ITEM 1A. RISK FACTORS
Investing in our common stock
involves a high degree of risk. You should carefully consider the following risk factors before deciding whether to purchase or sell stock
in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our
business operations or our financial condition. If any of the events discussed below occur, our business, consolidated financial condition,
results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of the common
stock could decline.
Summary Risk Factors
Our business is subject to numerous
risks and uncertainties that you should consider before investing in our common stock. Set forth below is a summary of the principal risks
we face:
Risks Related to the Company’s Digital Assets Strategy and Holdings
We purchase digital assets, including
SOL, the price of which has been, and will likely continue to be, highly volatile. Our operating results and share price may significantly
fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.
We purchase or otherwise acquire
SOL for the establishment of our digital asset treasury operations. Digital assets, such as SOL, are highly volatile assets, as a result
of many factors including shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory
announcements. In addition, digital assets do not pay interest or other returns, unless utilized in staking or financial applications,
and so the ability to generate a return on investment from the net proceeds of any capital raisings will principally depend on whether
there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such capital
raisings. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially
below what we paid for such digital assets.
We adopted a digital asset treasury strategy
with a focus on SOL, and we may be unable to successfully implement this new strategy.
We adopted a digital asset treasury
primarily dedicated to SOL, including SOL acquisitions, staking and other decentralized finance activities. There is no assurance that
we will be able to successfully implement this new strategy or operate Solana-related activities at the scale or profitability currently
anticipated. Solana operates with a proof-of-stake combined with proof-of-history consensus mechanism, which differs significantly from
bitcoin’s proof-of-work mining mechanism. This strategic shift requires specialized employee skillsets and operational, technical
and compliance infrastructure to support SOL and related staking activities. This also requires that we implement different security protocols
and treasury management practices. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including
Nasdaq and the SEC, with respect to the treatment of public company cryptocurrency strategies. There is no assurance that we will be able
to execute this strategy by building out the needed infrastructure within the timeframe that we currently anticipate. Errors by key management
could result in significant loss of funds and reduced rewards. As a result, our shift towards SOL could have a material adverse effect
on our business and financial condition.
Our management relies upon the advice of the
Asset Manager through the Asset Management Agreement to assist in building our new Treasury Policy and the execution of the Company’s
Treasury Policy and may not yield the desired return.
We have engaged the Asset Manager
to manage our digital assets holdings and provide discretionary investment management services with respect to all of the Company’s
cash, cash equivalents, stablecoins, cryptocurrency and certain other investible assets (the “Treasury Assets”) including
all digital assets, the proceeds of any bona fide capital raise or other financing transaction conducted by or on behalf of the Company
or any of our subsidiaries and any investments of the Treasury Assets. Such Asset Manager (i) will have broad discretion in the application
of our Treasury Policy and management of our Treasury Assets, (ii) will have sole responsibility and authority with respect to the discretionary
investment management of the Treasury Assets and, (iii) from time to time direct the investment and reinvestment of our Treasury Assets.
The Asset Manager’s investments decisions and use of the Treasury Assets could not improve our results of operations or enhance
the value of our common stock. The failure to apply and manage these Treasury Assets effectively could result in financial losses that
could cause the price of our common stock to decline.
Our shift towards a Solana-focused strategy
requires substantial changes in our day-to-day operations and exposes us to significant operational risks.
Our shift towards a SOL treasury-focused
strategy, including staking, liquid staking, and other decentralized finance activities, exposes us to significant operational risks.
To participate in Solana’s Proof-of-Stake consensus mechanism, we must either operate or delegate to validator nodes, and such validator
nodes must keep software updated, maintain validator uptime and employ secure key management. In addition, the Solana ecosystem rapidly
evolves, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup if we are operating
a validator node. The upgrades and protocol changes may require that we incur unanticipated costs and could cause temporary service disruptions
to the Solana network. We may also need to employ third-party service providers in our operations, which may introduce risks outside of
our control, including significant cybersecurity risks. Any of these operational risks could materially and adversely affect our ability
to execute our SOL treasury strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.
The concentration of our SOL holdings enhances
the risks inherent in our Solana-focused strategy.
We have and intend to purchase
SOL and increase our overall holdings of SOL in the future. The intended concentration of our SOL holdings limits the risk mitigation
that we could achieve if we were to purchase a more diversified portfolio of treasury assets, and the absence of diversification enhances
the risks inherent in our Solana-focused strategy. The price of SOL experienced a significant decline in 2022, and any similar future
significant declines in the price of SOL could have a more pronounced impact on our financial condition than if we used our cash to purchase
a more diverse portfolio of assets. Our initial purchases of SOL were valued at approximately $232 per SOL, or $1.58 billion in the aggregate,
in early September. At September 30, 2025, the fair value of our SOL holdings was approximately $209 per SOL, or $1.43 billion in the
aggregate, and at November 30, 2025, the fair value of our SOL holdings was approximately $133 per SOL, or $920.5 million in the aggregate.
