primary provider risk with respect to our ETH is custodian performance obligations under the various custody arrangements we have entered

In particular, Sharplink is reliant on our custodial relationships and agreements with Anchorage Digital Bank N.A.

and its affiliates,

as well as Coinbase Inc.

and its affiliates.

Any failures of our custodians to perform could have an impact on our business, prospects,

financial condition and operating results.

In addition, in the event of a termination of one or more of our custody agreements, the Company

would be required to contract with an alternative custodian at terms and conditions that may not be as favorable as our current custody

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 perceived and actual counterparty and provider risk applicable to digital

asset ownership and trading.

Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation

of our ETH, nor have such events adversely impacted our access to our ETH, 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.

all of 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 ETH and LsETH 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 ETH holdings, we would become subject to additional

counterparty risks.

Any significant non-performance by providers and counterparties, including in particular the custodians with which

we custody substantially all of our ETH, could have a material adverse effect on our business, prospects, financial condition and operating

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-Q

Item 1A. Risk Factors