Item 1A. Risk Factors.
Ownership of our securities involves a high degree of risk. You should carefully consider the risks described below, together with all other information contained in or incorporated by reference into this Report, including our consolidated financial statements and the notes thereto, and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following discussion highlights material risks that could adversely affect our business, financial condition, results of operations, cash flows, liquidity, prospects and the trading price of our common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the risks actually occur, our business could be materially harmed and the market price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Holding Digital Assets and Our Tokenization Strategies
Our business strategy has a limited operating history and volatility in the price of our tokenized securities could materially and adversely affect our financial results and the market price of our common stock.
Our business strategy has a limited operating history and may not perform as we expect across different market conditions. If we are unable to execute our RWA tokenization due to limitations of availability of capital, our financial condition, results of operations, and the market price of our common stock could be materially adversely affected. Our ability to pursue this strategy also depends, in significant part, on our ability to raise capital on acceptable terms.
In addition, our tokenized securities may experience significant price volatility and limited liquidity, particularly because our tokenization activities are at an early stage and secondary-market infrastructure for tokenized securities has limited operating history. We have limited experience developing and commercializing tokenized products, and we may not be able to launch, scale, or generate material revenues from tokenization activities on a timely basis or at all. The trading price of our tokenized securities may be affected by, among other things, market acceptance, liquidity and price discovery, the availability and reliability of relevant market infrastructure and intermediaries, and regulatory developments, and may fluctuate for reasons unrelated to our operating performance. If we are unable to successfully execute our tokenization strategy, our business, financial condition, results of operations, and prospects could be materially adversely affected.
We face risks relating to the custody of our Digital Assets, including concentration with one or more custodians, limits on insurance coverage, and adverse outcomes in insolvency proceedings.
We hold our digital assets with regulated custodians that have contractual duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our digital assets among our custodians, and our digital asset holdings may be concentrated with a single custodian from time to time. In light of the significant amount of digital assets we hold, we may seek to engage additional custodians to achieve a greater degree of diversification in the custody of our digital assets as the extent of potential risk of loss is dependent, in part, on the degree of diversification. If there is a decrease in the availability of digital asset custodians that we believe can safely custody our digital assets, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our digital assets, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected.
Any insurance that we may have or may obtain covering losses of our digital asset holdings may cover none or only a small fraction of the value of the entirety of our digital asset 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 digital assets. Moreover, our use of custodians exposes us to the risk that the digital assets 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 digital assets. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our digital assets. 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, recovery processes or treatment in proceedings.
If we were deemed to be an investment company under the Investment Company Act, applicable restrictions likely would make it impractical for us to continue our business as currently conducted.
Under the Investment Company Act, a company generally will be considered an investment company if it primarily invests in securities or if it owns more than 40% of its total assets in securities. Although we do not believe we meet these tests, a substantial portion of our assets are digital assets, including ETH, which currently represent more than 40% of our total assets. In addition, we plan to tokenize RWAs and have acquired minority interests in several other companies. While we do not currently consider these assets to be “investment securities” under the Investment Company Act, there is a risk that the SEC or another regulatory authority could treat some or all of these assets as securities for these purposes.
If any of these assets were deemed to be investment securities, our ownership could exceed the thresholds for investment company status, which could require us to take actions to dispose of assets, restrict our operations, or otherwise alter our business strategy. Reliance on available exemptions or safe harbors under the Investment Company Act, may not be available when needed and could require us to limit certain business activities, including tokenization projects or holding minority interests.
Because the rules governing digital assets, tokenized assets, and minority investments are uncertain and evolving, there can be no assurance that we will not be deemed to be an investment company in the future. Being classified as an investment company could materially and adversely affect our business, financial condition, results of operations, and prospects.
Volatility in the price of our tokenized securities could materially adversely affect our financial results and the market price of our common stock.
Our business strategy has a limited operating history and may not perform as we expect across different market conditions. If we are unable to execute our RWA tokenization strategy due to limitations of availability of capital, our financial condition, results of operations, and prospects and the market price of our common stock could be materially adversely affected. Our ability to pursue this strategy also depends, in significant part, on our ability to raise capital on acceptable terms.
In addition, our tokenized securities may experience significant price volatility and limited liquidity, particularly because our tokenization activities are at an early stage and secondary-market infrastructure for tokenized securities has limited operating history. We have limited experience developing and commercializing tokenized products, and we may not be able to launch, scale, or generate material revenues from tokenization activities on a timely basis or at all. The trading price of our tokenized securities may be affected by, among other things, market acceptance, liquidity and price discovery, the availability and reliability of relevant market infrastructure and intermediaries, and regulatory developments, and may fluctuate for reasons unrelated to our operating performance. If we are unable to successfully execute our tokenization strategy, our business, financial condition, results of operations, and prospects and the market price of our common stock could be materially adversely affected.