Solana is created and transmitted through the
operations of the peer-to-peer Solana network, a decentralized network of computers running software following the Solana protocol. If
the Solana network is disrupted or encounters any unanticipated difficulties, the value of SOL could be negatively impacted.
If the Solana network is disrupted
or encounters any unanticipated difficulties, then the processing of transactions on the Solana network may be disrupted, which in turn
may prevent us from depositing or withdrawing SOL from our accounts with our custodian or otherwise affecting SOL transactions. Such disruptions
could include, for example: the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems
of participants, custodians, or others; the closing of SOL trading platforms due to fraud, failures, security breaches or otherwise; or
network outages or congestion, power outages, or other problems or disruptions affecting the Solana network. In 2021 and 2022, the Solana
network experienced performance degradation including liveness disruptions due to network congestion; although the Solana network has
been upgraded to address those congestion issues, there is no assurance that future issues may not arise. The implementation of material
network upgrades, such as the proposed Alpenglow consensus upgrade or the continued integration of the Firedancer validator client, two
initiatives taking place on the Solana blockchain, could result in future degradation of performance. Any disruption of the Solana network
could materially impact the operation of decentralized finance on the network, resulting in the inability of the Company to transfer or
sell SOL, and the price of SOL.
SOL and other digital assets are novel assets,
and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s
financial position, operations and prospects.
SOL and other digital assets,
as well as applications on blockchain networks such as Solana, are relatively novel and are subject to significant uncertainty, which
could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets
and blockchain-based applications 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 SOL or other digital assets, or the
ability of blockchain-based applications to operate.
The U.S. federal government,
states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement
or judicial actions, that could materially impact the price of SOL or the ability of individuals or institutions such as us to own or
transfer SOL and utilize blockchain-based applications on networks such as Solana. For example, the U.S. executive branch, the SEC, the
European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the United Kingdom,
the Financial Services and Markets Act 2023 became law. It is not possible to predict whether, or when, any of these developments will
lead to Congress granting additional authorities to the SEC, Commodity Futures Trading Commission (“CFTC”), 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 authorities, how additional legislation or regulatory oversight might impact the ability of
digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital
assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and
SOL specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market
price of SOL and in turn adversely affect the market price of our common stock.
Moreover, the risks of engaging
in a digital asset treasury strategy are relatively novel and have created, and could continue to create complications due to the lack
of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability
insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets
industry in general, and the use and acceptance of SOL in particular, may also impact the price of SOL and is subject to a high degree
of uncertainty. The pace of worldwide growth in the adoption and use of the Solana network and SOL may depend, for instance, on public
familiarity with digital assets, ease of buying, accessing or gaining exposure to SOL, institutional demand for SOL as an investment asset,
the participation of traditional financial institutions in the digital assets industry, consumer demand for SOL as a means of payment,
and the availability and popularity of alternatives to SOL. Even if growth in SOL adoption occurs in the near or medium term, there is
no assurance that SOL and Solana network usage will continue to grow over the long term.
Because SOL have no physical
existence beyond the record of transactions on the Solana blockchain, a variety of technical factors related to the Solana blockchain
could also impact the price of SOL. For example, malicious attacks by validators, inadequate validation and staking rewards to incentivize
validating of Solana transactions, hard “forks” of the Solana blockchain into multiple blockchains, difficulties with upgrades
to the Solana network (such as the proposed Alpenglow consensus upgrade or integration of the Firedancer validator client) and advances
in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Solana blockchain and negatively affect
the price of SOL. The liquidity of SOL may also be reduced and damage to the public perception of Solana may occur, if financial institutions
were to deny or limit banking services to businesses that hold SOL, provide Solana-related services or accept SOL as payment, which could
also decrease the price of SOL. Similarly, the open-source nature of the Solana blockchain means the contributors and developers of the
Solana blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any
failure to properly monitor and upgrade the Solana blockchain could adversely affect the Solana blockchain and negatively affect the price
of SOL.
The liquidity of SOL may also
be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading
venues to provide services for SOL and other digital assets.
In connection with our SOL treasury strategy,
we expect to interact with various smart contracts deployed on the Solana network, which may expose us to risks and technical vulnerabilities.
In connection with our SOL treasury
strategy, including staking, liquid staking, and other decentralized finance activities, we expect to interact with various smart contracts
deployed on the Solana network in order to optimize our strategy and generate income. Smart contracts are self-executing code that operate
without human intervention once deployed. Although smart contracts are integral to the functionality of staking deposit contracts, liquid
staking protocols, and decentralized finance applications, they are subject to many known risks such as technical vulnerabilities, coding
errors, security flaws, and exploits. Any vulnerability in a smart contract we interact with could result in the loss or theft of SOL
or other digital assets, which could have a materially adverse impact on our business. In addition, certain smart contracts are upgradable
or subject to certain governance controls which could result in unforeseen code errors, asset or account freezing, or the loss of digital
assets. A vulnerability in a smart contract could create an unintended and unforeseeable consequence that has adverse financial consequences,
such as the loss of or inability to access funds. There is no assurance that the smart contracts we integrate with or rely upon will function
as intended or remain secure. Exploitation of such vulnerabilities could have a material adverse effect on our business and financial
condition.
Part of our future business strategy may include
acquisitions and investments in companies with Solana-focused or blockchain strategies, and there are risks associated with the integration
of any assets or operations acquired and our ability to manage those risks. In addition, we may be unable to make attractive acquisitions
or successfully integrate acquired businesses, assets or properties, and any inability to do so may disrupt our business and hinder our
ability to grow.
We intend to pursue a strategy
focused on both SOL accumulation and future acquisitions. Accordingly, in the future we may make acquisitions of businesses or assets
that we expect to complement or expand our current assets. However, we may not be able to identify attractive acquisition opportunities
in the future. Even if we do identify attractive acquisition opportunities, we may not be able to complete the acquisition or do so on
commercially acceptable terms. No assurance can be given that we will be able to identify additional suitable acquisition opportunities,
negotiate acceptable terms, obtain financing for acquisitions on acceptable terms or successfully acquire identified targets.
The success of any acquisition
will depend on our ability to integrate effectively the acquired business or asset into our existing operations. The process of integrating
acquired businesses and assets may involve unforeseen difficulties and may require a disproportionate amount of our managerial and financial
resources. The integration of acquisitions is a complex, costly and time-consuming process, and our management may face significant challenges
in such process. Some of the factors affecting integration will be outside of our control, and any one of them could result in increased
costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue.
Our failure to achieve consolidation
savings, to incorporate the acquired businesses and assets into our existing operations successfully or to minimize any unforeseen operational
difficulties could have a material and adverse effect on our financial condition and results of operations.
Additional ability to achieve
the objectives of our business strategy depends in significant part on our ability to obtain equity and debt financing. If we are unable
to obtain equity or debt financing on favorable terms or at all, we may not be able to successfully execute on our business strategy.
Certain of the Sponsors and their affiliates
have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations.
Certain of the Sponsors and their
affiliates have been, and may continue to be, the subjects of legal and regulatory proceedings and investigations. For example, Galaxy
Digital Inc. agreed to pay $200 million as part of an agreement with the New York Attorney General to resolve civil claims related to
certain investments, trading, and public statements made in connection with the LUNA digital asset from late 2020 to 2022. Separately,
Multicoin Capital Management, LLC and its managing partner Kyle Samani have been named as co-defendants along with Solana Labs in a putative
class-action litigation related to the promotion and sale of SOL for which a motion to dismiss is pending. Certain of these matters have
involved, among other things, allegations of improper marketing practices and misrepresentations, as well as unregistered securities offerings
with respect to SOL and other digital assets. Any adverse outcome in these proceedings or other future litigation or regulatory inquiries
could negatively affect public perception of the Sponsors, the Company, and Solana itself, which could constrain trading activity and
suppress the price and liquidity of SOL. Any such development could materially and adversely affect the value of our digital asset treasury,
the market price of our stock and our ability to execute on our digital asset treasury strategy.
Changes in regulatory interpretations could
require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.
The regulatory regime for digital
assets in the U.S. and elsewhere is uncertain. The Company may be unable to effectively react to proposed legislation and regulation of
digital assets, which could adversely affect its business.
If regulatory changes or interpretations
require us to register as a money services business with The Financial Crimes Enforcement Network (FinCEN) under the U.S. Bank Secrecy
Act, or as a money transmitter under state laws, we may be subject to extensive regulatory requirements, resulting in significant compliance
costs and operational burdens. In such a case, we may incur extraordinary expenses to meet these requirements or, alternatively, may determine
that continued operations are not viable. If we decide to cease certain operations in response to new regulatory obligations, such actions
could occur at a time that is unfavorable to investors.
Multiple states have implemented
or proposed regulatory frameworks for digital asset businesses. Compliance with such state-specific regulations may increase costs or
impact our business operations. Further, if we or our service providers are unable to comply with evolving federal or state regulations,
we may be forced to dissolve or liquidate certain operations, which could materially impact our investors.
If any of the digital assets that we hold are
classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.
Regulatory changes or interpretations
that classify digital assets that we hold as a security under the Securities Act of 1933 or the Investment Company Act, could require
us to register as an investment company and comply with additional regulations. Compliance with these requirements could impose extraordinary,
non-recurring expenses on our business. If the costs and regulatory burdens become too great, we may be forced to modify or cease certain
operations, which could be detrimental to our investors.