Regulatory uncertainty regarding ETH, our digital assets treasury strategy and our tokenization activities could subject us to additional regulation, enforcement actions and significant compliance costs, require us to materially change or cease certain operations, and adversely affect the market price of ETH and our securities.
The regulatory treatment of digital assets generally, ETH specifically, and tokenized instruments representing interests in RWAs is evolving and remains uncertain in the United States and abroad. Regulatory authorities, including the SEC, the CFTC, FINRA and state regulators, have taken differing, and at times inconsistent, positions regarding the classification and regulation of digital assets, digital asset transactions, and tokenized securities. As a result, we cannot predict whether, when, or how new laws, regulations, interpretive guidance, enforcement priorities or judicial decisions will impact ETH, our ETH-related activities, or our tokenization strategy. Any such developments could increase our compliance costs, restrict our operations, limit the availability of service providers and trading venues, reduce liquidity, or otherwise adversely affect our business, financial condition, results of operations and prospects, as well as the market price of ETH and the market price of our securities.
The Digital Asset Interpretation represents a shift in the SEC’s regulatory posture toward the crypto asset industry, moving from reliance primarily on enforcement actions to affirmative guidance establishing a classification framework and clarifying when crypto-related activities do or do not implicate the federal securities laws. While the Digital Asset Interpretation conveys the SEC’s views on how the definition of “security” applies to crypto assets, it does not have the binding force of a regulation adopted through notice-and-comment rulemaking. Accordingly, courts are not bound by it and may reach different conclusions, and a future SEC could revise or withdraw it.
Notwithstanding the Digital Asset Interpretation, if ETH were determined to be a digital security, we could become subject to additional regulatory requirements and potential enforcement proceedings, including injunctions, cease-and-desist orders, fines and penalties, and we could be required to alter, suspend or restrict aspects of our digital assets treasury strategy, including our ability to acquire, hold, stake, lend, collateralize or otherwise transact in ETH. In addition, a determination that ETH, or other digital assets or interests we hold, constitutes “investment securities” for purposes of the Investment Company Act could increase the risk that we would be deemed an investment company, which could require us to dispose of assets, restrict our operations, or otherwise materially change our business strategy, and could make it impractical for us to continue our business as currently conducted.
Even if ETH is not treated as a tokenized security under the Digital Asset Interpretation or otherwise, ETH is treated as a digital commodity under the Digital Asset Interpretation and the CFTC has stated that it intends to administer the CEA consistent with the SEC’s interpretation. The CFTC has in the past asserted regulatory authority over certain ETH-related markets and activities. Legislative or regulatory developments, including new or revised CFTC interpretations or rules, could expand or otherwise change the regulatory obligations applicable to ETH, ETH derivatives, or other ETH-related transactions. To the extent our current or future activities are deemed to require CFTC registration or enhanced compliance, including, depending on the structure of our activities, as a commodity pool operator and or commodity trading advisor and registration of the Company as a commodity pool through the National Futures Association, we could incur substantial, non-recurring and ongoing expenses, face operational constraints, and be required to limit, restructure or cease certain activities, any of which could materially adversely affect our business and results of operations.
Our tokenization activities also involve significant securities law and related regulatory considerations. Our business model involves the securitization of RWAs and the issuance of digital, tokenized instruments representing interests in such assets that may be offered and sold in primary transactions and traded in secondary markets. Because our tokenized RWA products are digital securities under the Digital Asset Interpretation, our offers and sales are subject to the Securities Act, including the requirement to register each offer and sale or rely on an available exemption, and regulators have stated that tokenization, including on-chain recordkeeping, does not change the application of the federal securities laws. Accordingly, regulators could determine that aspects of our tokenization, distribution, transfer and trading arrangements, including arrangements involving Liquidity.io or other intermediaries or trading venues, require additional registrations or compliance under the Exchange Act, including as an exchange or alternative trading system, broker-dealer, dealer, clearing agency or otherwise, or under the Investment Company Act or the Investment Advisers Act of 1940, as amended (the “ Advisers Act ”). Any such determination could require us to modify, limit, delay or cease certain token offerings or tokenization-related operations, could result in significant legal and compliance costs, and could expose us to investigations, enforcement actions, civil , rescission , reputational , and restrictions on our ability to operate in certain jurisdictions.
These risks may be compounded by regulatory changes or enforcement actions affecting the broader digital asset ecosystem and the service providers on which we rely, including custodians, trading venues, staking providers, broker-dealers, identity verification and AML providers, and other counterparties. In addition, evolving requirements under AML, sanctions, money services and money transmission regimes, as well as foreign regulatory frameworks, could further increase our costs, impose new operational constraints, limit market access, or reduce liquidity.
Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and prospects, and could cause the market price of ETH and the market price of our securities to decline.
We are dependent on third parties and third-party platforms to execute and support the trading and transfer of our tokenized securities
Secondary trading of our Aero Token occurs on Liquidity.io and we expect that any secondary trading of our tokenized securities would occur on one or more registered alternative trading systems, including Liquidity.io. These platforms and the related technology and market infrastructure for secondary trading of tokenized securities are relatively new and have limited operating history with respect to securities such as ours. As a result, the initial distribution, listing, or secondary trading of our tokenized securities may experience technical difficulties, limited liquidity, limited price transparency, market fragmentation, operational disruptions, or other challenges that could impair trading activity, hinder price discovery, or adversely affect the perceived value of our tokenized securities.
If we are unable to obtain or maintain access to one or more suitable staking providers, custodians, or trading venues, or if staking or trading on such platforms is delayed, limited, disrupted, or terminated, our ability to execute our tokenization strategy, attract participants, and generate revenues from tokenization-related activities could be materially and adversely affected.
We rely on third-party service providers to support “know-your-customer” and AML investor verification for our tokenized securities, and any failure or interruption of those services could disrupt our tokenization activities.
We expect to rely on one or more third-party compliance and identity verification providers to perform “know-your-customer,” AML, sanctions screening and related investor verification processes in connection with the offer, sale, issuance and transfer of our tokenized securities, including to support gating functionality and maintaining records of verified participants.
If any such provider experiences service interruptions, cybersecurity incidents, data integrity issues, regulatory actions, technology failures, or ceases operations, we may be unable to onboard new participants, process subscriptions, complete issuances, or permit transfers of our tokenized securities. Any failure or compromise of these systems could also impair the accuracy or integrity of our verification and compliance records, expose us to regulatory scrutiny or enforcement risk, and lead to customer disputes, reputational harm, and additional legal and compliance costs. In addition, migrating to an alternative provider may be time-consuming, costly, and operationally complex, and could require changes to our processes, technology integrations, or contractual arrangements. Any of the foregoing could reduce liquidity, or limit our tokenization initiatives, and materially and affect our business, results of operations and prospects.
We may rely on smart contracts that are upgradeable, which could introduce operational, security, and governance risks and could adversely affect our tokenization activities.
Our tokenization activities may rely on smart contracts and related blockchain-based infrastructure that are implemented using upgradeable proxy patterns or other mechanisms that permit changes to contract logic after deployment. While upgradeability can allow us or our service providers to address bugs, add features, respond to regulatory developments, or modify functionality, it also introduces risks.
Contract upgrades may be implemented incorrectly, may introduce new vulnerabilities, may create unexpected interactions with other protocols or infrastructure, or may otherwise impair the functionality, security, or reliability of the smart contracts. In addition, upgrade authority may create governance and control risks, including the risk of misuse, key compromise, or actions that are perceived as unfavorable by users, counterparties, regulators, or other market participants.
Any failure, exploit, or disruption relating to our smart contracts, or any perception that our tokenized instruments are subject to uncertain or changeable rules, could lead to financial losses, trading or transfer disruptions, customer disputes, regulatory scrutiny, reputational harm, and could materially and adversely affect our business, results of operations, and prospects.
If the Company fails to commercialize its plans to securitize RWAs and allow such RWAs to be monetized through tokenized tradable instruments with both primary and secondary market liquidity, in the future, the Company could once again be deemed to be a “shell company.”
Prior to the completion of our November 2020 initial business combination, we were a “shell company,” which is a company that (i) has no or nominal operations; and (ii) either: (A) no or nominal assets; (B) assets consisting solely of cash and cash equivalents; or (C) assets consisting of any amount of cash and cash equivalents and nominal other assets. In the future we could again be deemed a “shell company,” including if we fail to take significant steps to expand and commercialize our plans to securitize RWAs, and allow such RWAs to be monetized through tokenized tradable instruments with both primary and secondary market liquidity, in the future, or if we fail to undertake alternative business operations and/or if our expected ETH holdings are deemed cash equivalents. Rule 144 as promulgated under the Securities Act is not available for the resale of securities initially issued by a shell company (reporting or non-reporting) or a former shell company, unless certain conditions are satisfied. Because we are a former shell company, our securities cannot be resold under Rule 144 unless certain conditions are met. If in the future we become a “shell company” again, Rule 144 will not be available for the sale of our common stock or other securities until we cease to be “shell company” and at least one year has elapsed since we file Form 10 information with the SEC, subject to the other requirements of Rule 144.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of, or changes to, our ETH holdings, 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. The board of directors of the Company (the “ 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, holding and selling ETH.