The SEC has previously indicated
that certain digital assets may be considered securities depending on their structure and use. Future developments could change the legal
status of digital assets that we may hold, requiring us to comply with securities laws. If we fail to do so, we may be forced to discontinue
some or all of our business activities, negatively impacting investments in our securities.
If the SEC or other regulators
determine that digital assets that we may hold qualify as securities, we may be required to change our operations, wind down our operations,
or register as an investment company under the Investment Company Act. This classification would subject us to additional periodic reporting,
disclosure requirements, and regulatory compliance obligations, significantly increasing our operational costs. Compliance with the requirements
of the Investment Company Act applicable to registered investment companies may make it difficult for us to continue our current operations,
and this would materially and adversely affect our business, financial condition and results of operations. In addition, if SOL or another
digital asset we hold were determined to constitute a security for purposes of the federal securities laws, we would likely take steps
to reduce the percentage of SOL or such other digital assets that constitute investment assets under the Investment Company Act. These
steps may include, among others, selling SOL that we might otherwise hold for the long term and deploying our cash in non-investment assets,
and we may be forced to sell our SOL or other digital assets at unattractive prices, or cease our operations.
Although we do not currently
engage in investing, reinvesting, or trading securities, and we do not hold ourselves out as an investment company, we could inadvertently
be deemed one under the Investment Company Act. If we are unable to rely on an exclusion, we would be required to register with the SEC,
which could impose additional financial and regulatory burdens.
Further, state regulators may
conclude that the digital assets we hold are securities under state laws, requiring us to comply with state-specific securities regulations.
States like California have stricter definitions of “investment contracts” than the SEC, increasing the risk of additional
regulatory scrutiny.
The classification of digital assets that we
hold as a commodity could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain
operations.
Under current interpretations,
SOL are classified as a commodity under the Commodity Exchange Act and are subject to regulation by the CFTC. If our activities require
CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational
disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further
impact how SOL and SOL derivatives are classified and traded.
If SOL are further regulated
as a commodity, we may be required to register as a commodity pool operator and register the Company as a commodity pool with the CFTC
through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring
expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to
cease certain operations, which could negatively impact our investors.
We are not subject to legal and regulatory obligations
that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, exchange-traded
funds (ETFs) and their 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 our changes
to our digital asset strategy, our use of leverage, 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.
Due to the unregulated nature and lack of transparency
surrounding the operations of many digital asset trading venues, digital asset trading venues experience greater risk of fraud, market
manipulation and other deceptive marketing practices, as well as security failures or regulatory or operational problems than trading
venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect
the value of digital assets, and the Company’s financial position, operations and prospects.
Digital asset trading venues
are relatively new and, in many cases, unregulated. Furthermore, there are many digital asset trading venues that 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 digital asset trading venues, including prominent exchanges that handle a significant
volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause
for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational
problems.
Negative perception, a
lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset
trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the digital
asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason,
may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greater volatility in the price of
digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure
of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.
Digital Assets, including SOL, historically
are highly volatile assets, and fluctuations in the price of SOL are likely to influence our financial results and the market price of
our common stock. Our historical financial statements do not reflect the potential variability in earnings that we may experience in the
future relating to our holdings of digital assets. Accordingly, it may be difficult to evaluate the Company’s business and future
prospects, and the Company may not be able to achieve or maintain profitability in any given period.
We purchase digital assets, including
SOL, the price of which has been, and will likely continue to be, highly volatile. Our financial results and the market price of our common
stock could be materially adversely affected if the price of SOL decreased substantially, as it has in the past, including as a result
of shifts in market sentiment, speculative trading, macroeconomic trends, technology-related disruptions and regulatory announcements.
In addition, our historical financial
statements do not reflect the potential variability in earnings that we may experience in the future from holding or selling digital assets.
Accordingly, volatility in our earnings may be significantly more than what we experienced in prior periods, and it may be difficult to
evaluate the Company’s business and future prospects. We also will need to perform an analysis each quarter to identify whether
events or changes in circumstances indicate that our digital assets are impaired.
Digital asset holdings are less liquid than
cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the digital asset
market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies
markets, concerns regarding pseudonymity of digital asset addresses, 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 digital assets at favorable
prices or at all. As a result, digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash
and cash equivalents. Further, digital assets we hold with our custodians and transact with our trade execution partners do not enjoy
the same protections or insurance 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 digital assets or otherwise generate funds using
our digital asset holdings, including in particular during times of market instability or when the price of digital assets has declined
significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions, including capital raising
transactions using SOL as collateral, or otherwise generate funds using our SOL holdings, or if we are forced to sell our digital assets
at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
The availability of spot ETPs for SOL and other
digital assets may adversely affect the market price of our listed securities.
Although bitcoin, SOL and other
digital assets have experienced a surge of investor attention since bitcoin was developed in 2008, until recently investors in the United
States had limited means to gain direct exposure to SOL through traditional investment channels, and instead generally were only able
to hold SOL 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 SOL directly, as well as the potential reluctance of financial planners
and advisers to recommend direct SOL holdings to their retail customers, some investors have sought exposure to bitcoin, SOL and other
digital assets through investment vehicles that hold bitcoin, SOL and other digital assets and issue shares representing fractional undivided
interests in their underlying digital asset holdings. These vehicles, which were previously offered only to “accredited investors”
on a private placement basis.
In October of 2025, the SEC approved
the listing and trading of spot SOL exchange-traded products (“ETPs”), the shares of which can be sold in public offerings
and are traded on U.S. national securities exchanges. The first approved SOL ETP commenced trading directly to the public on October 28,
2025, with a trading volume of approximately $55 million on the first trading day and had the highest launch day inflows of any ETP launched
in 2025. The value of our common stock may decline due to investors having a greater range of options to gain exposure to SOL now that
SOL ETPs are approved and investors may prefer to gain such exposure through ETPs rather than our common stock. The listing and trading
of spot ETPs for SOL or other digital assets offers investors another alternative to gain exposure to digital assets, which could result
in a decline in the trading price of SOL as well as a decline in the value of our common stock relative to the value of our SOL.
As a result of the foregoing
factors, the availability of spot ETPs for SOL and other digital assets could have a material adverse effect on the market price of our
listed securities.
Digital asset lending arrangements may expose
us to risks of borrower default, operational failures and cybersecurity threats.
From time to time, we may generate
income through lending digital assets, which carries significant risks. The volatility of such digital assets 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 therefore may be subordinated to the secured debt of the borrower in the event of the borrower’s bankruptcy or
insolvency. If a borrower becomes insolvent, we may be unable to recover the loaned SOL, leading to substantial financial losses.
Additionally, digital asset lending
platforms are vulnerable to operational and cybersecurity risks. Technical failures, software bugs or system outages could disrupt lending
activities, delay transactions or result in inaccurate record-keeping. Cybersecurity threats, including hacking, phishing and other malicious
attacks, pose further risks, potentially leading to the loss, theft or misappropriation of our loaned SOL. A successful cyberattack or
security breach could materially and adversely impact our financial position, reputation and ability to conduct future lending activities.
Decentralized finance arrangements may expose
us to risks of smart contract risk, operational failures and cybersecurity threats.
From time to time, we may generate
income through the use of digital assets including SOL or stablecoins in decentralized protocols including decentralized finance (“DeFi”)
applications. DeFi applications include over-collateralized borrow-lend vaults, token-exchange pools, and other financial or commercial
arrangements. Although these protocols are largely designed to limit counterparty risk in transactions, they introduce novel risks relating
to software code bugs, liquidation risks, and governance risks. These protocols are designed to operate in decentralized environments
but can be subject to failures or exploits. In addition: (a) network congestion or downtime can increase the likelihood of asset loss
or liquidation; (b) the volatility of digital assets deployed into DeFi applications may increase the likelihood of liquidation due to
market downturns, liquidity crises, governance attacks or other exploits, leading to substantial financial losses; (c) the uncertainty
in the accounting treatment of certain DeFi applications; (d) DeFi applications generally operate on a user-to-protocol basis where a
user of a DeFi application does not know the identity of other parties utilizing the DeFi application; and (e) the use of monitoring and
forensics software to mitigate risks of engaging in DeFi applications may not prevent the Company from engaging in DeFi pools that are
also used by bad actors or sanctioned persons.
The reliance on open-source code by digital
asset networks exposes us to risks related to competitive networks and products built on such code, the failure of individuals to maintain
that code, and discovery of security vulnerabilities that could threaten the ability of such networks to operate.
Digital asset networks are open-source
projects and, although there may be an influential group of leaders in the network community, generally there is no official developer
or group of developers that formally controls the digital asset network. Without guaranteed financial incentives, there may be insufficient
resources to address emerging issues, upgrade security or implement necessary improvements to the network in a timely manner. If the digital
asset network’s software is not properly maintained or developed, it could become vulnerable to security threats, operational inefficiencies
and reduced trust, all of which could negatively impact the digital assets’ long-term viability and our business.
The lack of legal recourse and insurance for
digital assets increases the risk of total loss in the event of theft or destruction.
Digital assets that we acquire
will not be insured against theft, loss or destruction. If we lose our digital assets, due to cyberattacks, fraud, theft, or other malicious
activities, we may not have any viable legal recourse or ability to recover the lost assets. Unlike funds held in insured banking institutions,
our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If
our digital assets are lost under circumstances that render another party liable, there is no guarantee that the responsible party will
have the financial resources to compensate us. As a result, we and our shareholders could face significant financial losses.
The Company will face risks relating to the
custody of its digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized
parties obtain access to our private keys, or if our private keys are lost or destroyed, or other similar circumstances or events occur,
we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.