Our ETH holdings are concentrated and 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.
As of December 31, 2025, approximately 79% of our assets were concentrated in our ETH holdings or resulted from funds received from the 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 balance sheet 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 balance sheet assets.
Historically, the ETH market has been characterized by significant price volatility, 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. In addition, trading venues may impose transaction or withdrawal limits or suspend withdrawals entirely, which could make it difficult or impossible for us to convert ETH to fiat currency when needed. For example, a number of ETH trading venues temporarily halted deposits and withdrawals in 2022. As a result, our ETH holdings may not be 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 and transact with our trade execution partners does not 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 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 or when the price of ETH has significantly. If we are 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 to sell our ETH at a significant , in order to meet our working capital requirements, our business and financial condition could be impacted.
Our digital asset holdings expose us to risk of non-performance by providers and counterparties.
Our digital asset holdings expose 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 our digital assets, a loss of the opportunity to generate funds, or other losses. Because many digital asset trading venues are relatively new and may provide limited transparency regarding their operations, controls and regulatory compliance, we may face heightened risk of fraud, security failures or operational disruptions at such venues and counterparties.
Our primary provider risk with respect to our ETH is custodian performance obligations under the various custody arrangements we have entered into, which are reliant on our custodial relationships and agreements with Coinbase Inc. (“ Coinbase ”) 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, we would be required to contract with an alternative custodian at terms and conditions that may not be as favorable as our current custody agreements.
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 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 digital assets, nor have such events adversely impacted our access to our digital assets, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While 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 digital assets 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 digital asset 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 digital asset holdings, may adversely affect our prospects, financial condition and operating results.
Our common stock may be more volatile and may trade at a substantial premium or discount to the value of the digital assets we hold.
The market price of our common stock reflects many factors that do not affect the spot price of our digital asset holdings and may therefore diverge materially—positively or negatively—from the value of such holdings. These factors include, among others: our corporate-level expenses; taxes; the timing, size and pricing of equity or debt financings (including at-the-market offerings or convertible securities), equity awards and other sources of dilution; expectations about our future purchases or sales of ETH, staking activity or special distributions; our liquidity, public float, short interest and securities lending/borrow dynamics; the availability and pricing of exchange-listed alternatives (such as exchange-traded products holding ETH) and differences between those vehicles and a corporate issuer (including the absence in our case of an in-kind creation/redemption mechanism that can reduce premiums/discounts); differences in trading hours and market microstructure between our common stock and spot markets for ETH; changes in index inclusion, analyst coverage or investor sentiment toward us as an operating company; our corporate governance, financial reporting and any actual or perceived operational, custody, technology or regulatory risks specific to us; and broader equity-market conditions independent of crypto-asset markets. As a result, our stock may be more volatile and may trade at a premium or discount to the value of our digital asset holdings for extended periods.
The availability of spot exchange-traded products (“ ETPs ”) for ETH and other digital assets may adversely affect the market price of ETH or other digital assets and, consequently, the trading price of our common stock.
Although 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.
Although we are an operating company, and we believe we offer a different value proposition than an 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.
As 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 common stock.
Changes in the accounting treatment of our ETH holdings and the application of fair value accounting could materially increase the volatility of our results and adversely affect the market price of our common stock.
We have adopted Accounting Standards Update No. 2023-08 (“ 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. These impacts could in turn have a material adverse effect on our financial results and listed securities.
Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of ETH, particularly because we only began our RWA tokenization and digital asset strategy in the third quarter of 2025. The price of ETH has historically been subject to dramatic price fluctuations and is highly volatile. We determine the fair value of our ETH based on quoted (unadjusted) prices on the Coinbase exchange, and, as a result of ASU 2023-08, we recognize gains and losses from changes in such fair value in net income each reporting period. This accounting treatment may create significant volatility in our reported earnings and could decrease the carrying value of our digital assets, which in turn could have a material adverse effect on the market price of our common stock. Conversely, any sale of ETH at prices above our carrying value for such assets would create a gain for financial reporting purposes, even if we would otherwise incur an economic or tax loss with respect to such transaction, which could also contribute to volatility in our reported earnings.
Because 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 greater than what we experienced in prior periods.
Transactions using ETH require the payment of “gas fees,” which are subject to fluctuations that may result in high transaction fees.
Transactions using ETH, including purchases, sales and staking, require the payment of “gas fees” in ETH. Gas fees are payments made by the user to compensate for the computational energy required to process and validate transactions, such as purchases, sales and staking, on the ETH network. These fees can fluctuate and can be very expensive relative to the cost of the transaction depending upon congestion and demand on the network. If fees are high, the cost of a transaction will potentially decrease the return of the investment, which could be negative. High gas fees may also cause delays in the execution of a transaction, which could affect the preferred timing of execution and may lead to execution of a transaction during inopportune times. In addition, gas fees are paid in ETH itself, which would require that sufficient ETH balances are maintained. Future upgrades to the Ethereum protocol, regulatory changes, or technical issues could also adversely impact the cost of gas fees and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
Liquid staking applications pose risks associated with concentration of control.