We expect our primary counterparty
risk with respect to our SOL will be custodian performance obligations under the custody arrangements we enter into. A series of recent
high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in
the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the
digital assets industry, SEC enforcement actions against other providers, and the placement into receivership or civil fraud lawsuit against
digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership
and trading. Legal precedent created in these bankruptcies and other proceedings may increase the risk of future rulings adverse to our
interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency
or similar proceedings.
While our custodians will be
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 SOL will not become part of the custodian’s bankruptcy estate
if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. The treatment of digital assets in
bankruptcy proceedings remains an evolving area of law. Additionally, if we pursue any strategies to create income streams or otherwise
generate funds using our SOL holdings, we would become subject to additional counterparty risks. We will need to carefully evaluate market
conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to
implementing any such strategy, all of which could affect our ability to successfully implement and execute on any such future strategy.
These risks, along with any significant non-performance by counterparties, including in particular the custodian or custodians with which
we will custody substantially all of our SOL, could have a material adverse effect on our business, prospects, financial condition, and
operating results.
We face risks relating to the use of third-party
trading platforms in connection with our Solana-focused strategy.
We use third-party trading platforms,
which we believe are reputable, as well as reputable over-the-counter brokers to purchase SOL for our treasury. As part of our process
in determining transactions with third-party exchanges, we search for reputable exchanges that have industry standard policies and procedures
in place regarding data security and customer diligence related to anti-money laundering (“AML”), Office of Foreign Assets
Control (“OFAC”) sanctions compliance, and know-your-customer (“KYC”) rules and regulations. If any of these third-party
exchanges no longer meet our standards or if there is a decrease in reputable third-party exchanges, we may need to find additional counterparties
and enter into additional agreements that could be on less favorable terms, which could have a material adverse effect on our business,
financial condition or the results of our operations.
The irreversibility of digital asset transactions
exposes us to risks of theft, loss and human error, which could negatively impact our business.
Digital asset transactions are
generally irreversible without the consent and active participation of the recipient of the transaction or, in theory, control of a majority
of the processing power (or, in proof-of-stake networks, a majority of the staked tokens) on that digital asset network. Once a transaction
has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital
assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.
Although we plan to regularly
transfer digital assets to or from vendors, consultants and services providers, it is possible that, through computer or human error,
or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.
To the extent we are unable to
seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable
to seek recourse or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations
and financial condition.
We will be subject to significant competition
in the growing digital asset industry and the Company’s business, operating results, and financial condition may be adversely affected
if the Company is unable to compete effectively.
Following the launch of the Company’s
digital asset treasury strategy, the Company will operate in a competitive environment and will compete against other companies and other
entities with similar strategies, including companies with significant holdings in SOL and other digital assets, and the Company’s
business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
Solana faces unique technical, governance and
concentration risks that could materially affect its long-term viability.
Solana is a high-throughput Layer
1 blockchain with architectural features that differ significantly from other blockchains, such as Ethereum. While these features allow
for rapid processing of transactions, they introduce risks that could adversely impact the value of SOL and the stability of the Solana
network. Historically, Solana has suffered network outages, slow operations and validator coordination failures. If such challenges were
to persist, the confidence of the Solana development community and its users would be adversely affected, which could cause a rapid decline
in the value of SOL. In addition, Solana’s consensus mechanism (Proof of History combined with Proof of Stake) is novel and relatively
untested at a large scale over time. Structural flaws could emerge that require a fork, which may have an adverse impact on the Solana
network and our holdings.
Solana validators are relatively small in number,
compared to some other leading blockchains, which may lead to coordinated censorship.
Solana has fewer validators than
certain other blockchains but has a high Nakamoto coefficient, which refers to the minimum number of validators or node operators that
would need to collude to compromise or take control of a blockchain network. In contrast, Ethereum has a higher number of validators.
Despite the higher Nakamoto coefficient, a malicious actor might more easily be able to gain control of a network with fewer validators.
Such control of the network could allow a malicious actor to censor transactions, reverse transactions (double-spending), or manipulate
block validations.
Solana is subject to technological obsolescence,
including competition from emerging blockchain and artificial intelligence protocols.
The digital asset ecosystem is
characterized by rapid technological innovation, short development cycles, and intense competition among blockchains and related infrastructure
providers. Solana faces intense competition among existing protocols, such as Aptos, Hyperliquid, Sei and Sui, the Ethereum Layer 2 blockchains
such as Base, and new entrants that are currently being developed. Competitors may offer or develop superior scalability, security, interoperability,
decentralization, programmability and adoption, and may attract developers away from the Solana ecosystem. Advancements in AI and blockchain
technology are likely to accelerate the development of such protocols, including the development of additional networks that natively
integrate AI into consensus mechanisms and other core features. If Solana is unable to evolve to address such increased competition or
if market participants believe that Solana’s core technology stack is outdated or less attractive compared with other blockchain
networks, Solana may be considered technologically obsolete by the next generation of protocols. The decline in the Solana network would
materially impact the market value of SOL and adversely affect the value of our SOL treasury holdings and our stock price.
The Company may be subject to additional tax
liability if regulation or policy changes adversely affect the tax treatment of rewards from staking SOL.
The U.S. federal income tax treatment
of rewards from staking digital assets such as SOL or utilizing liquid staking tokens remains uncertain and is currently the subject of
debate and regulatory attention. Under current guidance by the Internal Revenue Service (“IRS”), staking rewards and transaction
fees may be treated as ordinary income upon receipt, although additional guidance is expected pursuant to the President’s Working
Group July 2025 report “Strengthening American Leadership in Digital Financial Technology.” If regulation or policy changes,
or the interpretation or enforcement thereof, results in adverse tax treatment of rewards from staking SOL, we could be subject to increased
audits by the IRS and additional tax liabilities.
The Solana blockchain experiences a high number
of “spam” transactions which can cause periods of congestion or outages or make it difficult for users to have their transactions
processed.
Solana’s high throughput
and lower transaction fees compared to other blockchains have made it an attractive target for large volumes of low-value or “spam”
transactions, which are often generated by automated bots or malicious actors seeking to exploit the network’s resources. These
spam transactions can congest the network, delay or prevent the processing of legitimate transactions, and in some cases, cause partial
or complete network outages or performance degradation. During periods of high congestion, users may experience significant delays, increased
transaction fees, or failed transactions, which can erode confidence in the network and reduce its utility for both users and developers.
In addition, repeated or prolonged network disruptions may discourage new projects from building on Solana, limit the adoption of decentralized
applications, and negatively impact the value of SOL. The Solana development team and community have implemented, and may in the future
implement additional, technical upgrades or other measures to address these issues, but there can be no assurance that such efforts will
be successful or sufficient to prevent future disruptions.
A high percentage of Solana validators rely
on software provided by Jito Labs, a third party unaffiliated with Solana Labs. If Jito Labs were to stop maintaining such software or
if such software failed to function properly, it could have an adverse effect on the Solana blockchain and value of SOL.
A significant portion of Solana
validators utilize software developed and maintained by Jito Labs, an independent third party that is not affiliated with Solana Labs
or the Solana Foundation. This reliance on third-party software introduces additional operational and security risks to the Solana network.
If Jito Labs were to discontinue support for its software, experience operational difficulties, or if the software were to contain critical
bugs, vulnerabilities, or backdoors, the performance and security of the Solana network could be compromised. For example, a failure or
exploit in the Jito Labs software could result in network instability, validator downtime or other adverse outcomes. The software offered
by Jito Labs has also reduced the impact of “spam” transactions on the Solana blockchain. If Jito Labs were to stop offering
or supporting its software, there could be a far greater impact of “spam” transactions on the Solana network which could congest
the network, delay or prevent the processing of legitimate transactions, and in some cases, cause partial or complete outages of the blockchain.
Any such events could materially and negatively affect the value of SOL, reduce confidence in the network, and impair the ability of the
Company to realize the expected benefits of its investment in SOL.
A cyberattack or other malicious attack on the Solana blockchain
could have a material impact on the value of SOL held by the Company.
Solana and other digital assets
and the entities that provide services to participants in blockchain ecosystems have been, and may in the future be, subject to security
breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the
account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently
fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture
of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security
breach or cyberattack could result in:
· harm to our reputation and brand;
Further, any actual or perceived
data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks,
regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Solana ecosystem or in the use
of the Solana network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a
variety of industries, including industries related to Solana, are increasing in frequency, persistence, and sophistication, and, in many
cases, are being conducted by sophisticated, well-organized groups and individuals, including state actors. The techniques used to obtain
unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services,
or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after
they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners.
We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities
or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities,
as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing
and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state 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 and Israel 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 Solana industry, including third-party services on which
we rely, could materially and adversely affect our financial condition and results of operations.
The emergence or growth of other digital assets,
including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could
have a negative impact on the price of SOL and adversely affect the Company’s securities.
Following the launch of the Company’s
proposed digital asset treasury strategy, as a result of our Solana strategy, we expect our assets to be concentrated in SOL holdings.
Accordingly, the emergence or growth of digital assets other than SOL, including those with significant private or public sector backing,
including by governments, consortiums or financial institutions, may have a material adverse effect on our financial condition. As of
September 30, 2025, Solana was the fifth largest digital asset by market capitalization, excluding stablecoins. However, there are numerous
alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources
into private or permissioned blockchain platforms. If the mechanisms or network effects on alternative blockchain platforms are perceived
as superior to the Solana network, those digital assets could gain market share relative to Solana.
Many of the blockchain applications
on large blockchain networks involve the use of “stablecoins,” which are designed to maintain a constant price related to
or based on some other asset or traditional currency 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.