Validators must deposit 32 ETH to activate a unique validator key pair that is used to sign block proposals and attestations on behalf of its stake ( i.e. , vote on its view of the chain). For every 32 ETH deposit that is staked, a unique validator key pair is generated. An application built on the Ethereum network, or a single node operator, can manage many validator key pairs. For example, Lido, an application that provides a so-called “liquid staking” solution which permits holders of ETH to deposit them with Lido, which stakes the ETH while issuing the holder a transferrable token, is reported by some sources to have or have had up to 275,000 validator key pairs (each representing 32 staked ETH) divided across over 30 node operators. At times, Lido has reportedly controlled around or in excess of 33% of the total staked ETH on the Ethereum network. While it is widely believed that Lido has little incentive to attempt to interfere with transaction finality or block confirmations using its reported 33% stake, since doing so would likely cause its entire stake to be slashed and thus lost (assuming good actors unaffiliated with Lido controlled the remainder), and also because Lido is believed to not control most of the third party node operators where its ETH is staked, and finally since the occurrence of such manipulation of the Ethereum network’s consensus processed by Lido or any other actor would likely cause ETH to substantial value (which would obviously Lido economically), it nevertheless risks associated with such a concentration of control (including centralization ). If Lido, or a actor with a similar sized stake, were to attempt to with transaction finality or block confirmations, it could affect the use and adoption of the Ethereum network, the value of ETH, and thus the value of our assets.
Lending arrangements may expose us to risks of borrower default and operational failures .
From time to time, we may generate income through lending our ETH to third party borrowers, which carries significant risks. The volatility of the market price of ETH increases the likelihood that borrowers may default due to market downturns, liquidity crises, fraud or other financial distress. These lending transactions may be unsecured, and so may be subordinated to secured debt of the borrower. If a borrower becomes insolvent, we may be unable to recover the loaned ETH, leading to substantial financial losses.
In addition, ETH lending arrangements typically require us to rely on borrowers and intermediaries to perform key operational functions, including custody, settlement, margining, collateral management and recordkeeping. Any failure, interruption, or inability of a borrower, agent, platform or other counterparty to perform these functions, including delays in returning loaned ETH or enforcing our rights to collateral, could result in losses, disputes, or reduced liquidity and could materially and adversely affect our financial condition, results of operations and prospects.
Security breaches or cyberattacks could result in loss of our digital assets and disrupt our tokenization activities.
Security breaches and cyberattacks are of particular concern with respect to our ETH and our tokenization activities, including the third-party platforms and service providers we rely on to issue, record, service, transfer, settle and support the trading of our tokenized securities. Purchasers’ ability to access, transfer or trade our tokenized securities may be impaired by outages, security incidents or compromised credentials affecting those third parties, including broker-dealers, alternative trading systems, custodians, account interfaces, wallet integrations and investor onboarding and verification providers. A successful security breach or cyberattack could result in:
a partial or total loss of our ETH or tokenized securities 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 or other agreements with third-party platforms and service providers;
harm to our reputation and brand;
improper disclosure of data and violations of applicable data privacy and other laws;
significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure; or
disruptions to, or the inability to conduct, the issuance, servicing, transfer, settlement, or trading of our tokenized securities, including as a result of outages, security incidents, compromised credentials, failures in wallet or account access systems, or disruptions affecting third-party broker-dealer or alternative trading system operations.
In addition, the Ethereum network and the digital asset service providers we rely on depend on Internet connectivity and the integrity of Internet routing. Denial-of-service attacks can cause temporary delays in block creation and transfers. Border gateway protocol hijacking, or BGP hijacking, may allow an attacker to intercept or reroute traffic, isolate portions of the network, and increase the risk of double-spending or other security failures. Any such disruption could impair our ability to transfer ETH, disrupt staking activities, reduce confidence in digital assets, and adversely affect the price of ETH and the market price of our common stock and could also prevent or delay purchasers from accessing, transferring, settling, or trading our tokenized securities for a period of time. Because ETH transactions rely on the Ethereum network, disruptions affecting the network could prevent or delay our ability to transfer, deposit, or withdraw ETH and could also or tokenization-related processes that depend on Ethereum-based infrastructure or service providers.
Cyberattacks are increasing in frequency, persistence, and sophistication, including by well-funded and organized groups and state actors. The methods used to obtain unauthorized access to systems and information, disrupt services, or sabotage operations evolve rapidly and may be difficult to detect, and the growing use of artificial intelligence has enabled threat actors to develop more advanced techniques. Attacks may target our systems or those of our third-party service providers and partners. We may experience breaches due to human error, malfeasance, insider threats, or system vulnerabilities, including through hacking, social engineering, phishing, and fraud. Certain threats may remain dormant or for extended periods, and remote-work arrangements and ongoing geopolitical may increase cybersecurity risks. In addition, because our tokenization activities depend on third-party platforms and service providers, a , , or compromise affecting any such party could their ability to perform essential functions, including investor onboarding, account access, transfer restrictions, recordkeeping, transaction processing, settlement, or reporting.
Digital asset transactions generally are not reversible without the consent and active participation of the recipient (or, in theory, control or consent of a majority of the network’s processing power). As a result, if unauthorized parties obtain access to our ETH, compromise private keys or other credentials, or effect an unauthorized or erroneous transfer, whether through compromise of our systems or those of our custodians, staking providers, execution partners, tokenization partners, or other third parties, we may be unable to recover the affected ETH or tokenized securities, or otherwise unwind or remediate unauthorized or erroneous transactions in a timely manner. Any such loss could materially and adversely affect our business, financial condition, and results of operations.
Risks Related to our Common Stock
The price of our common stock has and may continue to fluctuate significantly.
The trading price of our common stock has fluctuated widely and may continue to fluctuate widely as a result of a number of factors, many of which are outside our control. During the year ended December 31, 2025, our common stock traded at prices as low as $4.86 per share and as high as $174.60 per share (when taking into account the Reverse Stock Split). This volatility may affect the price at which you could sell the shares of our common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors.
As a result, you may not be able to sell your shares of common stock at or above the price at which you purchase them. In addition, the stock market in general, and Nasdaq and the stock of digital asset and ETH companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
Resales of our common stock in the public market by our stockholders, or the perception that such sales may occur, may cause the market price of our shares of common stock to fall.
Sales of a substantial number of shares of our common stock could occur at any time. We have previously registered the resale of a significant number of shares of our common stock, and if sold in the market all at once or at about the same time, or if there is a perception that such sales could occur, it could significantly depress the market price of our common stock and could also affect our ability to raise equity capital in the future at a time and price that we deem reasonable or appropriate. The issuance of new shares of common stock could result in resales of our shares of common stock by our current stockholders concerned about the potential ownership dilution of their holdings. In turn, these resales could have the effect of depressing the market price for shares of our common stock.
Our stock repurchases are discretionary and even if effected, they may not achieve the desired objectives.
On August 22, 2025, the Board of Directors authorized and approved a stock repurchase program for up to $250.0 million of the outstanding shares of the Company’s common stock. Subject to any future extension in the discretion of the Board of Directors, the repurchase program is scheduled to expire upon the earliest of (i) June 30, 2026, (ii) when a maximum of $250.0 million of the Company’s common stock has been repurchased or (iii) when such program is discontinued by the Board of Directors. Repurchases are made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the trading price of the stock, alternative uses for capital, and the Company’s financial performance. The program does not obligate the Company to acquire a minimum amount of shares. Since August 22, 2025, the Company has purchased an aggregate of 2,099,471 shares of common stock for an average purchase price of $22.79.
The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to purchase a particular number of, or any, shares. There is no guarantee as to the exact number or value of shares that will be repurchased by the Company, if any.
There can be no assurance that any repurchases pursuant to our stock repurchase program will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchase such shares. The amounts and timing of the repurchases may also be influenced by general market conditions, regulatory developments (including recent legislative actions which, subject to certain conditions, may impose an excise tax of 1% on our stock repurchases) and the prevailing price and trading volumes of our common stock. If our financial condition deteriorates or we decide to use our cash for other purposes, we may suspend repurchase activity at any time.
Sales of our common stock through our ATM Program, or the perception that such sales may occur, could cause the market price of our common stock to fall.
Pursuant to an amended and restated sales agreement dated November 14, 2025, between Clear Street LLC and TCBI Securities, Inc., doing business as Texas Capital Securities, we may offer and sell shares of our common stock from time to time, or the agents acting as our sales agents may offer our common stock, in at-the-market transactions. Continued sales of our common stock, if any, under the ATM Program will depend upon market conditions and other factors to be determined by us and may be made in negotiated transactions or transactions that are deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act. Future sales of our common stock are not guaranteed, and there are no firm commitments to receive funding under the ATM Program. The issuance from time to time of these new shares of common stock, or the perception that such sales may occur, could have the effect of depressing the market price of our common stock.
You may experience future dilution as a result of future equity or debt offerings.
In order to raise additional capital, we may in the future offer, through our ATM Program or other means, additional shares of common stock or other securities convertible into or exchangeable for our shares of common stock that could result in further dilution to our current stockholders or result in downward pressure on the price of our common stock. We may sell through our ATM Program or other means, additional shares of common stock or other securities in any offering at prices that are higher or lower than the prices paid by prior investors, and the investors purchasing shares or other securities in the future could have rights superior to existing stockholders. Moreover, to the extent that we issue options or warrants to purchase, or securities convertible into or exchangeable for, our shares of common stock in the future and those options, warrants or other securities are exercised, converted or exchanged, stockholders may experience further dilution.
Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or where shares are to be issued to our officers, directors and applicable consultants. Our Board of Directors has authority, without action or vote of the stockholders, but subject to Nasdaq rules and regulations (which generally require stockholder approval for any transaction that would result in the issuance of more than 20% of our then outstanding shares of common stock or voting rights representing over 20% of our then outstanding shares of stock, subject to certain exceptions), to issue all or part of the authorized but unissued shares of common stock. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management’s ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.
We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
The continued operation and expansion of our business will require substantial funding. We have paid no cash dividends on our common stock to date, and we currently intend to retain our available cash to fund the development and growth of our business. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, which may never occur.
General Risks
If we make acquisitions, they may disrupt or have a negative impact on our business.
If we make acquisitions in the future, funding permitting, which may not be available on favorable terms, if at all, we could have difficulty integrating the acquired company’s assets, personnel and operations with our own. We do not anticipate that any acquisitions or mergers we may enter into in the future would result in a change of control of the Company. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:
the difficulty of integrating acquired products, services or operations;
the potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;
difficulties in maintaining uniform standards, controls, procedures and policies;
the potential impairment of relationships with employees and customers as a result of any integration of new management personnel;
the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;
the effect of any government regulations which relate to the business acquired;
potential unknown liabilities associated with acquired businesses or product lines, or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition; and
potential expenses under the labor, environmental and other laws of various jurisdictions.
Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition, many of which cannot be presently identified. These risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
Our limited number of employees subjects us to significant resource constraints, which may hinder our ability to comply with public company regulations and manage our operations effectively.
We operate with a very small number of employees, and our success depends on the continued service and performance of this lean team. As a public company, we are subject to complex reporting, legal, and accounting requirements that demand significant time and attention. Because of our limited headcount, our executive officers must personally devote a substantial portion of their time to compliance and SEC reporting tasks. This diverts their attention away from our primary business objectives. Our small staff makes it difficult to maintain an ideal “segregation of duties” within our internal control over financial reporting. This increases the risk that errors or fraud could occur and not be detected in a timely manner. The loss of even one or two employees could disproportionately disrupt our operations, as we lack the “bench strength” or redundancy found in larger organizations to easily redistribute specialized tasks. To meet our public obligations, we rely on outside consultants, auditors, and legal counsel. This increases our operating costs and makes our compliance dependent on the availability and performance of these third-party providers.
If we are unable to effectively manage our limited human resources or if we fail to scale our staff as our strategy progresses, we may experience delays in our filings, weaknesses in our internal controls, or a failure to execute our business plan, any of which could materially and adversely affect our stock price.
We have in the past, and may in the future, identify material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
The Company’s management evaluated, with the participation of our principal executive officer and principal financial and accounting officer, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of the end of December 31, 2025. Based on their evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions.
The material weakness in internal control over financial reporting identified was related to controls over the classification and technical accounting review of significant, one-time accounting transactions.
A material weakness is a control deficiency or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. As a company with limited accounting resources, a significant amount of management’s time and attention has been and will be diverted from our business to ensure compliance with these regulatory requirements.
Management continues to take steps to remediate the material weakness described above and has implemented the following control enhancements:
Implemented an added layer of technical review by an internal financial reporting director for one-time significant entries to ensure appropriate classification is assessed.
Hired additional third-party accounting consultants to assist with accounting treatment, controls design, reconciliation and close procedures, and financial disclosures.
Maintaining effective disclosure controls and procedures and effective internal control over financial reporting are necessary for us to produce reliable financial statements and we are committed to remediating our material weakness in such controls as promptly as possible. However, there can be no assurance as to when this material weakness will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the currently identified material weakness, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations or may lose confidence in our reported financial information. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and Nasdaq, we could face consequences from those authorities. Any of these cases could result in a material effect on our business, on our financial condition or have a effect on the trading price of our common stock. Further, if we to remedy any future or maintain the adequacy of our disclosure controls and procedures and our internal controls, we could be subject to regulatory , civil or or stockholder us or our management.
We can give no assurance that the measures we take in the future will remediate any additional material weaknesses which could be identified, or that restatements of our financial statements will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of those controls.
Further, in the future, if we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting (to the extent we may be required in the future), investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC or Nasdaq, as applicable, or other regulatory authorities.
In addition, even if we are successful in strengthening our controls and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or facilitate the fair presentation of our financial statements or our periodic reports filed with the SEC. This may require us to restate prior financial statements.
Our classified Board of Directors structure may delay or complicate changes in control of our Board of Directors, but a hostile takeover or activist campaign could nevertheless result in changes to our Board of Directors and management that adversely affect our business and the market price of our common stock.
Our Board of Directors is divided into two classes, with approximately half of our directors standing for election in alternating years. This classified Board of Directors structure may have the effect of delaying or discouraging certain takeover attempts or changes in control of our Board of Directors. However, it does not eliminate the possibility that we may become the target of unsolicited or hostile takeover proposals, activist campaigns, proxy contests or other efforts by third parties seeking to influence or gain control of our Board of Directors, management, strategic direction or significant corporate decisions.
The pursuit or threat of such actions, even if ultimately unsuccessful or delayed due to our classified Board of Directors structure, could result in substantial costs, divert the attention of our directors and management, create uncertainty for employees, partners and customers, disrupt our operations and harm our reputation or business relationships. In addition, the extended time frame associated with a contested effort to change our Board of Directors composition may prolong uncertainty and instability.
If a hostile party succeeds over time in replacing some or all of our directors or influencing our management, our strategic direction, business plans, risk tolerance, capital allocation policies or approach to our ETH or digital asset holdings and related activities could change in ways that differ materially from the expectations of our stockholders. New directors or officers may lack familiarity with our business or industry, pursue strategies or transactions that stockholders do not favor, or implement changes that disrupt our operations. Changes in leadership, whether occurring incrementally as a result of staggered elections or through negotiated or contested processes, may also result in the loss of institutional knowledge or reduced operational effectiveness.
Any actual or perceived instability in our leadership, uncertainty regarding the outcome or duration of a hostile takeover or activist campaign, or delays in strategic decision-making resulting from such uncertainty could adversely affect our business, financial condition and operating results and could cause the market price of our common stock to decline.
Changes in applicable tax laws and regulations could adversely affect our business.
We are currently subject to income and other taxes in the United States, UK and Canada. Thus, the tax treatment of the Company is subject to changes in tax laws or regulations, tax treaties, or positions by the relevant authority regarding the application, administration, or interpretation of these tax laws and regulations. These factors, together with the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, and uncertainties regarding the geographic mix of earnings in any period, can affect our estimates of our effective tax rate and income tax assets and liabilities, result in changes in our estimates and accruals, and have a material adverse effect on our business results, cash flows, or financial condition. We are unable to predict what tax reforms may be proposed or enacted in the future or what effect such changes would have on our business, but such changes could potentially result in higher tax expense and payments, along with increasing the complexity, burden, and cost of compliance.
Our tax burden could increase as a result of ongoing or future tax audits.
We may be subject to periodic tax audits by tax authorities. Tax authorities may not agree with our interpretation of applicable tax laws and regulations. As a result, such tax authorities may assess additional tax, interest, and penalties. We regularly assess the likely outcomes of these audits and other tax disputes to determine the appropriateness of our tax provision and establish reserves for material, known tax exposures. However, the calculation of such tax exposures involves the application of complex tax laws and regulations in many jurisdictions. Therefore, there can be no assurance that we will accurately predict the outcomes of any tax audit or other tax dispute or that issues raised by tax authorities will be resolved at a financial cost that does not exceed our related reserves. As such, the actual outcomes of these disputes and other tax audits could have a material adverse effect on our business results or financial position.
Taxation of digital assets is complex and evolving.
The tax treatment of digital assets and other crypto assets is complex, evolving, and may be uncertain or subject to differing interpretations by taxing authorities globally and in the United States. The IRS and other tax authorities have issued limited guidance specifically addressing the classification, reporting, and taxation of transactions involving tokens, including their acquisition, holding, use, and disposition.
As a result, we may be subject to adverse tax consequences, including but not limited to, unexpected tax liabilities, additional tax reporting obligations, withholding taxes, penalties and interest for noncompliance, and the risk of audits or disputes with tax authorities regarding the timing, amount, or character of income, gain, loss, or deduction related to our digital asset holdings.
Furthermore, changes in tax laws, regulations, or enforcement policies could increase our tax burden or affect the tax efficiency of our investment strategy. Such changes could also require us to modify our investment, accounting, or operational practices, potentially resulting in increased costs or reduced returns.
There can be no assurance that tax authorities will not challenge the tax treatment of our digital asset holdings or that such challenges would not have a material adverse effect on our financial condition, results of operations, or cash flows.