In July 2025, the U.S. President signed into law the “GENIUS Act,” which establishes a federal framework for “payment
stablecoins,” treating them as payment systems, not securities, and mandating fiat-backed reserves, monthly disclosures, anti-money
laundering safeguards, and similar measures. Stablecoins have grown rapidly as a medium of exchange and store of value, particularly on
digital asset trading platforms, and their use as an alternative to digital assets such as bitcoin and SOL could expand further as rules
are promulgated under the GENIUS Act. As of September 30, 2025, two of the seven largest digital assets by market capitalization were
U.S. dollar-pegged stablecoins. Stablecoins are an important aspect of blockchain networks such as Solana and if other blockchains are
deemed more attractive than Solana for the use of stablecoins, that may impact the usefulness of the Solana network and Solana-based blockchain
applications, and therefore the value of SOL.
If we lose key personnel, if we fail to recruit
additional highly skilled personnel, or if we lose the services of our Asset Manager, our ability to operate and manage our digital asset
treasury strategy will be impaired.
Our ability to operate and manage
our digital asset treasury strategy depends upon our ability to attract and retain highly qualified personnel, including our newly appointed
Chairman, Kyle Samani, members of our executive team, or other key personnel. In addition, we rely heavily on the services of our Asset
Manager for the management of our digital asset treasury and for strategic guidance relating to our business, operations, growth initiatives
and industry trends in the crypto technology sector. The loss of the services of any of our executive officers, key employees, or the
Asset Manager, or our inability to find suitable replacements, could result in significant disruptions to our operations and management
of our digital assets.
Risks Relating to Our Design Business
Our design business has experienced recurring losses. We cannot assure
you that we will regain profitability in the future.
Our design business generated
a net loss of approximately $5,159,000 in Fiscal 2025. We can provide no assurance that our design business will not experience losses
in the future. Our design business will need to generate increased revenues to achieve profitability in the future. Despite our efforts,
our design business may not achieve profitability in the future or sustain profitability for a prolonged period of time. If our design
business cannot generate sufficient revenues to operate profitably, we may be forced to cease, limit or suspend operations, or we may
be required to raise additional capital or incur additional debt to maintain or grow our design business. There is no assurance that we
will be able to raise such capital and if so on terms that are not onerous and dilutive to the Company and its shareholders.
The loss of any of, or a material reduction
in orders from, our largest design customers would materially and adversely affect our design business results of operations and financial
condition.
Our design business can at times
be concentrated with certain larger customers. In Fiscal 2024, our largest design customer accounted for over 30% of our consolidated
net revenues In December 2024, our largest design customer notified the Company of its plan to discontinue their insulin patch program,
on which the Company was working. We expect this to continue to cause a material decrease in our revenues relative to Fiscal 2024. We
have implemented cost reduction efforts to mitigate this reduction in design revenue.
Although our design customer
concentration changes from year to year, and we continue our efforts to diversify our design business, we cannot provide any assurance
that we will be successful. The loss of any of these customers would have a material adverse effect on the financial condition, liquidity
and results of operations of our design business.
If we are unable to provide our design customers
with high-quality products and services or if we are unable to deliver our products and/or services to our customers in a timely manner,
the financial condition, and results of operations of our design business may be materially adversely affected.
In order to maintain our existing
design business customer base and obtain business from new customers, we must demonstrate our ability to develop, design and produce products
and services at the level of quality, responsiveness, timeliness, and cost that our customers require. If our products or services are
provided at what customers believe are of a substandard quality, if they are not delivered on time, if we are not responsive to our customers’
demands or cannot meet their needs, our reputation as a reliable supplier of high-quality products and a sophisticated product designer
and developer would likely be damaged. If we are unable to meet anticipated product and service standards imposed by contractual arrangements,
customer expectations, industry practices, regulatory requirements and competitive forces, we may be unable to obtain new or keep our
existing customers, and this would have a material adverse effect on the business, financial condition, and results of operations of our
design business.
If our design teams fail to complete a project
in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss
on that project.
Our design engagements often
involve large-scale, complex projects. The quality of our performance on such projects depends in large part upon our ability to manage
the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party
contractors and our own personnel, in a timely manner. We may commit to a client that we will complete a project by a scheduled date and/or
at a fixed fee. We may also commit that a project, when completed, will achieve specified performance standards. If the project is not
completed by the scheduled date or fails to meet required performance standards, we may incur significant additional costs or be held
responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance
standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project.
If the project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project.
In addition, performance of projects can be affected by a number of factors beyond our control, including unavoidable delays from government
inaction, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services
requested by our clients, industrial accidents, environmental hazards, and labor disruptions. Furthermore, our entrance into fixed price
arrangements means that if the costs of supplies, labor and other resources rise due to shortages, heightened demand, inflation or other
factors, our margin for a given project will decline. To the extent these events occur, the total costs of the project could exceed our
estimates, and we could experience reduced profits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall