FORUM MARKETS Inc 10-Q for FY2025 Q3
FORUM MARKETS Inc (FRMM)
About this 10-Q
FORUM MARKETS Inc filed this 10-Q on November 14, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $4.11M
- Net loss
- $216.74M
- compared with a net loss of $836.72K a year earlier
- Diluted EPS
- -$16.80
- compared with -$5.43 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from to
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Nasdaq Stock Market LLC (The |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 12, 2025,
ETHZILLA CORPORATION, FORMERLY 180 LIFE SCIENCES CORP. AND SUBSIDIARIES
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
ETHZILLA CORPORATION, FORMERLY 180 LIFE SCIENCES CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash equivalents | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Marketable securities | ||||||||
| Digital assets | ||||||||
| Staking receivables | ||||||||
| Other assets of discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Accrued expenses | ||||||||
| Loans payable - current portion | ||||||||
| Collateralized loan | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Convertible debt, net at fair value | ||||||||
| Derivative liabilities | ||||||||
| Long term liabilities of discontinued operations | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 12) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ | ||||||||
| Class B Convertible Preferred stock liability, $ | ||||||||
| Class C Preferred Stock; | ||||||||
| Class K Preferred Stock; | ||||||||
| Common stock, $ | ||||||||
| Treasury stock | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ETHZILLA CORPORATION, FORMERLY 180 LIFE SCIENCES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue: | ||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Total Revenue | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Expense) Income: | ||||||||||||||||
| Dividend income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of convertible debt | ||||||||||||||||
| Change in fair value of available for sale securities | ( | ) | ( | ) | ||||||||||||
| Digital asset gains and losses | ||||||||||||||||
| Change in fair value of derivative liabilities | ||||||||||||||||
| Gain (loss) on settlement of liabilities | ( | ) | ||||||||||||||
| Total other (expense) income, net | ||||||||||||||||
| Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit | ||||||||||||||||
| Net Loss From Continuing Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss From Discontinued Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Comprehensive Loss: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Change in fair value of held to maturity securities | ||||||||||||||||
| Total other comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Total Comprehensive Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and Diluted Net Loss per Common Share | ||||||||||||||||
| Continuing operation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ETHZilla CORPORATION, formerly180 LIFE SCIENCES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For The Three and Nine Months Ended September 30, 2025 and 2024
(unaudited)
| For the Three and Nine Months Ended September 30, 2025 and 2024 | ||||||||||||||||||||||||||||||||||||
| Series B Preferred | Common Stock | Treasury | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Stock | Capital | Income | Deficit | (Deficit) | ||||||||||||||||||||||||||||
| Balance - January 1, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Cancelled shares | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued for settlement of liabilities | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Conversion of Series B Convertible Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for settlement of liabilities | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Commitment to repurchase common stock | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance - June 30, 2025 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Cancelled shares | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued for cash and warrants, net | ||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||||||||||
| Cashless exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||
| Exercise of options | ||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Share repurchases | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Adjustment related to reverse stock split | - | - | ||||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||||||||||||||||||
| Balance - September 30, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||||||||||||
| Shares issued from exercise of August 2023 pre-funded warrants | ||||||||||||||||||||||||||||||||||||
| Adjustment related to reverse stock split | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ||||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued for settlement of liabilities | ||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance -June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Shares issued for settlement of liabilities | ||||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Warrants issued for asset acquisition | - | - | ||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance -September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ETHZilla CORPORATION formerly 180 LIFE SCIENCES CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Digital asset gains and losses | ( | ) | ||||||
| Change in fair value of available for sale securities | ||||||||
| Non-cash settlement expense | ( | ) | ||||||
| Non-cash staking and incentive revenue | ( | ) | ||||||
| Gain loss on settlement of liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable - related parties | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| Total adjustments | ||||||||
| Net cash used in operating activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of marketable securities | ( | ) | ||||||
| Purchases of digital assets | ( | ) | ||||||
| Net cash used in investing activities from continuing operations | ( | ) | ||||||
| Net cash used in investing activities from discontinued operations | ||||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from exercise of pre-funded warrants from the Amendment to August 2023 Offering | ||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Repayment of loans payable related parties | ( | ) | ||||||
| Treasury stock purchases | ( | ) | ||||||
| Proceeds from collateralized loan | ||||||||
| Proceeds from convertible debt, net | ||||||||
| Proceeds from exercise of common stock options | ||||||||
| Proceeds from exercise of common stock warrants | ||||||||
| Proceeds from shares issued for cash and warrants, net | ||||||||
| Net cash provided by (used in) financing activities from continuing operations | ( | ) | ||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net Change In Cash, cash equivalents and restricted cash equivalents | ( | ) | ||||||
| Cash, cash equivalents and restricted cash equivalents - Beginning of Period | ||||||||
| Cash, cash equivalents and restricted cash equivalents - End of Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the period for income taxes | $ | $ | ||||||
| Cash paid during the period for interest expense | $ | $ | ||||||
| Non cash investing and financing activities | ||||||||
| Conversion of Series B Convertible Preferred Stock | $ | $ | ||||||
| Shares issued for settlement of liabilities | $ | $ | ||||||
| Prepaid expense financed with notes payable | $ | $ | ||||||
| Commitment to repurchase common stock | $ | $ | ||||||
| Warrants and Series B Convertible Preferred Stock issued for asset acquisition | $ | $ | ||||||
| ETH holdings contributed in exchange for common stock | $ | $ | ||||||
| Staking receivable | $ | $ | ||||||
| Cashless exercise of warrants | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ETHZilla CORPORATION, FORMERLY 180 LIFE SCIENCES CORP. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
ETHZilla
CORPORATION, formerly 180 Life Sciences Corp., formerly known as KBL Merger Corp. IV (“180LS”, or together with its
subsidiaries, the “Company”), was a blank check company organized under the laws of the State of Delaware on
180 Life Corp. (“180”, f/k/a 180 Life Sciences Corp. and CannBioRx Life Sciences Corp.) is a wholly-owned subsidiary of the Company and was incorporated in the State of Delaware on January 28, 2019. The Company is located in the United States (“U.S.”) and is a medical pharmaceutical company focused upon unmet medical needs in the areas of inflammatory diseases, fibrosis, and chronic pain by employing innovative research and, where appropriate, combination therapies, through 180’s three wholly-owned subsidiaries, 180 Therapeutics L.P. (“180 LP”), CannBioRex Pharmaceuticals Corp. (“CBR Pharma”), and Katexco Pharmaceuticals Corp. (“Katexco”). 180 LP, CBR Pharma and Katexco are together, the “180 Subsidiaries.” Katexco was incorporated on March 7, 2018 and CBR Pharma was incorporated on March 8, 2018, under the provisions of the British Corporation Act of British Columbia. 180 LP was formed as a limited partnership on September 6, 2013, in Delaware. Additionally, 180’s wholly-owned subsidiaries Katexco Callco, ULC, Katexco Purchaseco, ULC, CannBioRex Callco, ULC, and CannBioRex Purchaseco, ULC were formed in the Canadian Province of British Columbia on May 31, 2019 to facilitate the acquisition of Katexco, CBR Pharma and 180 LP. On July 1, 2021, the assets and liabilities of the Canadian companies (Katexco and CBR Pharma) were transferred to their respective subsidiaries, which are Katexco Pharmaceuticals Corp. (“Katexco U.S.”) and CannBioRex Pharma Limited (“CBR Pharma U.K.”).
Historically, he Company had been a clinical stage biotechnology company focused on the development of therapeutics for unmet medical needs in chronic pain, inflammation, fibrosis, and other inflammatory diseases,
In November 2024, the biotechnology related to α7nAChR was returned to Stanford University and the Company is currently evaluating strategic options for the TNF and CBD programs, including but not limited to a sale or disposition, return of these assets to the underlying owners or other strategic alternatives. While there are several parties conducting preliminary due diligence, no formal bids have been received to date, and the Company has not yet made a final determination with respect to these assets.
On September 29, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Elray Resources, Inc. (“Elray”). Pursuant to the Purchase Agreement, Elray agreed to sell us certain source code and intellectual property relating to a “back-end technology platform” which is a key component of creating an online blockchain casino (the “Purchased Assets”). Elray agreed to provide support and assistance to the Company in connection with the building and launching of a fully operational casino utilizing the Purchased Assets.
At the time of the closing of the Purchase Agreement, the Company planned to use this technology platform to establish a blockchain-based business aimed at the global iGaming market. However, during the three months ended September 30, 2025, the Company made a strategic shift in its operations and determined it would no longer pursue the commercialization of its “back-end” gaming platform, which incorporates blockchain technology and cryptocurrency operability, which we acquired in September 2024 (the “Gaming Technology Platform”), and its pharmaceutical research business. As a result, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 205, the assets and operations relating to the Gaming Technology Platform and the pharmaceutical research business are reflected on the September 30, 2025 and December 31, 2024 Consolidated Balance Sheets as “assets or liabilities of discontinued operations” and the results of operations are reflected in the Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2025 and 2024 as “net loss from discontinued operations”. See Note 3 and 15.
5
NOTE 2 - GOING CONCERN AND MANAGEMENT’S PLANS
In the consolidated financial statements as of and for the three months ended June 30, 2025 and prior periods, management disclosed substantial doubt about the Company’s ability to continue as a going concern. Due to the significant fundraising events undertaken by the Company during the three months ended September 30, 2025, as disclosed below in Notes 8 and 13, management determined that the Company will have sufficient cash flows to meet its obligations over the next 12 months, and as such the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with U.S. GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2025. For further information, refer to the financial statements and footnotes included in the Company’s annual financial statements for the fiscal year ended December 31, 2024, which are included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2025.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the condensed consolidated financial statements. The Company’s significant estimates and assumptions used in these condensed consolidated financial statements include, but are not limited to, the fair value of financial instruments including staking receivables and convertible debt, the valuation of the Company’s digital assets, warrants, option, and embedded derivatives. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and may cause actual results to differ from those estimates.
Foreign Currency Translation
The Company’s reporting currency is the United States dollar. The functional currency of certain subsidiaries was the British Pound (“GBP”). Equity accounts are translated at historical exchange rates. The resulting translation adjustments are recognized in stockholders’ equity as a component of accumulated other comprehensive income.
Comprehensive income is defined as the change in equity of an entity from all sources other than investments by owners or distributions to owners and includes foreign currency translation adjustments as described above.
Foreign currency gains and losses resulting from transactions denominated in foreign currencies, including intercompany transactions, are included in results of operations. Such amounts have been classified within general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss.
Cash, cash equivalents and restricted cash equivalents
We consider all highly liquid
temporary cash investments with an original maturity of three months or less to be cash equivalents, including certificates of deposits
and United States Treasury securities. As of September 30, 2025 and December 31, 2024, our cash and cash equivalents totaled $
6
Concentrations of Credit Risk
The Company is subject to concentration of credit risk arising from its cash, cash equivalents, digital assets, and counterparties, including financial institutions, custodians, and Ethereum blockchain (“ETH”), liquid staking tokens (“LST”), and liquid staking incentive tokens. The Company maintains cash balances with financial institutions that, at times, may exceed federally insured limits. The Company manages this risk by placing its cash with high-credit-quality institutions.
The Company holds significant balances of digital assets, including ETH, with third-party custodians. The Company’s risk is mitigated by using reputable, regulated custodians and by monitoring their financial health and operational controls. However, the failure of any custodian could result in a loss of some or all digital assets held.
In addition, the Company participates in liquid staking arrangements, whereby ETH is deposited into third-party protocols (such as ether.fi or Puffer) in exchange for liquid staking tokens. These protocols may not be subject to the same regulatory oversight as traditional financial institutions, and the Company is exposed to risks including, but not limited to:
| ● | Smart contract risk: Vulnerabilities or exploits in protocol code could result in loss of staked assets. |
| ● | Counterparty risk: Protocol operators or validators may fail to perform as expected, leading to loss or slashing of staked ETH. |
| ● | Concentration risk: A significant portion of the Company’s digital assets may be held with a limited number of protocols or custodians, increasing exposure to any single point of failure. |
| ● | Liquidity risk: In periods of market stress or protocol congestion, the Company may not be able to promptly withdraw or redeem staked assets. |
The Company regularly evaluates the creditworthiness and security practices of its custodians and protocol operators, and may diversify holdings across multiple platforms to mitigate concentration risk. The Company also monitors regulatory developments that may affect the safety and recoverability of its digital assets.
Intangible Assets
Intangible assets consist of licensed patents as well as technology licenses acquired in connection with the Reorganization. Licensed patents are amortized over the remaining life of the patent. Technology licenses represent the fair value of licenses acquired for the development and commercialization of certain licenses and knowledge. The technology licenses are amortized on a straight-line basis over the estimated useful lives of the underlying patents. It will be necessary to monitor and possibly adjust the useful lives of the licensed patents and technology licenses depending on the results of the Company’s research and development activities.
In addition, the Company acquired the Gaming Technology Platform from Elray in 2024. Both the licensed patents and Gaming Technology Platform are classified as discontinued operations in accordance with ASC 205. See Note 15.
Digital Assets
The Company’s digital assets include Ether, the native cryptocurrency of the Ethereum blockchain (“ETH”), liquid staking tokens(“LST”), and liquid staking incentive tokens.
Crypto assets within the scope of ASC 350-60 Intangibles—Goodwill and Other—Crypto Assets(“ASC 350-60):
ETH and liquid staking incentive tokens have been determined to fall within the scope of ASC 350-60. The company reflects crypto assets held at fair value on the consolidated balance sheets within the Digital Assets line item. Changes in the fair value of crypto assets are recognized in income, reflected within the Digital asset gains and losses within the consolidated statement of operations.
In determining the fair value of digital assets in accordance with ASC 820, Fair Value Measurement (“ASC 820”). The Company utilizes Coinbase as the principal market. The Company uses a first-in, first-out methodology to assign costs to digital assets.
7
Non-monetary receivable with an embedded derivative within the scope of ASC 310, Receivables (“ASC 310”) and ASC 815-15, Derivatives and Hedging – Embedded Derivatives (“815-15”):
The Company’s LST, comprised of weETH and pufETH, has been determined to fall within the scope of ASC 310 and ASC 815-15 and is accounted for as a non-monetary receivable with an embedded derivative. The host contract represents the holder’s right to receive ETH denominated in USD and is carried at cost.
The embedded derivative component is measured at fair value at each reporting date, using observable prices in the principal market in accordance with ASC 815-15 and ASC 820, Fair Value Measurement (“ASC 820”). Where quoted prices are directly available in active markets, the embedded derivatives are classified as Level 1 within the fair value hierarchy; if observable market prices are not available, management utilizes other relevant inputs and valuation techniques, which may result in Level 2 or Level 3 classification.
Upon
redemption of liquid staking tokens for ETH, the Company derecognizes both the receivable and the embedded derivative, recognizing ETH
at fair value. Any difference between the carrying amount and the fair value of ETH received is recognized as a gain or loss, which amounted
to $
Management has exercised judgment in determining the principal market, fair value hierarchy, and bifurcation of embedded derivatives. There is diversity in industry practice regarding the measurement and recognition of liquid staking tokens and related rewards. The Company continually evaluates the principal market and the reliability of inputs to ensure that fair value measurements reflect current market conditions.
ETH Staking
Beginning in August 2025, the Company used the proceeds from its capital raising activities to acquire and deploy ETH in staking activities, which can include native staking, liquid staking and restaking. The Company has entered into separate contractual agreements with various third-party entities to facilitate its ETH staking activities. The Company commenced both native staking in August of 2025 and commenced liquid staking in September 2025. The Company intends for staking to become a primary yield generation strategy of the Company within the current fiscal year.
Native Staking
The Company utilized one third-party asset manager to manage and stake ETH on its behalf as of September 30, 2025. Under these arrangements, the Company’s ETH is held by a qualified custodian and staked in the Ethereum protocol through a third-party validator operator (e.g., Coinbase). The validator operator manages the staking process and delegates the Company’s ETH to network validators. When selected by the Ethereum network, these validators earn staking rewards and transaction fees proportional to the amount of stake delegated.
ETH used in native staking is retained on the Company’s balance sheet as a crypto asset measured at fair value in accordance with ASC 350-60. The Company does not derecognize ETH when participating in native staking because it retains the ability to direct the use of the asset and obtain substantially all benefits.
The validator operator (e.g., Coinbase) is considered the customer, as it receives the Company’s staking capacity (the performance obligation) and, in exchange, provides staking rewards. The contract duration for native staking is typically determined by the daily reward cycle, consistent with the period in which enforceable rights and obligations exist under the Company’s agreements with validator operators. The Company has determined that a new contract is effectively renewed each day, such that contract inception changes daily. Revenue from native staking is recognized over time because the customer simultaneously receives and consumes the benefit of the Company’s performance throughout the daily reward cycle.
Revenue from native staking is recognized at the end of each daily period, when the Company’s right to staking rewards becomes determinable (i.e., when the constraint is lifted). The amount of revenue recognized is measured at the fair value of rewards at contract inception for that day, net of validator commissions, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and ASC 820. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception. Subsequent changes in the fair value of ETH after initial recognition are recorded as unrealized gains or losses.
Because the Company is not the principal to the block validation service, but rather provides staking capacity to third parties, it does not control the full output of the reward-generating activity and instead receives net staking rewards after validator commissions are deducted. Staking revenue is presented on a net basis, reflecting only the portion of protocol rewards to which the Company is entitled. Asset manager fees are presented as separate operating expenses.
8
Liquid Staking
The Company participates in liquid staking arrangements, whereby ETH is deposited into third-party protocols (such as ether.fi or Puffer) in exchange for liquid staking tokens (e.g., weETH, pufETH). These tokens represent the right to redeem underlying ETH and accrued rewards, and may be transferred, traded, or used in other decentralized finance (DeFi) transactions, providing ongoing liquidity and access to additional yield opportunities. In certain arrangements, liquid staking tokens may also be restaked into additional protocols to earn incremental rewards.
Upon deposit, the Company derecognizes the ETH and recognizes a non-financial receivable with an embedded derivative, reflecting the right to receive ETH and protocol rewards. The host contract is measured at cost (the value of ETH deposited), while the embedded derivative is bifurcated and measured at fair value through earnings, reflecting exposure to ETH price and protocol yield variability, in accordance with ASC 310 and ASC 815-15. Subsequent changes in the fair value of liquid staking tokens and embedded derivatives after initial recognition are not included in revenue but are recognized separately in earnings as unrealized gains or losses. Gains or losses realized upon redemption or sale of liquid staking tokens are recognized in accordance with ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”).
The protocol or platform (e.g., ether.fi or Puffer) to which the Company delegates its ETH is considered the customer, as it receives the Company’s staking capacity (the performance obligation) and, in exchange, provides staking rewards and incentive tokens (based on hitting certain ETH deposit thresholds). The contract duration for liquid staking is based on the ability of either party to terminate with 30 days’ notice; for accounting purposes, a new contract is considered to begin each day, reflecting the daily renewal of enforceable rights and obligations (i.e., a new 30 day contract is renewed on a daily basis). Revenue from liquid staking is recognized over time because the customer simultaneously receives and consumes the benefit of the Company’s performance throughout the duration of the contract.
Revenue from liquid staking is recognized at the end of each daily period, when the Company’s right to staking rewards and incentive tokens (e.g., PUFFER, ETHFI) becomes determinable (i.e., when the constraint is lifted). The amount of revenue recognized is measured at the fair value of rewards and incentive tokens at contract inception for that day, net of validator commissions, in accordance with ASC 606 and ASC 820. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception. Fair value for liquid staking tokens is determined based on the underlying ETH and accrued rewards to which the Company is entitled, rather than the quoted token price, because the redemption ratio between ETH and liquid staking tokens (e.g., weETH, pufETH) fluctuates over time as rewards accrue and protocol fees apply.
Because the Company is not the principal to the block validation service, but rather provides staking capacity to third parties, it does not control the full output of the reward-generating activity and instead receives net staking rewards after validator commissions are deducted. Asset manager or protocol fees are presented as separate operating expenses.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606.
To determine revenue recognition for contracts with customers, the Company performs the following five steps:
| 1. | identify the contract with the customer, |
| 2. | identify the performance obligations in the contract, |
| 3. | determine the transaction price, including variable consideration to the extent it is probable a significant future reversal will not occur, |
| 4. | allocate the transaction price to the respective performance obligations in the contract, and |
| 5. | recognize revenue when (or as) the Company satisfies the performance obligation. |
The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange.
Native Staking Revenue
The validator operator (e.g., Coinbase) is considered the customer, as it receives the Company’s staking capacity (the performance obligation). The Company acts as an agent in native staking transactions, delegating ETH to third-party validator operators who perform the technical validation responsibilities.
The contract duration for native staking is defined by the daily reward cycle under the Company’s agreements. Native staking rewards are recognized as revenue over time and at the end of each contract period (typically daily) when the Company’s share of rewards is determinable. The fair value of staking rewards, which are received as noncash consideration, is measured using quoted prices from the principal market at contract inception of each daily period, in accordance with ASC 606 and ASC 820. Subsequent changes in the fair value of ETH after initial recognition are recorded as unrealized gains or losses. The amount of revenue recognized is presented net of validator or other protocol fees.
9
Liquid Staking Revenue
The protocol or platform (e.g., ether.fi or Puffer) is considered the customer, as it receives the Company’s staking capacity (the performance obligation). The Company acts as an agent in liquid staking transactions, delegating ETH to third-party protocols or platforms who perform the technical validation responsibilities.
The contract duration for liquid staking is based on the ability of either party to terminate the contract with 30 days’ notice without cause. The Company has determined that a new 30-day contract is effectively renewed each day, such that contract inception changes daily. Revenue from staking rewards and incentive tokens is recognized over time and at the end of each day when the Company’s proportional share of rewards is determinable, measured at fair value at contract inception for that day, net of validator commissions. Fair value is based on the underlying ETH and accrued rewards, not the market price of the liquid staking tokens. The ratio between ETH and liquid staking tokens changes over time as rewards accrue and protocol economics adjust; this variability does not affect the timing of revenue recognition but is considered in determining fair value at contract inception. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception.
Segment Reporting
ASC Topic 280, “Segment Reporting,” requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updates reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The amendments do not change how segments are determined, aggregated, or how thresholds are applied to determine reportable segments. The Company adopted ASU No. 2023-07 on January 1, 2025.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with U.S. GAAP. For certain of our financial instruments, including cash, accounts payable, accrued expenses, and short-term loans, the carrying amounts approximate fair value due to their short maturities. The Company elected to account for its convertible notes payable under the fair value option available under ASC 820. See Note 10.
We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| Level 1: | Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| Level 2: | Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
The Company adopted the provisions of FASB ASC 820 (the Fair Value Topic) which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
Net Loss Per Common Share
Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the common share equivalents had been issued (computed using the treasury stock or if converted method), if dilutive.
10
Discontinued Operations
In September 2025 the Company decided to cease the operations of 180 Life Corp. (f/k/a 180 Life Sciences Corp.) (“180”), Katexco Pharmaceuticals Corp. (“Katexco”), CannBioRex Pharmaceuticals Corp. (“CBR Pharma”), 180 Therapeutics L.P. (“180 LP” and together with Katexco, CBR Pharma and 180 Life Sciences Corp, the “180 Parties”). As such, the 180 Parties are reported as discontinued operations in the financial statements included herein. Additionally, the Gaming Technology Platform will no longer be part of the Company’s future business strategy and are also included in discontinued operations.
The assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024. The results of the discontinued operations are aggregated and presented separately in the Condense Consolidated Statements of Operations and Comprehensive Loss as net income (loss) from discontinued operations for the three and nine months ended September 30, 2025 and 2024. The cash flows of the discontinued operations are reflected as cash flows of discontinued operations within the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024.
Amounts presented in discontinued operations have been derived from our condensed consolidated financial statements and accounting records using the historical basis of assets, liabilities, results of operations, and cash flows of 180 Parties and the Gaming Technology Platform. The discontinued operations exclude general corporate allocations.
Subsequent Events
The Company has evaluated events that have occurred after the balance sheet date but before these condensed consolidated financial statements were issued. Based upon that evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed in Note 16.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standard Board (“FASB”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which amends the existing segment reporting guidance (ASC Topic 280) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount for other segment items by reportable segment and a description of its composition, the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The Company adopted this standard effective January 1, 2025.
In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversions and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”). ASU 2024-04 is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. This ASU is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on its disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2028 and for interim period reporting beginning in fiscal 2029 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires enhanced disclosures surrounding income taxes, particularly related to rate reconciliation and income taxes paid information. In particular, on an annual basis, companies will be required to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Companies will also be required to disclose, on an annual basis, the amount of income taxes paid, disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions above a quantitative threshold. The standard is effective for the Company for annual periods beginning January 1, 2025 on a prospective basis, with retrospective application permitted for all prior periods presented. The Company will adopt ASU 2023-09 for the annual period ending December 31, 2025 and is currently evaluating the impact of this guidance on its disclosures.
11
NOTE 4 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following as of September 30, 2025 and December 31, 2024:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Director and Officer’s Insurance | $ | $ | ||||||
| Professional fees | ||||||||
| Other receivable | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
NOTE 5 – DIGITAL ASSETS
The Company holds ETH and liquid staking incentive tokens (both in scope of ASC 350-60), as well as liquid staked ETH (in scope of ASC 310 and ASC 815-15). The following presents a summary of the Company’s digital asset holdings as of September 30, 2025, and activity for the nine months then ended. For detailed accounting policies related to digital assets, refer to Note 3.
Crypto assets within the scope of ASC 350-60:
The following table presents the Company’s significant crypto assets holdings as of September 30, 2025:
| September 30, 2025 | ||||||||||||
| Quantity | Cost basis2 | Fair value2 | ||||||||||
| ETH1 | $ | $ | ||||||||||
| Liquid staking tokens and incentive tokens 2 | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
| (1) |
| (2) |
The following table presents a rollforward of the Company’s ETH for the nine months ended September 30, 2025:
| Fair value | ||||
| ETH as of December 31, 2024 | $ | |||
| Additions1 | ||||
| Receipt and accrual of ETH from native staking activities | ||||
| Deposits of ETH into liquid staking activities | ( | ) | ||
| Change in fair value of ETH | ||||
| ETH fair value as of September 30, 2025 2 | $ | |||
| (1) |
| (2) |
12
During
the nine months ended September 30, 2025, the Company recognized cumulative realized gains of $
The following table presents a rollforward of the Company’s incentive tokens for the nine months ended September 30, 2025:
| Fair value | ||||
| Liquid Staking and Incentive tokens as of December 31, 2024 | $ | |||
| Receipt and accrual of liquid staking and incentive tokens | ||||
| Sales of liquid staking and incentive tokens in exchange of ETH | ||||
| Change in fair value of liquid staking and incentive tokens | ||||
| Incentive tokens fair value as of September 30, 2025 | $ | |||
Non-monetary receivable with an embedded derivative within the scope of ASC 310-10 and ASC 815-15:
As described in Note 3, the Company accounts for liquid staked ETH as a non-monetary receivable with an embedded derivative. The host contract is measured at cost, and the embedded derivative is measured at fair value through earnings.
As
of September 30, 2025, the carrying amount of the host contract (representing the
The total of the host contract and embedded derivative, together with any accrued staking rewards (i.e., native staking and liquid staking), are collectively presented as “Staking Receivables” on the Consolidated Balance Sheet. Accordingly, “Staking Receivables” reflects the combined fair-value changes and reward accruals arising from both native staking and liquid staking arrangements.
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following as of September 30, 2025 and December 31, 2024:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Interest | $ | $ | ||||||
| Other | ||||||||
| Total accrued expenses | $ | $ | ||||||
During the nine months ended
September 30, 2025, the Company issued
13
NOTE 7 – REVENUE RECOGNITION
Native Staking
As of September 30, 2025,
the Company had native staked
Liquid Staking
As
of September 30, 2025, the Company had liquid staked
NOTE 8 - DEBT
Loans Payable
The following table summarizes the activity of loans payable during the nine months ended September 30, 2025:
| Principal balance at December 31, 2024 | Principal additions | Principal repayments in cash | Other | Effects of foreign exchange rates | Principal balance at September 30, 2025 | |||||||||||||||||||
| First Insurance - 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| First Insurance - 2025 | ( | ) | ||||||||||||||||||||||
| Total loans payable | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||
| Less: loans payable – current portion | ||||||||||||||||||||||||
| Loans payable – noncurrent portion | $ | $ | ||||||||||||||||||||||
14
Initial Senior Convertible Note Sales
On August 8, 2025, the Company
entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with investment funds managed by
an institutional investor (the “Investor”), under which the Company agreed to sell and issue to the Investor senior
secured convertible notes (the “August 2025 Convertible Notes”) in an aggregate principal amount of $
The August 2025 Convertible
Notes bear interest at a rate of
At any time following the
nine-month anniversary of the August 2025 Note Funding Date, the Investor has the right to require that the Company redeem all or any
part of the outstanding August 2025 Convertible Notes. If at any time after the August 2025 Note Funding Date,
The August 2025 Convertible
Notes provide that the Investor may convert all or any portion of the principal amount of such August 2025 Convertible Note, together
with any accrued and unpaid interest thereon, at an initial conversion price of $
The
August 2025 Convertible Notes provide for certain covenants, including that the Company shall maintain, at all times,
Pursuant to the Securities Purchase Agreement, the Company has agreed to certain obligations to register and maintain the registration of the shares of common stock underlying the August 2025 Convertible Notes, including filing within 15 calendar days of the Closing Date, a resale registration statement to register for resale the shares underlying the August 2025 Convertible Notes, which was timely filed and has been declared effective to date.
15
The security documents consist
of (i) a Pledge and Security Agreement entered into by the Company, certain subsidiaries of the Company and the collateral agent, which
is an affiliate of the Investor (the “Collateral Agent”); (ii) a control agreement in respect of the August 2025 ETH
Collateral entered into by the Company, the Collateral Agent and the custodian of such account, (iii) a control agreement in respect
of the August 2025 Cash Collateral entered into by the Company, the Collateral Agent and the custodian of such account, and (iv) a guaranty
agreement entered into by certain subsidiaries of the Company in favor of the Investor. In addition, the Company paid $
Clear Street LLC (“Clear
Street”) provided us placement agent services in connection with the Debt Financing. As compensation for serving as the Company’s
placement agent, the Company (i) paid Clear Street a total cash fee equal to
Registration Rights Agreement
On the August 2025 Note Funding Date, the Company entered into a Registration Rights Agreement (the “RRA”) with the Investor pursuant to which, among other things, and subject to certain limitations set forth therein, the Investor has customary demand registration rights and the Company was obligated to prepare and file a registration statement registering the offer and sale of all of the Investor’s common stock, which registration statements have been timely filed and declared effective to date.
New Senior Convertible Note Sales
On
September 22, 2025, the Company entered into an Amendment and Waiver Agreement with the Investor (the “Amendment Agreement”),
pursuant to which, among other things (a) the Company agreed to sell a new series of senior secured convertible notes to the Investor
(the “September 2025 Convertible Notes”, and together with the August 2025 Convertible Notes, the “Convertible
Notes”); (b) the Company and the Investor agreed to partially waive and modify certain terms of the August 2025 Convertible
Notes and the Securities Purchase Agreement, including: (i) to reduce the interest rate from
The
September 2025 Convertible Notes were sold to the Investor on September 23, 2025, in the aggregate principal amount of $
The Company closed the New Debt Financing on September 23, 2025 (the “New Debt Funding Date”).
The September 2025 Convertible
Notes bear interest at a rate of
At any time after May 8,
2026, the Investor shall have the right to require that the Company redeem all or any part of the outstanding September 2025 Convertible
Notes. If at any time after the New Debt Funding Date,
16
The
September 2025 Convertible Notes provide that the Investor may convert all or any portion of the principal amount of such September 2025
Convertible Notes, together with any accrued and unpaid interest thereon, at an initial conversion price of $
As a result of the Conversion Price of the September 2025 Convertible Notes being less than the conversion price of the August 2025 Convertible Notes, the conversion price of the August 2025 Convertible Notes automatically adjusted to the Conversion Price on the New Debt Funding Date (the “Existing Note Conversion Price Adjustment”).
The September 2025 Convertible
Notes also provide that, at any time after March 22, 2026, the Company may require holders to convert all or a portion of the outstanding
principal into shares of common stock (a “Mandatory Conversion”) if certain conditions are satisfied. Specifically,
the volume-weighted average price (“VWAP”) of the Company’s common stock on its principal trading market must
exceed $
Additionally, the September 2025 Convertible Notes provide that, if at any time and from time to time on or after the issuance date thereof, there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Company’s common stock, other than the 1-for-10 reverse stock effective October 20, 2025 (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the Event Market Price (as defined below) is less than the Conversion Price then in effect (after giving effect to certain adjustments), then on the 16th Trading Day (as defined in the September 2025 Convertible Notes) immediately following such Stock Combination Event Date, the Conversion Price then in effect on such sixteenth (16th) Trading Day (after giving effect to certain adjustments) shall be reduced (but in no event increased) to the Event Market Price. “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the volume weighted average prices (VWAP) of the Company’s common stock for each of the five Trading Days with the lowest VWAP of the Company’s common stock during the 15 consecutive Trading Day period ending and including the Trading Day immediately preceding the 16th Trading Day after such Stock Combination Event Date, divided by (y) five.
Additionally, if the Company issues or sells shares of common stock after the New Debt Funding Date, at a price lower than the then-current conversion price of the September 2025 Convertible Notes, subject to certain excepted issuances, the conversion price of the September 2025 Convertible Notes will be adjusted downward to match the price of such newly issued shares.
Finally, if the Company issues or enters into an agreement to issue common stock, options, or convertible securities with a price that varies or may vary with the market price of the common stock (excluding certain at-the-market offerings and customary anti-dilution adjustments), subject to certain customary exceptions, the holders of the September 2025 Convertible Notes have the right, but not the obligation, to elect to use such “Variable Price” for purposes of converting the September 2025 Convertible Notes. The holder may make this election on a per-conversion basis and is not required to rely on the Variable Price for any future conversions.
17
The
September 2025 Convertible Notes provide for certain covenants, including that the Company shall maintain, at all times,
Pursuant to the Amendment Agreement, the Company has agreed to certain obligations to register and maintain the registration of the shares of common stock underlying the September 2025 Convertible Notes, which shares have been registered to date.
The September 2025 Convertible Notes are secured by the same August 8, 2025 security agreements as discussed above.
Clear Street provided the
Company placement agent services in connection with the New Debt Financing. As compensation therewith, the Company (i) paid Clear Street
a total cash fee equal to
In
aggregate, the Company incurred professional fees and expenses of $
The Company made an accounting election to account for the Convertible Notes at fair value with changes in fair value recognized in earnings.
As
of September 30, 2025, the fair value of the convertible debt balance was $
The
Company estimated the fair value of the convertible debt using a Monte Carlo Simulation in a risk-neutral framework and the following
inputs: estimated volatility of
For
the three months ended September 30, 2025 and 2024, the Company recognized interest expense associated with the Convertible Notes of
$
Collateralized Loan Agreement
On September 8, 2025, the
Company entered into a collateralized loan agreement with Cumberland DRW LLC (“Cumberland”). Under the agreement, the Company
transferred
The
Company accounts for the arrangement as a single collateralized loan in accordance with ASC 815, Derivatives and Hedging, and the AICPA
Practice Aid, Accounting and Auditing of Digital Assets. The Company recorded a liability equal to $
18
In accordance with ASC 326, Financial Instruments – Credit Losses, the Company recognizes an allowance for expected credit losses on the crypto asset loan receivable. The allowance is determined based on management’s assessment of counterparty credit risk and reasonable and supportable forecasts.
Digital asset gains and losses, including both realized gains and losses recognized upon derecognition of digital assets (such as sales, conversions, or transfers in liquid staking arrangements) and unrealized gains and losses resulting from changes in fair value of digital assets held at period end, are presented in a single line item in the consolidated statements of operations.
NOTE 9 – FAIR VALUE
The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of September 30, 2025, and December 31, 2024:
| Fair value at | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | September 30, 2025 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Restricted cash equivalents | ||||||||||||||||
| Marketable securities | ||||||||||||||||
| Cryptocurrency holdings | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Convertible debt | $ | $ | $ | $ | ||||||||||||
| Embedded derivative liabilities | ||||||||||||||||
| Total liabilities | $ | $ | $ | $ | ||||||||||||
| Fair value at | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | December 31, 2024 | |||||||||||||
| Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
NOTE 10 – Earnings Per Share
The computation of net loss per share is as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Basic loss per common share | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Derivative (gain) loss associated with convertible debt | ||||||||||||||||
| Interest expense associated with convertible debt | ||||||||||||||||
| Net loss for dilutive calculation | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding | ||||||||||||||||
| Dilutive effect of convertible debt | ||||||||||||||||
| Dilutive effect of common stock warrants | ||||||||||||||||
| Dilutive effect of common stock options | ||||||||||||||||
| Weighted average shares outstanding for diluted net loss per share | ||||||||||||||||
| Loss per common share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
For the three and nine months ended September
30, 2025, the weighted average common shares outstanding included
19
The outstanding securities that were excluded from the computation of diluted loss per share attributable to common stockholders for the periods presented was because including them would have been antidilutive are as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Stock options | ||||||||||||||||
| Warrants | ||||||||||||||||
| Convertible debt, net of discount | ||||||||||||||||
| Total | ||||||||||||||||
NOTE 11 – SERIES B CONVERTIBLE PREFERRED STOCK
On September 29, 2024, the
Company entered into an Asset Purchase Agreement with Elray Resources, Inc. (“Elray”). Pursuant to the Asset Purchase Agreement,
Elray agreed to sell us certain source code and intellectual property relating to a “back-end technology platform” which
is a key component of creating an online blockchain casino (the “Purchased Assets”) in consideration for
On September 30, 2024,
in contemplation of the closing of the transactions contemplated by the Purchase Agreement, and pursuant to the power provided to the
Company by the Certificate of Incorporation of the Company, as amended, the Company’s Board of Directors (the “Board”)
approved the adoption of, and filing of, a Certificate of Designations of the Company. Establishing the Designations, Preferences, Limitations
and Relative Rights of Its Series B Convertible Preferred Stock (the “Series B Designation”), which was filed with,
and became effective with, the Secretary of State of Delaware on the same date. The Series B Designation designated
The purchase of the Purchased Assets closed on September 30, 2024.
Based on the terms of the
Series B Convertible Preferred Stock and the Purchase Agreement, and in accordance with FASB ASC 480-10, at issuance, the Series B Convertible
Preferred Stock was accounted for as a liability due to the variable number of shares issuable under the agreement pursuant to the conversion
terms, with an initial value of $
The
Purchase Warrants have an exercise price of $
On
March 27, 2025, Elray Resources, Inc., the sole holder of the Series B Convertible Preferred Stock of the Company converted all
On July 27, 2025, the Purchase Warrants were exercised in full. See Note 13.
The below is a summary of the rights and preferences of the Series B Convertible Preferred Stock:
Voting Rights. Until such time, if ever, as the shareholders of the Company approved the issuance of shares of common stock upon the conversion of the Series B Convertible Preferred Stock (“Stockholder Approval”), the Series B Convertible Preferred Stock only had rights to vote on amendments to the Series B Designation (which are subject to the approval of a simple majority of the holders of Series B Convertible Preferred Stock), and the Protective Provisions, discussed below.
20
The Series B Convertible Preferred Stock requires the consent of the holders of at least a majority of the issued and outstanding shares of Series B Convertible Preferred Stock to (a) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B Convertible Preferred Stock of the Company; (b) adopt or authorize any new designation of any Preferred Stock or amend the Certificate of Incorporation of the Company in a manner which (i) provides any holder of common stock or preferred stock any rights upon a liquidation of the Company which are prior and superior to those of the holders of the Series B Convertible Preferred Stock; or (ii) adversely affect the rights, preferences and privileges of the Series B Convertible Preferred Stock; (c) effect an exchange, or create a right of exchange, cancel, or create a right to cancel, of all or any part of the shares of another class of shares into shares of Series B Convertible Preferred Stock; (d) alter or change the rights, preferences or privileges of the shares of Series B Convertible Preferred Stock so as to affect adversely the shares of such series; and (e) issue any shares of Series A Preferred Stock or Series B Convertible Preferred Stock, other than the Preferred Stock issued pursuant to the Purchase Agreement (collectively, the “Protective Provisions”).
After Stockholder Approval, which has occurred to date, in addition to the above voting rights, each holder of outstanding shares of Series B Convertible Preferred Stock shall be entitled to cast the number of votes in connection with the Series B Convertible Preferred Stock shares held by such holder equal to the number of whole shares of common stock into which the shares of Series B Convertible Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted to common stock basis (after aggregating all fractional shares into which shares of Series B Convertible Preferred Stock held by each holder could be converted) shall be rounded down to the nearest whole share. Except as provided by law or by the other provisions of the Certificate of Incorporation or the Series B Designation, holders of Series B Convertible Preferred Stock shall vote together with the holders of common stock as a single class and there shall be no series voting.
Dividend Rights. None, except that if the Company declares a dividend or makes a distribution of cash (or any other distribution treated as a dividend under Section 301 of the Internal Revenue Code) on its common stock, each holder of Shares of Series B Convertible Preferred Stock is entitled to participate in such dividend or distribution in an amount equal to the largest number of whole shares of common stock into which all shares of Series B Convertible Preferred Stock held of record by such holder are convertible as of the record date for such dividend or distribution or, if there is no specified record date, as of the date of such dividend or distribution. Notwithstanding the foregoing, holders shall have no right of participation in connection with dividends or distributions made to the common stock stockholders consisting solely of shares of common stock.
Liquidation
Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary (each
a “Liquidation Event”), the holders of Series B Convertible Preferred Stock are entitled to receive prior and in preference
to any distribution of any of the assets of the Company to the holders of the common stock or securities junior to the Series B Convertible
Preferred Stock (other than the common stock) by reason of their ownership of such stock, but after any required distribution to
any holders of Series B Convertible Preferred Stock, an amount in cash per share of Series B Convertible Preferred Stock for each share
of Series B Convertible Preferred Stock held by them equal to the greater of (x) one times the Stated Value; and (y) the total
amount of consideration that would have been payable on such share upon a Liquidation Event, had such share of Series B Convertible Preferred
Stock been converted into common stock, immediately prior to such Liquidation Event (as applicable, the “Liquidation Preference”).
The “Stated Value” is $
Conversion
Rights. None prior to Stockholder Approval. After Stockholder Approval, at the option of the holder(s) thereof, each share
of Series B Convertible Preferred Stock is convertible into a number of shares of common stock of the Company as equals the Conversion
Rate. The “Conversion Rate” was initially
Based
on the terms of the Series B Convertible Preferred Stock and the Purchase Agreement, and in accordance with FASB ASC 480-10, the Series
B Convertible Preferred Stock was accounted for as a liability at its issuance date due to the variable number of shares issuable under
the agreement pursuant to the conversion terms, with an initial fair value of $
21
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Litigation and Other Loss Contingencies
The Company records liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company has no liabilities recorded for loss contingencies as of September 30, 2025.
The Company through its United Kingdom subsidiary is registered for Value Added Tax (VAT) in the United Kingdom under the accrual accounting scheme. Under this scheme, VAT output tax becomes due when invoices are issued, irrespective of cash settlement.
As of the reporting date, management has identified that the settlement of certain existing liabilities could give rise to an obligation to remit additional VAT to HM Revenue & Customs (HMRC) in respect of VAT already invoiced or collected.
The amount of any such payment cannot be reliably estimated at this time, and the likelihood of settlement remains uncertain. Accordingly, no provision has been recognized in the financial statements. Management will continue to monitor this situation and will make further disclosures or recognize a liability when the settlement becomes probable and can be reasonably estimated.
Legal Matters
Declaratory Relief Action Against the Company by AmTrust International
On June 29, 2022, AmTrust International Underwriters DAC (“AmTrust”), which was the premerger directors’ and officers’ insurance policy underwriter for KBL, filed a declaratory relief action against the Company in the U.S. District Court for the Northern District of California (the “Declaratory Relief Action”) seeking a declaration that AmTrust is not obligated to reimburse the Company for fees advanced by the Company to Dr. Krauss and George Hornig under the directors’ and officers’ insurance policy.
On, and effective on, April 6, 2025 (the “Effective Date”), the Company entered into a Confidential Settlement Agreement and Release (the “AmTrust Settlement Agreement”) with AmTrust, and its wholly-owned subsidiary, AmTrust Financial Services, Inc. (“AFSI”). Pursuant to the AmTrust Settlement Agreement, the Company and AmTrust agreed to resolve the ongoing litigation and disputes discussed above, relating to the Company’s pre-merger directors’ and officers’ insurance policy (the “Coverage Action”).
Pursuant
to the terms of the AmTrust Settlement Agreement, the Company agreed to (i) pay AmTrust a cash payment of $
Within ten days after delivery of both the Settlement Sum and the AmTrust Settlement Shares, the parties agreed to file a joint stipulation of dismissal with prejudice of the Coverage Action, which has been filed to date, and was granted on April 30, 2025.
In connection with the settlement, the Company and AmTrust provided each other broad mutual releases of all claims, known and unknown, arising out of or relating to, among other things, the Coverage Action, certain claims relating to an SEC investigation of certain of the Company’s pre-merger officers, including Dr. Krauss, a lawsuit filed by the Company against Dr. Krauss, certain cross claims made by the Company against AmTrust, and related insurance claims and matters, including any claims for bad faith, breach of the implied covenant of good faith and fair dealing, or alleged unfair insurance practices. These releases extend to affiliates, officers, directors, employees, agents, and other related parties of both entities. The AmTrust Settlement Agreement expressly provides that it does not release the parties from obligations arising under the AmTrust Settlement Agreement itself.
22
In connection with the issuance of the AmTrust Settlement Shares and pursuant to the AmTrust Settlement Agreement, the Company agreed to provide AFSI with certain registration rights. Specifically, the Company was obligated to use commercially reasonable efforts to file a registration statement on Form S-1 (or Form S-3, if available) with the SEC within 45 days of the Effective Date (i.e., prior to May 21, 2025) to register the resale of the AmTrust Settlement Shares (the “Resale Registration Statement”) and use commercially reasonable efforts to cause the Resale Registration Statement to be declared effective within 60 days following the Effective Date, or, in the event of SEC notice that the Registration Statement will not be reviewed, by the third business day thereafter, which Resale Registration Statement was timely filed and has become effective to date, within the time period set forth in the AmTrust Settlement Agreement.
The Company is required to keep the Resale Registration Statement continuously effective until such time as AFSI no longer holds any AmTrust Settlement Shares, and to bear all related costs and expenses in connection with such registration, excluding AFSI’s legal fees. Additionally, the Company must provide legal opinion coverage at its expense, if necessary, to enable AFSI to rely on Rule 144 resale exemptions after six months.
If
the prospectus included in the Resale Registration Statement can no longer be relied upon, or if the Company fails to maintain the effectiveness
of the Resale Registration Statement (each, a “Registration Statement Failure Event”), the Company is required to
pay liquidated damages equal to
Elray and Luxor Settlement Agreement
On April 28, 2025, the Company entered into a Settlement and Mutual Release Agreement (the “Elray Settlement Agreement”) with Elray, and Luxor Capital, LLC (“Luxor”). Elray and Luxor are both controlled by Anthony Brian Goodman, the father of the Company’s then director, Jay Goodman. The Elray Settlement Agreement and related arrangements discussed below resolved certain disputes which had arisen between the parties relating to among other things, certain potential acquisitions.
Pursuant
to the Elray Settlement Agreement: (a) the Company agreed to acquire all
In connection with the settlement,
Elray agreed to deliver five stock powers authorizing cancellation of the Elray Shares, to be held in escrow and released proportionally
at the option of the Company, as settlement payments are made, with all remaining shares canceled once the full amounts of the Elray
Payment and Luxor Payment are made. The stock powers are to be released in tranches, with the stock power relating to the initial
Luxor also agreed to indemnify the Company against any claims brought by a third party related to certain prior negotiations involving an online casino asset acquisition.
The Elray Settlement Agreement included customary representations and warranties of the parties and confidentiality requirements. The Elray Settlement Agreement also provides a restriction on Elray’s sale or transfer of any of the Elray Shares.
The Elray Settlement Agreement also required Elray to enter into a Voting Agreement with the Company. Pursuant to the Voting Agreement, which was entered into on April 28, 2025, by Elray, the Company, and Blair Jordan, the Company’s then Chief Executive Officer, solely for the benefit of the Company, Elray agreed to vote any Elray Shares which it continued to hold, as recommended by the Board of Directors of the Company, at any meeting of stockholders or via any written consent of stockholders, which may occur prior to April 28, 2026. In order to enforce the terms of the Voting Agreement, and solely for the benefit of the Company, Elray provided Mr. Jordan (or his assigns) an irrevocable voting proxy to vote the Elray Shares pursuant to the guidelines set forth above at any meeting of stockholders or via any written consent of stockholders.
23
The
Elray Settlement Agreement and related transactions were approved by the Board of Directors of the Company, as well as the Company’s
Audit Committee, with Mr. Jay Goodman (a then member of the Board of Directors) abstaining. The Elray Settlement Agreement was determined
to be a forward purchase contract, and was recognized as a liability under ASC 480. The settlement payment was at a price per share below
fair market value, and therefore no loss was recognized. The Company recognized the $
Other Commitments
Woody Separation Agreement
On May 7, 2024, Dr. James N. Woody resigned as Chief Executive Officer (Principal Executive Officer), and as a member of the Board of Directors, of the Company effective the same date, and entered into a Separation and Release Agreement with the Company (the “Woody Separation Agreement”).
On
February 5, 2025, the Company entered into a First Amendment to Separation and Release Agreement with Dr. Woody (the “First
Amendment”). Pursuant to the First Amendment, Dr. Woody agreed to amend the terms of the Woody Separation Agreement, to terminate
the prior requirement of the Company to pay the Future Contingent Payment. Instead, pursuant to the First Amendment, Dr. Woody agreed
to accept $
The First Amendment also required Dr. Woody to enter into a Voting Agreement with the Company. Pursuant to the Voting Agreement, which was entered into on February 5, 2025, by Dr. Woody, the Company, and Blair Jordan, the Company’s Chief Executive Officer, solely for the benefit of the Company, Dr. Woody agreed to vote the Separation Shares as recommended by the Board of Directors of the Company, at any meeting of stockholders or via any written consent of stockholders, which may occur prior to February 5, 2026; the date after August 5, 2025, that Dr. Woody has sold all of the Separation Shares; or the date that the Company terminates the Voting Agreement. In order to enforce the terms of the Voting Agreement, and solely for the benefit of the Company, Dr. Woody provided Mr. Jordan (or his assigns) an irrevocable voting proxy to vote the Separation Shares pursuant to the guidelines set forth above at any meeting of stockholders or via any written consent of stockholders. The Voting Agreement also provides a restriction on Dr. Woody’s sale or transfer of any of the Separation Shares until August 5, 2025. The Voting Agreement expired pursuant to its terms on August 21, 2025.
Former Chief Executive Officer and Consulting Agreement
On February 20, 2025, the Company entered into an Executive Consulting Agreement with Mr. Blair Jordan dated February 21, 2025, and Blair Jordan Strategy and Finance Consulting Inc. (an entity owned by Mr. Jordan) (“Jordan Consulting” and the “February 2025 Jordan Agreement”). The February 2025 Jordan Agreement replaced and superseded a prior consulting agreement between the parties. On June 17, 2025, the Company entered into an Amended and Restated Executive Consulting Agreement with Mr. Jordan, and Jordan Consulting, dated June 17, 2025 (as amended from time to time, the “Jordan Agreement”). The Jordan Agreement replaced and superseded the February 2025 Jordan Agreement.
The
Jordan Agreement provided for Mr. Jordan to act as Chief Executive Officer of the Company, and to be paid $
The
agreement also allowed the Company to pay Mr. Jordan or Jordan Consulting an incentive bonus of up to
The
Company also agreed to grant
24
On September 4, 2025, Mr. Blair Jordan, the then Chief Executive Officer of the Company, and Jordan Consulting entered into a Separation and Release Agreement with the Company (the “Jordan Separation Agreement”).
Pursuant to the Jordan Separation
Agreement, the Company agreed to (a) pay Jordan Consulting $
Under the Jordan Separation Agreement, Mr. Jordan, Jordan Consulting and the Company, provided each general releases; the Company agreed to continue to indemnify and hold Mr. Jordan and Jordan Consulting harmless against any claims relating to the performance of the Jordan Consulting Agreement; and Mr. Jordan and Jordan Consulting agreed to certain confidentiality, non-disclosure, non-solicitation, non-disparagement (which were mutual), and cooperation covenants.
Executive Employment Agreement with McAndrew Rudisill
On September 15, 2025, the Company entered into an Executive Employment Agreement with Mr. McAndrew Rudisill, the Company’s Chief Executive Officer and Executive Chairman (the “Rudisill Employment Agreement”).
Pursuant to the Rudisill Employment Agreement, the Company agreed to continue to engage Mr. Rudisill as Chairman of the Board and Chief Executive Officer of the Company, during the term of the agreement, which continues until the earlier of (i) Mr. Rudisill providing the Company 30 days written notice of his termination of the Rudisill Employment Agreement, or (ii) December 31, 2028; subject to up to two additional years of automatic renewals, if neither party provides the other intent of its non-renewal prior to December 31, 2028 or if automatically renewed, December 31, 2029.
In
consideration for agreeing to provide services under the Rudisill Employment Agreement, we agreed: (a) to pay Mr. Rudisill a base salary
of $
Separately,
upon termination of the Rudisill Employment Agreement for any reason, the Company must promptly, and no later than 30 days after termination
(or sooner if required by law), pay Mr. Rudisill (or his surviving spouse or estate) a lump sum covering any portion of his then current
salary due through the termination date and reimbursement of eligible expenses incurred. Additionally, if Mr. Rudisill has been employed
for more than 12 months, he will also receive a severance payment equal to two times his base salary at the time of termination. In addition,
if his employment ends within 36 months of the start date (September 15, 2025), he will receive a payment, payable in stock and/or cash
as determined by the Board, equal to the greater of (a)
The Rudisill Employment Agreement also contains customary confidentiality obligations and work made for hire language. In addition, Mr. Rudisill is eligible to receive certain employee benefits, including profit sharing, medical, disability and life insurance plans and programs, that are established and made generally available by the Company from time to time to its employees, subject, however, to the applicable eligibility requirements and other provisions of such plans and programs (including, without limitation, requirements as to position, tenure, location, salary, age and health).
Notwithstanding the terms of the Rudisill Employment Agreement, as discussed above, the Board and/or Compensation Committee may from time to time, in their discretion, increase Mr. Rudisill’s base salary or award discretionary bonuses to Mr. Rudisill, which may take the form of cash consideration or equity.
The Rudisill Employment Agreement superseded the offer letter previously provided to Mr. Rudisill to serve on the Company’s Board of Directors.
25
Appointment of Chief Accounting Officer and Consulting Agreement
Effective
on February 15, 2025, the Company appointed Eric R. Van Lent as the Chief Accounting Officer (Principal Accounting/Financial Officer) of
the Company (the “Appointment”), which Appointment was effective as of the same date. As a result of the Appointment,
Blair Jordan, the Chief Executive Officer (Principal Executive Officer) of the Company, who had served as the Principal Accounting/Financial
Officer of the Company since October 16, 2024, stepped down from such role, also effective on February 15, 2025. Effective on February
15, 2025, the Company entered into an Executive Consulting Agreement dated January 30, 2025 with Mr. Van Lent and EVL Consulting, LLC
(an entity owned by Mr. Van Lent) (“EVL Consulting” and the “EVL Consulting Agreement”). Pursuant
to the EVL Consulting Agreement, the Company agreed to engage EVL Consulting to provide the services of Mr. Van Lent to the Company as
Chief Accounting Officer of the Company. The EVL Consulting Agreement has a term through July 30, 2025, unless otherwise terminated pursuant
to the terms of the agreement (discussed below) and provides for Mr. Van Lent to act as Chief Accounting Officer of the Company,
and to be paid $
On July 12, 2025, and effective
July 31, 2025, the Company, Mr. Van Lent and EVL Consulting entered into a First Amendment to Consulting Agreement, which amended the
EVL Consulting Agreement to (a) extend the term of such agreement through December 31, 2025; and (b) increase the termination fee to
$
The Company has the right
to terminate the EVL Consulting Agreement at any time, provided that it pays EVL Consulting $
The
Company is also able to terminate the EVL Consulting Agreement at any time, without notice upon: (a) the death or physical or mental
incapacity of Mr. Van Lent if as a result of which Mr. Van Lent is unable to perform services for a period in excess of 30 days; (b) in
the event Mr. Van Lent or a related party to Mr. Van Lent ceases to own or control
If the Company terminates the EVL Consulting Agreement for just cause, we are required to pay EVL Consulting any unpaid fees and/or unpaid and unreimbursed expenses accrued but unpaid prior to the effective termination date.
Non-Executive Director Compensation
Effective
on May 7, 2024, the Board of Directors set the compensation payable to non-executive members of the Board of Directors for services on
the Board of Directors, at (a) $
On
February 4, 2025, the Board of Directors of the Company appointed independent director Ryan Smith, as Lead Independent Director of the
Company, and agreed to pay Mr. Smith an additional $
Board of Directors Adoption of 180 Life Sciences Corp. 2025 Option Incentive Plan
On June 17, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors, adopted the Company’s 2025 Option Incentive Plan (the “2025 Plan”). Notwithstanding such adoption, in accordance with the rules of the Nasdaq Capital Market, following the date of adoption, but prior to the Shareholder Approval Date (as defined below), (i) no stock options granted thereunder can be exercised, and (ii) if Shareholder Approval (as defined below) is not received, the 2025 Plan is to be unwound, and the outstanding stock options granted thereunder cancelled (the “Nasdaq Pre-Approval Requirements”). As discussed above, the 2025 Plan was approved by the Board of Directors, but has not yet been approved by the Company’s stockholders, in accordance with the rules of The Nasdaq Capital Market, which allow the Company to adopt an equity arrangement and grant options thereunder prior to obtaining stockholder approval, provided that (i) no options can be exercised prior to obtaining stockholder approval, and (ii) the plan can be unwound, and the outstanding options cancelled, if stockholder approval is not obtained.
26
Shareholder approval of the 2025 Plan is to be obtained in accordance with the Company’s Second Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws, each as amended and applicable laws, within twelve (12) months of the date of adoption (the “Shareholder Approval” and the date of such Shareholder Approval, the “Shareholder Approval Date”). Additionally, the grant of incentive stock options under the 2025 Plan is subject to Shareholder Approval.
The Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to the terms of the 2025 Plan (including as discussed above and any limitations provided by federal or state securities laws), to receive (i) incentive stock options (to eligible employees only); or (ii) nonqualified stock options. Incentive stock options granted under the 2025 Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Nonqualified (non-statutory stock options) granted under the 2025 Plan are not intended to qualify as incentive stock options under the Code.
A
total of
2025 Supplemental Option Plan
On July 29, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors, adopted the Company’s 2025 Supplemental Option Incentive Plan (the “2025 Supplemental Plan”). Notwithstanding such adoption, in accordance with the rules of The Nasdaq Capital Market, following the date of adoption, but prior to the Shareholder Approval Date (as defined below), (i) no stock options granted thereunder could be exercised, and (ii) if stockholder approval for the 2025 Supplemental Plan was not received, the 2025 Supplemental Plan was to be unwound, and the outstanding stock options granted thereunder cancelled.
The 2025 Supplemental Plan provides an opportunity for any employee, officer, director or consultant of the Company, subject to the terms of the 2025 Supplemental Plan (including as discussed above and any limitations provided by federal or state securities laws), to receive (i) incentive stock options (to eligible employees only); or (ii) nonqualified stock options. Incentive stock options granted under the 2025 Supplemental Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Nonqualified (non-statutory stock options) granted under the 2025 Supplemental Plan are not intended to qualify as incentive stock options under the Code.
A
total of
2025 Supplemental Option Plan Option Grants
Effective
July 29, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved (i) the grant of stock options to purchase
The
2025 Supplemental Plan Options were granted under the 2025 Plan and have a term of
Accelerated Vesting of Executive Award
Effective
June 17, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved the accelerated vesting of
27
Executive Option Grants
Effective
June 17, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved the grant of stock options to certain individuals, including awards to the following named executive officers: (a) Jordan
Consulting for Blair Jordan, the Chief Executive Officer of the Company (options to purchase
The
options were granted under the 2025 Plan and have a term of
Executive Restricted Stock Awards
Effective
on June 17, 2025, the Company issued, after recommendation by the Compensation Committee of the Company’s Board of Directors and
approval by the Board of Directors,
Accelerated Vesting of Prior Awards
Effective
June 17, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved the accelerated vesting of
Non-Executive Director Option Awards
Effective
June 17, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved the grant of stock options to the non-executive members of the Board of Directors as follows: Ryan Smith, Lead Director, options
to purchase
The
options were granted under the 2022 Plan and have a term of
Attorney Compensation Option Award
Effective
on June 17, 2025, the Company issued, after recommendation by the Compensation Committee of the Company’s Board of Directors and
approval by the Board of Directors, approved the grant of stock options to purchase
Non-Executive Director Restricted Stock Awards
Effective
on June 17, 2025, the Company issued, after recommendation by the Compensation Committee of the Company’s Board of Directors and
approval by the Board of Directors,
28
Attorney Compensation Restricted Stock Award
Effective
on June 17, 2025, the Company issued, after recommendation by the Compensation Committee of the Company’s Board of Directors and
approval by the Board of Directors,
Accelerated Vesting
On
July 29, 2025, the Board, with the recommendation of the Compensation Committee of the Board, Effective on July 11, 2025 and July 12,
2025, the Board of Directors of the Company, approved the accelerated vesting of the shares and options, respectively, granted on June
17, 2025, which vested in full on such dates. The Company recognized additional stock-based compensation of $
2025 Supplemental Option Plan Grants
On
July 29, 2025, the Board, with the recommendation of the Compensation Committee of the Board, approved (i) the grant of stock options
to purchase
2025 Second Supplemental Option Plan Grants
Effective
August 8, 2025, the Board of Directors of the Company, with the recommendation of the Compensation Committee of the Board of Directors,
approved (i) the grant of stock options to purchase
RSU Grant
Effective on August 8, 2025,
the Board, with the recommendation of the Compensation Committee, approved the grant of
Indemnification Agreements
The Company has entered into Indemnity Agreements (each an “Indemnification Agreement”) with each of its directors and officers (each an “Indemnitee”), to provide for indemnification to the officers and directors under Delaware law. Among other things, consistent with the Company’s Bylaws, each Indemnification Agreement generally requires that the Company (i) indemnify the Indemnitee from and against all expenses and liabilities with respect to proceedings to which Indemnitee may be subject by reason of the Indemnitee’s service to the Company to the fullest extent authorized or permitted by Delaware law and (ii) advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding, and in connection with any proceeding to enforce the Indemnitee’s rights under the Indemnification Agreement. The Indemnification Agreement also establishes various related procedures and processes and generally requires the Company to maintain directors’ and officers’ liability insurance coverage.
NOTE 13 - STOCKHOLDERS’ (DEFICIT) EQUITY
Reverse Stock Splits
On
October 14, 2025, we filed a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation with the Secretary
of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, in a ratio of
29
No fractional shares were issued as a result of the Reverse Stock Split. Instead, each stockholder received a cash payment equal to the fraction of which such stockholder was otherwise entitled multiplied by the closing price per share of the common stock on the last trading day prior to the Effective Time as reported by Nasdaq (as adjusted to give effect to the Reverse Stock Split). The common stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market on October 20, 2025. No change was made to the trading symbol for the Company’s shares of common stock or public warrants (since expired), “ETHZ” and “ETHZW”, respectively, in connection with the Reverse Stock Split.
In
addition, the number of shares of common stock issuable upon exercise of stock options and other equity awards (including shares reserved
for issuance under the Company’s equity compensation plans), and the number of shares of common stock issuable upon exercise of
warrants were proportionately adjusted, using the
On
February 16, 2024, at a Special Meeting of the Stockholders of the Company, the stockholders of the Company approved an amendment to
the Company’s Second Amended and Restated Certificate of Incorporation, as amended, to effect a reverse stock split of our issued
and outstanding shares of our common stock, par value $
On
February 16, 2024, the Company’s Board approved a reverse stock split of the Company’s common stock at a ratio of
In
addition, the number of shares of common stock issuable upon exercise of stock options and other equity awards (including shares reserved
for issuance under the Company’s equity compensation plans), and the number of shares of common stock issuable upon exercise of
warrants were proportionately adjusted, using the
The rights and privileges of the holders of shares of common stock are substantially unaffected by the Reverse Stock Splits.
All share and per share data in the accompanying condensed consolidated financial statements and accompanying notes have been retroactively adjusted to reflect the effect of the Reverse Stock Splits.
Shares issued for Services
On
March 7, 2025, the Compensation Committee and the Board approved the grant of
Effective
on June 17, 2025, the Company issued, after recommendation by the Compensation Committee of the Company’s Board of Directors and
approval by the Board of Directors, (a)
Shares cancelled
On
January 30, 2025, the Company cancelled
On June 12, 2025, under the
terms of a release agreement, Mr. Jay Goodman, a former director of the Company, confirmed that the
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Shares issued for settlement of liabilities
During
the nine months ended September 30, 2025, the Company issued
Conversion of Series B Convertible Preferred Stock
On
March 27, 2025, Elray Resources, Inc., the sole holder of the Series B Convertible Preferred Stock of the Company converted all then
Stock Options
A summary of the option activity during the nine months ended September 30, 2025 is presented below:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Intrinsic Value | |||||||||||||
| Outstanding, January 1, 2025 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Exercised | ( | ) | - | |||||||||||||
| Forfeited | ( | ) | - | |||||||||||||
| Outstanding, September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2025 | $ | $ | ||||||||||||||
A summary of outstanding and exercisable stock options as of September 30, 2025 is presented below:
| Stock Options Outstanding | Stock Options Exercisable | |||||||||||||
| Exercise | Number of | Weighted Average | Number of | |||||||||||
| Price | Shares | Remaining Life in Years | Shares | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | - | |||||||||||||
| $ | - | |||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
On
September 15, 2025, Stephen H. Shoemaker resigned as a member of the Board of Directors. In connection with his resignation, the Board,
with the recommendation of the Compensation Committee of the Board, approved an extension of the expiration date of options to purchase
The
fair value of stock options granted during the nine months ended September 30, 2025 was estimated using the Black-Sholes option pricing
model and the following key assumptions range: 1) volatility of
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Warrants
A summary of the common stock underlying the warrants activity (including both liability and equity classified instruments) during the nine months ended September 30, 2025 is presented below:
| Number of Shares of Common Stock Underlying Warrants | Weighted Average Exercise Price | Weighted Average Remaining Life in Years | Intrinsic Value | |||||||||||||
| Outstanding, January 1, 2025 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Outstanding, September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2025 | $ | |||||||||||||||
A summary of outstanding and exercisable common stock underlying the warrants as of September 30, 2025 is presented below:
| Common Stock Underlying Warrants Outstanding | Common Stock Underlying Warrants Exercisable | |||||||||||||
| Exercise | Number of | Weighted Average | Number of | |||||||||||
| Price | Shares | Remaining Life in Years | Shares | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
On
July 27, 2025, Elray Resources, Inc., the holder of warrants to purchase
Securities Purchase Agreement
On July 29, 2025, the Company
entered into a securities purchase agreement (the “SPA”) with certain accredited institutional investors (the “Purchasers”)
pursuant to which the Company agreed to sell and issue to the Purchasers in a private placement an aggregate of (i)
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The
unfunded exercise price of each Pre-Funded Warrant will equal $
Strategic Advisor Agreements and Warrants
On July 29, 2025, and in
connection with the launch of the Company’s digital asset treasury strategy, the Company entered into a Strategic Advisor Agreement
with each of Pink Sands Group, LLC, Cyber, Moode LLC, Moon Cat, LLC, Zorba Investments LLC, Purple Poseidon LLC, Tentacle Holdings LLC,
PCAO LLC, Johnny Foxtrot LLC and New Island Advisors LLC (collectively, the “Strategic Advisors” and the “Strategic
Advisor Agreements”). Pursuant to the Strategic Advisor Agreements, the Strategic Advisors agreed to provide the Company advice
from time to time regarding the ETH treasury strategy, including on ETH purchase and staking strategies and such other areas as may be
mutually determined by the Strategic Advisor and the Company from time to time (the “Services”). In consideration
for agreeing to provide the Services, the Company granted on the same day the Strategic Advisors warrants to purchase an aggregate of
The Strategic Advisor Agreements include customary restrictions on the use of confidential information, limits of liability of each party, and customary representations and warranties of the parties. The Strategic Advisor Agreements have a term of 30 months, unless otherwise terminated with the mutual agreement of the parties, or by either party, upon the breach of the agreement by the other, and failure to cure within ten (10) days.
The
per share exercise price of each Strategic Advisor Warrant is equal to $
In connection with the September
2025 Convertible Notes, the Company granted additional warrants to purchase an aggregate of
The fair value of the Strategic
Advisor Warrants and the Subsequent Strategic Advisor Warrants granted during the nine months ended September 30, 2025 was estimated
using the Black-Sholes option pricing model and the following key assumptions range: 1) volatility of
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In
connection with the Private Placement and the Strategic Advisor Agreements, the Company, the Purchasers and the Strategic Advisors (collectively,
the “Registration Rights Holders”) have entered into a Registration Rights Agreement (the “Registration Rights
Agreement”), providing for the registration for resale of the shares of Common Stock sold pursuant to the SPA and upon exercise
of the Pre-Funded Warrants, and the shares of Common Stock issuable upon exercise of the Strategic Advisor Warrants (provided that the
Placement Shares (defined below), also have the same registration rights as those securities), pursuant to a registration statement to
be filed with the SEC no later than thirty (30) calendar days after the closing date of the sale of the September 2025 Convertible
Notes, provided that the Company has agreed to use commercially reasonable efforts to effect such filing within fifteen (15) calendar
days after the closing date of the sale of the September 2025 Convertible Notes. The Company has agreed to use reasonable best efforts
to cause the Registration Statement to be declared effective as promptly as possible, but in no event later than sixty (60) days after
the Closing of the Private Placement (which shall be extended by fifteen (15) days if the SEC shall issue more than one comment letter
on the Registration Statement), if the SEC shall review the Registration Statement, or within
Asset Management Agreement
In connection with the Private Placement, at the Closing (the “AMA Effective Date”), the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with Electric Treasury Edge, LLC (the “Asset Manager”). Pursuant to the Asset Management Agreement, the Asset Manager will provide discretionary investment management services with respect to, among other assets (including without limitation certain subsequently raised funds), the majority of the Company’s proceeds from the Private Placement (the “Account Assets”) in accordance with the terms of the Asset Management Agreement. The Asset Manager will pursue a long-bias strategy of digital assets primarily focused on Ethereum (the “ETH Strategy”). The custodians under the Asset Management Agreement will consist of cryptocurrency wallet providers mutually acceptable to the Company and the Asset Manager.
The
Company shall pay the Asset Manager a monthly asset-based fee (the “Asset-based Fee”) equal to
The
Asset Management Agreement will, unless terminated earlier in accordance with its terms, remain in effect until the fifth anniversary
of the AMA Effective Date and shall thereafter automatically renew for successive one-year terms unless either party provides written
notice at least
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If the Asset Management
Agreement is terminated by the Company without an Asset Manager Cause Event, or by the Asset Manager for a Company Cause Event, prior
to the fifth anniversary of the AMA Effective Date, the Asset Manager is entitled to liquidated damages in an amount equal to
If the Asset Manager becomes
subject to a legal or regulatory order that prohibits it from carrying out its business as contemplated under the Asset Management Agreement,
it must suspend performance and notify the Company. The parties have agreed to work together in good faith to amend the Asset Management
Agreement or, if amendment is not possible, the Asset Management Agreement may be terminated upon
Beginning with the AMA
Effective Date, the Account Manager shall have the right to provide asset management services with respect to Account Assets that consist
of at least
The Company and the Asset Manager have also agreed to negotiate in good faith either a separate and distinct asset management agreement or an amended and restated Asset Management Agreement, which provides for separate services related to the management of investments in securities or commodities with a substantially similar fee schedule, provided that the Asset Manager has obtained all requisite regulatory licenses and approvals necessary to provide such services, and further provided that the parties endeavor to avoid investments that would require the registration of the Company as an investment company under the Investment Company Act of 1940, as amended, which was subsequently entered into between the parties as discussed below.
The Asset Management Agreement includes customary confidentiality and indemnification provisions, representations, warranties and acknowledgements, for an agreement of the size and scope of the Asset Management Agreement.
On September 5, 2025, the Company entered into an Amended and Restated Asset Management Agreement (the “A&R Asset Management Agreement”), which amended and restated the Asset Management Agreement. The A&R Asset Management Agreement makes certain changes to the Asset Management Agreement, including, among other things, the expansion of the scope of account assets and advisory services provided by the Asset Manager.
Sales Agreement
On August 13, 2025, the Company entered into a Sales Agreement (the “Original Sales Agreement”) to sell shares of the Company’s common stock from time to time through Clear Street LLC (“Clear Street”), acting as sales agent, which was amended and restated on August 22, 2025, by the entry into another Sales Agreement between the Company and Clear Street (the “Sales Agreement”). Sales of the common stock made pursuant to the Sales Agreement, if any, will be made under a Registration Statement on Form S-3. Subject to the terms and conditions of the Sales Agreement, Clear Street may sell the shares, if any, only by methods deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act, including without limitation sales made directly through The Nasdaq Capital Market, by means of ordinary brokers’ transactions, in negotiated transactions, to or through a market maker other than on an exchange or otherwise, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices and/or any other method permitted by law. The Company is not obligated to sell, and Clear Street is not obligated to buy or sell, any shares of common stock under the Sales Agreement.
The Sales Agreement provides
that Clear Street will be entitled to aggregate compensation for its services of up to
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No assurance can be given that the Company will sell any shares of common stock under the Distribution Agreement, or, if it does, as to the price or amount of shares of common stock that it sells or the dates when such sales will take place.
During the three months
ended September 30, 2025, we sold an aggregate of
Stock Repurchase Program
On August 22, 2025, the Board
of Directors of the Company authorized and approved a stock repurchase program for up to $
Under the stock repurchase program, shares may be repurchased from time to time in the open market or through negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws, including Rule 10b-18 of the Exchange Act. Repurchases will be 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 shares, general market conditions, cost of capital, the trading price of the common stock, alternative uses for capital, and the Company’s financial performance. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.
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.
The repurchase program is expected to be funded using the Company’s working capital and from funds raised in “at-the-market” offerings or other future financings.
During the three months ended
September 30, 2025, a total of
NOTE 14 - RELATED PARTIES
Accounts Payable – Related Parties
Accounts payable - related
parties were $
Research and Development Expenses - Related Parties
Research and Development
Expenses – Related Parties of $
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NOTE 15 – DISCONTINUED OPERATIONS
During the three months ended September 30, 2025, the Company made a strategic shift in its operations to no longer pursue its pharmaceutical research operations or the Gaming Technology Platform. As such, these operations are presented as discontinued operations in accordance with ASC 205.
Summarized balance sheet information of discontinued operations is below:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Intangible assets (1) | ||||||||
| Other assets of discontinued operations | ||||||||
| Total assets of discontinued operations | $ | $ | ||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable – related parties | ||||||||
| Accrued expenses | ||||||||
| Loan payable –current portion | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Loan payable –noncurrent portion | ||||||||
| Long term liabilities of discontinued operations | ||||||||
| Total liabilities of discontinued operations | $ | $ | ||||||
| (1) |
The statements of operations of discontinued operations are summarized below:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Research and development | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Research and development - related parties | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative | ( | ) | ( | ) | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on asset impairment | ( | ) | ( | ) | ||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Net loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
NOTE 16 - SUBSEQUENT EVENTS
Subsequent to September 30, 2025, the Company
sold $
Adoption of the 2025 Omnibus Incentive Plan
On October 7, 2025, the shareholders
of ETHZilla voted for the adoption of the 2025 Omnibus Incentive Plan. Pursuant to this plan, on November 12, 2025, the Company
granted, after recommendation of the by the Compensation Committee of the Company’s Board of Directors,
Purchase and Subscription Agreement
On October 22, 2025, we entered into a Purchase and Subscription Agreement (the “Satschel Agreement”) with Satschel, Inc., a Delaware corporation (“Satschel”). Satschel owns Liquidity.io, a regulated broker-dealer and operator of a Digital Alternative Trading System (ATS) platform (the “Platform”).
Pursuant to the Satschel
Agreement, Satschel sold us shares of its Class A Common Stock representing
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The Satschel Agreement also provides certain additional rights to the Company following the Closing, including (a) the exclusive right in perpetuity to list any digital tokens or assets issued on Ethereum Layer 2 protocols on the Platform; (b) a right of first refusal until the earlier of (i) five years following the Closing Date; and (ii) the date that Satschel becomes publicly-traded, to acquire any equity securities of Satschel that it may offer or sell; and (c) the right to appoint one member of the Board of Directors of Satschel, for so long as the Company owns any equity interests of Satschel.
The acquisition contemplated by the Satschel Agreement closed on October 22, 2025.
ATM Sales Agreement
Since September 30, 2025,
we have sold an aggregate of
Treasury Stock Transactions
Subsequent to September 30,
2025, a total of
Exercise of Options
On October 28, 2025, Jordan
Consulting for Blair Jordan, the former Chief Executive Officer of the Company, exercised options to purchase
Expiration of Public Warrants
On November 6, 2025, the Company’s then outstanding public warrants expired pursuant to their terms.
License Agreement Termination
On October 29, 2025, the Kennedy Trust for Rheumatology Research (“Kennedy Trust”) provided the Company notice of the termination of a patent license agreement between the Company and the Kennedy Trust in connection with rheumatology research, which termination will become effective on December 29, 2025.
Assignment and Settlement Agreement
On November 6, 2025, the Company and CannBioRex Pharma Limited, a company incorporated under the laws of England and Wales and an indirect wholly-owned subsidiary of the Company (“CannBioRex”), entered into an Assignment and Settlement Agreement (the “Oxford Assignment Agreement”) dated November 5, 2025, with the Chancellor, Masters and Scholars of the University of Oxford (“Oxford”) and Oxford University Innovation Limited, a wholly-owned subsidiary of Oxford University (“OUI”). Pursuant to the Agreement, we have agreed to (i) terminate a 2013 license agreement between OUI and the Company (then known as 180 Life Sciences Corp.), pursuant to which we were granted certain rights under OUI’s patent related to the treatment of Dupuytrens’s Disease (the “OUI Patent”) and the use of clinical data generated by Oxford in clinical trials; (ii) assign all of our intellectual property rights relating primarily to the treatment of Dupuytrens’s Disease, including a patent relating to the Dupuytren’s Contracture indication (the “Company IP”), to OUI; and (iii) terminate a series of research sponsorship, research support, and studentship agreements between Oxford, the Company, and CannBioRex (collectively, the “Research Agreements”).
The Oxford Assignment Agreement
requires us to pay Oxford, within seven days after execution, an initial payment of $
The Oxford Assignment Agreement includes a mutual release and settlement of claims, customary representations of each of the parties, and mutual confidentiality provisions. In addition, we have agreed to indemnify OUI and Oxford against any third party claims against them by our shareholders or by Glenn Larsen (former chief executive officer of our subsidiary, 180 Therapeutics L.P.) arising from the Oxford Assignment Agreement, the termination of the License Agreement and Research Agreements, or the assignment of the Company IP to OUI.
Termination of Research and License Agreement
On November 11, 2025, Yissum and the Company terminated the Research and License Agreement dated May 13, 2018 between the Company (formerly 180 Life Sciences Corp./Cannbiorex Pharmaceuticals Corp.). Pursuant to the agreement, Yissum confirmed that it agreed to the discontinuation of all of the Company’s obligations to fund the ongoing patent expenses with respect to the licensed patents and to the return of the licensed technology.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements, within the federal securities laws, including the Private Securities Litigation Reform Act of 1995, regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed elsewhere in this Report, including under “Risk Factors”, and in other reports the Company files with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025 (under the heading “Risk Factors” and in other parts of that report), and include, but are not limited to, statements about:
| ● | The need for additional capital, dilution caused by future offerings, the availability of such offerings and the terms thereof; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors; |
| ● | the Company’s ability to fully comply with numerous federal, state and local laws and regulatory requirements; |
| ● | changing rates of inflation and interest rates, and economic downturns, including potential recessions, as well as macroeconomic, geopolitical, health and industry trends, pandemics, acts of war (including the ongoing Ukraine/Russian conflict, and Israel/Hamas conflict) and other large-scale crises; |
| ● | our ability to maintain our listing of our common stock on the Nasdaq Capital Market; |
| ● | the Company’s reliance on its management; |
| ● | the potential effect of economic downturns, recessions, tariffs, changes in interest rates and inflation, and market conditions, including recessions on the Company’s operations and prospects as a result of increased inflation, tariffs, increasing interest rates, global conflicts and other events; |
| ● | the Company’s ability to protect its proprietary information and intellectual property (IP); |
| ● | the effect of current and future regulation, the Company’s ability to comply with regulations (both current and future) and potential penalties in the event it fails to comply with such regulations and changes in the enforcement and interpretation of existing laws and regulations and the adoption of new laws and regulations that may unfavorably impact our business; |
| ● | other risks and uncertainties, including those described under “Risk Factors”, herein. |
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All forward-looking statements speak only as of the date of the filing of this Report. The reader should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Report are reasonable, we provide no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report and our Annual Report on Form 10-K for the year ended December 31, 2024, as amended by Amendments No. 1 and 2 thereof, filed with the Securities and Exchange Commission on April 25, 2025 and May 8, 2025, respectively. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
Reverse Stock Split
Effective on October 20, 2025 at 12:01 a.m. Eastern Time (the “Effective Time”), we affected a 1-for-10 reverse stock split of our then outstanding common stock (the “Reverse Stock Split”). No fractional shares were issued in connection with the Reverse Stock Split, and stockholders who would otherwise be entitled to receive a fractional share instead received cash in lieu of such fractional share, based upon the closing sale price of the common stock on the trading day immediately prior to the effective time of the Reverse Stock Split, as reported on the Nasdaq Capital Market.
In connection with the Reverse Stock Split discussed above, all outstanding options, warrants, and other securities entitling their holders to purchase or otherwise receive shares of common stock were adjusted, as required by the terms of each security. The number of shares available to be awarded under the Company’s equity incentive plans were also appropriately adjusted. Following the Reverse Stock Split, the par value of the common stock remained unchanged at $0.0001 par value per share. The Reverse Stock Split did not change the authorized number of shares of common stock or preferred stock.
The effects of the Reverse Stock Split have been retroactively reflected throughout this Report.
General Information
The following discussion is based upon our unaudited Condensed Consolidated Financial Statements included elsewhere in this Report, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Report, and in other reports we file with the SEC, and in our most recent Annual Report on Form 10-K. All references to years relate to the calendar year ended December 31st of the particular year.
This information should be read in conjunction with the interim unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Part II. Other Information – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contained in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on March 31, 2025, as amended by Amendments No. 1 and 2 thereof, filed with the Securities and Exchange Commission on April 25, 2025 and May 8, 2025, respectively (the “Annual Report”).
Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our unaudited condensed consolidated financial statements included above under “Part I – Financial Information” – “Item 1. Financial Statements”.
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Our logo and some of our trademarks and tradenames are used in this Report. This Report also includes trademarks, tradenames and service marks that are the property of others. Solely for convenience, trademarks, tradenames and service marks referred to in this Report may appear without the ®, ™ and SM symbols. References to our trademarks, tradenames and service marks are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensors if any, nor that respective owners to other intellectual property rights will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
The market data and certain other statistical information used throughout this Report are based on independent industry publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information and have not commissioned any such information. We are responsible for all of the disclosures contained in this Report, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this Report, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under, and incorporated by reference in, the section entitled “Item 1A. Risk Factors” of this Report. These and other factors could cause our future performance to differ materially from our assumptions and estimates. Some market and other data included herein, as well as the data of competitors as they relate to the Company, is also based on our good faith estimates.
See also “Cautionary Statement Regarding Forward-Looking Statements”, above, which includes information on forward-looking statements used herein and other matters which are applicable to this Report, including, but not limited to this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “ETHZilla”, and “ETHZilla Corporation” refer specifically to ETHZilla Corporation, formerly 180 Life Sciences Corp. and its consolidated subsidiaries. References to “KBL” refer to the Company prior to the November 6, 2020 Business Combination.
In addition, unless the context otherwise requires and for the purposes of this Report only:
“CAD” refers to Canadian dollars;
“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
“£” or “GBP” refers to British pounds sterling;
“SEC” or the “Commission” refers to the United States Securities and Exchange Commission; and
“Securities Act” refers to the Securities Act of 1933, as amended.
Additional Information
We file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov and are available for download, free of charge, soon after such reports are filed with or furnished to the SEC, on the “Investors”—“SEC Filings” page of our website at https://ethzilla.com. Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is https://ethzilla.com. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.
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The Company uses, and will continue to use, its website (https://ethzilla.com), press releases, and various social media channels, including its X account (x.com/ETHZilla_ETHZ) and its LinkedIn account (https://www.linkedin.com/company/ethzilla/), as additional means of disclosing public information to investors, the media and others interested in the Company. It is possible that certain information that the Company posts on its website, disseminated in press releases and on social media could be deemed to be material information, and the Company encourages investors, the media and others interested in the Company to review the business and financial information that the Company posts on its website, disseminates in press releases and on the social media channels identified above, as such information could be deemed to be material information. The contents on the Company’s website and its social media channels are not incorporated by reference in this Current Report on Form 8-K.
Going Concern and Management Liquidity Plans
In the consolidated financial statements as of and for the three months ended June 30, 2025 and prior periods, management disclosed substantial doubt about the Company’s ability to continue as a going concern. Due to the significant fundraising events undertaken by the Company during the three months ended September 30, 2025, as disclosed under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 8 - Debt” and “Note 13 – Stockholders’ (Deficit) Equity”, above, management determined that the Company will have sufficient cash flows to meet its obligations over the next 12 months, and as such the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.
Organization of MD&A
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:
| ● | Business Overview and Recent Events. A summary of the Company’s business and certain material recent events. |
| ● | Significant Financial Statement Components. A summary of the Company’s significant financial statement components. |
| ● | Results of Operations. An analysis of our financial results comparing the three and nine months ended September 30, 2025 and 2024. |
| ● | Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows and discussion of our financial condition. |
| ● | Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts. |
Business Overview
Our Company
ETHZilla is a technology company in the decentralized finance industry (“DeFi”) seeking to connect financial institutions, businesses and organizations worldwide by enabling secure, accessible blockchain transactions through Ethereum network protocol implementations. In August 2025, we adopted an Ethereum-focused treasury management strategy and have since continued our strategic shift towards implementation of our business plans designed to generate recurring revenues through various DeFi protocols that improve Ethereum network integrity and security. Through our proprietary protocol implementations, we facilitate DeFi transactions and asset digitization across multiple Layer 2 Ethereum networks. In the future, we plan to offer tokenization solutions, DeFi protocol integration, blockchain analytics, traditional-to-digital asset conversion gateways, and other DeFi services.
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In addition, (i) we own certain source code and intellectual property relating to an online blockchain casino, our “back-end” gaming platform, which incorporates blockchain technology and cryptocurrency operability (the “Gaming Technology Platform”), and (ii) have two legacy biotechnology programs that are focused on different diseases or medical conditions, and that target different factors, molecules or proteins. These operations are classified as discontinued operations under ASC 205, as discussed in greater detail under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 1 - Business Organization and Nature of Operations”, “Note 3 - Summary of Significant Accounting Policies” and “Note 15 – Discontinued Operations”.
Our Ethereum Treasury Strategy
In August 2025, our Board of Directors implemented an Ethereum-focused treasury strategy, with Ether (“ETH”) serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business. Our goal is to acquire and grow our overall ETH position and utilize professional treasury strategies to significantly increase our ETH holdings. We have not set a specific target for the maximum amount of ETH we seek to hold.
Our treasury strategy focuses on increasing the amount of ETH through a combination of capital raising activities and treasury activities including staking, restaking, liquid staking and other DeFi activities. We expect that ETH will serve as our primary treasury reserve asset in the future. We aim to maximize ETH accumulation and value accretion, while maintaining robust controls and oversight over these digital assets.
ETHZilla’s decision to accumulate ETH as a core treasury asset is grounded in a forward-looking view of the evolving global financial ecosystem. We believe Ethereum’s unparalleled programmability, security and developer momentum will make it a foundational layer for the next generation of decentralized financial applications. Ethereum’s transition to a Proof-of-Stake (“PoS”) consensus mechanism and the rise of Layer 2 blockchain networks with high scalability have transformed ETH into a yield-bearing, productive digital asset with increasing institutional adoption and intrinsic network value. We believe that ETH’s value proposition at its core is a digital trust commodity and that an investment in ETH represents an asymmetric long-term growth opportunity as more stablecoins and other tokenized real-world assets are secured by the Ethereum ecosystem.
Our treasury is designed with the goal of bringing value to our stockholders in a variety of ways. We plan to raise capital to be used to increase our ETH position in a manner which is accretive to shareholders. This can come in the form of equity, equity-linked debt or other forms of offerings designed to maximize shareholder exposure to ETH within a prudent risk management framework. We plan to continue to deploy the majority of the ETH in our treasury across staking, lending, and advanced DeFi protocols to generate yields and turn the treasury into a productive asset. As of September 30, 2025, over 70% of our ETH treasury has been deployed, and we intend to maintain a similar or higher percentage going forward. We do not hedge our ETH and do not currently have plans to hedge our ETH in the future. In addition, if the price of ETH increases in the future, the value of our ETH treasury will rise, which would also benefit our stockholders.
WE ARE NOT REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND STOCKHOLDERS DO NOT HAVE THE PROTECTIONS ASSOCIATED WITH OWNERSHIP OF SHARES IN A REGISTERED INVESTMENT COMPANY NOR THE PROTECTIONS AFFORDED BY THE COMMODITIES EXCHANGE ACT OF 1936, AS AMENDED.
How We Purchase or Sell Digital Assets
Our management team reviews the Company’s short term obligations and excess cash available to dedicate to the ETH treasury strategy. When it is determined that the Company has excess cash available to dedicate to the treasury strategy, we deploy that capital into one of our custodians and through acquisition strategies with the custodians and our asset manager, and we acquire the ETH over several days or weeks to maximize the number of ETH that is acquired with the deployed capital. If it is determined that the treasury needs to liquidate part of its ETH, the same process of selling the ETH into the market would be used. The Company has not reduced its treasury or sold any of its ETH staking rewards to date.
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Our ETH Deployment Strategy
Pursuant to our treasury strategy, we actively deploy our ETH in the treasury across staking, lending, and advanced DeFi protocols to generate yields. Through our proprietary protocol implementations, we facilitate DeFi transactions and asset digitization across multiple Layer 2 Ethereum networks. We have partnered with innovators such as Electric Capital and liquid restaking leaders like Puffer and etherFi, which enable us to better optimize returns on our ETH reserves while providing security and capital efficiency to stakeholders.
Our staking revenues are derived from the rewards we earn by actively participating in the Ethereum network’s PoS consensus mechanism. Specifically, ETHZilla delegates its ETH holdings to validators that process and verify transactions on the blockchain. In return, the Company receives protocol-level rewards in ETH, typically proportional to the amount staked and the network’s overall activity and performance.
Our ETH staking activities may include native staking, as well as liquid staking. In native staking, the Company, through its agreements with custodians and asset managers, stakes assets with third-party validators. Participants stake ETH through these validator nodes and, when chosen as validators by the network, earn staking rewards and transaction fees proportional to their staked amount. Liquid staking is similar to native staking, however, one key difference and intended benefit of this method is the ability to provide the Company with tokens representing digital assets in exchange for its ETH. Additionally, as part of the “activating” and “exiting” processes of ETH staking, any staked ETH may be inaccessible for a period of time determined by a range of factors, resulting in certain liquidity risks that we manage.
We view our staking operations and activities as a core strategic pillar of its broader alignment with the Ethereum ecosystem. Our participation is expected to yield economic return while also contributing directly to Ethereum’s decentralization, scalability, and security. Moreover, we believe staking is foundational to a new generation of blockchain-native capital structures that enable corporations to earn yield without relying on traditional debt instruments, equities, or centralized intermediaries. Our staking efforts are focused on maximizing yield, managing risk and ensuring that the Company’s operations meet institutional standards for transparency and efficiency.
Deployment Process
If it is determined to reduce the amount of the ETH deployed or it is determine to change the allocation of ETH, we will initiate an unstaking process, which effectively reverses the delegation or deployment of the ETH from the applicable validator, protocol or network.
Native ETH staking has a cooldown period known as the “deactivation period,” which is the time it takes for the unstaked ETH to become unbonded and fully liquid. During this period, the tokens are not actively earning rewards, but they are also not yet available for transfer or use. The length of this period can vary based on network conditions, which is generally expected to be 10 days or less, but has been over 45 days recently. Once the cooldown period is complete, the Company will have complete control over the ETH, including the ability to hold, sell, transfer, restake or otherwise deploy the ETH as determined by management.
Liquidity Management
The Company’s native staking program involves the temporary loss of the ability to transfer, assign a new validator or otherwise dispose of the ETH. We maintain a certain amount of liquid ETH in the treasury and a certain amount of cash to ensure that the Company is able to satisfy its current obligations.
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ETH and the Ethereum Network
ETH is a digital asset, also referred to as a digital currency or cryptocurrency, which serves as the unit of account on the open-source, decentralized, peer-to-peer Ethereum network. Ethereum launched in 2015 to expand blockchain’s potential beyond simple payments—enabling permissionless platforms for finance, gaming, social media, digital identity, and more. The Ethereum network represents one of the world’s most prominent blockchain ecosystems, distinguished by its ability to run decentralized applications and smart contracts on an open, distributed ledger. Ethereum is the foundation of digital finance and settlement layer for the majority of stablecoins, DeFi, and tokenized assets.
ETH
ETH is the network’s native cryptocurrency, used for transaction fees (known as “gas”), validator incentives, and diverse digital activities. ETH can be transferred in direct peer-to-peer transactions through the direct sending of ETH over the Ethereum blockchain from one ETH address to another. Among end-users, ETH can be used to pay other members of the Ethereum network for goods and services under what resembles a barter system. Consumers can also pay merchants and other commercial businesses for goods or services through direct peer-to-peer transactions on the Ethereum blockchain or through third-party service providers.
In addition to using ETH to engage in transactions, investors may purchase and sell ETH to speculate as to the value of ETH in the ETH market, or as a long-term investment to diversify their portfolio. The value of ETH within the market is determined, in part, by the supply of and demand for ETH in the global ETH market, market expectations for the adoption of ETH as a store of value, the number of merchants that accept ETH as a form of payment, and the volume of peer-to-peer transactions, among other factors. As of September 30, 2025, with a total market capitalization of approximately $495 billion, ETH is the second largest cryptocurrency by market capitalization behind bitcoin.
The Ethereum network has no formal cap on the total supply of ETH. The Ethereum network does, however, feature several mechanisms that, individually and in aggregate, have the effect of limiting the total supply of ETH outstanding.
New ETH is issued through the PoS process, where validators who help secure the network by locking up their ETH earn newly created ETH as rewards for validating transactions. The rate of new ETH issuance has dropped significantly since Ethereum switched from Proof-of-Work (“PoW”) to PoS in September 2022 (the “Merge”). The issuance rate varies based on the number of validators on the network and other factors.
At the same time, Ethereum features a burning mechanism introduced in connection with the Merge, which destroys a portion of transaction fees (known as the “base fee”), permanently removing that ETH from circulation. When network activity is high, this burn rate can sometimes exceed the rate of new issuance, causing the total supply of ETH to decrease temporarily (deflationary periods). The actual net supply growth is determined by the balance between new issuance to validators and ETH burned from transaction fees.
During the nine months ended September 30, 2025, the total ETH supply fluctuated between approximately 120.3 million and 120.7 million, with annual net supply changes expected to typically be at around 0% to 1%. There is no annual hard cap on the total supply of ETH, but the protocol’s economic design makes runaway inflation unlikely under normal circumstances.
The change from PoW to PoS also limits the total supply of ETH in circulation by effectively locking staked ETH for certain period of time, making the staked ETH temporarily unavailable for trading or selling.
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Ethereum Network
No single entity owns or operates the Ethereum network. The Ethereum network is accessed through software and governs ETH’s creation and movement. The source code for the Ethereum network is open-source, and anyone can contribute to its development. The Ethereum network is governed by a set of rules that are commonly referred to as the “Ethereum protocol.”
As part of the Merge, Ethereum transitioned from PoW to PoS, a consensus mechanism where validators stake ETH to secure the network, process transactions, and propose new blocks. The Merge was designed to dramatically reduce Ethereum’s energy use while maintaining security and decentralization. Developers can write smart contracts in programming languages ensuring that agreement terms are enforced transparently and without third-party oversight. Ethereum’s architecture allows for rapid iteration, robust interoperability with other chains, and widespread deployment of programmable digital assets—such as stablecoins, non-fungible tokens, and tokenized real-world assets.
We believe the potential of Ethereum is substantial: it has become the backbone of modern DeFi, facilitating lending, borrowing, trading, and earning yields without traditional intermediaries. Its programmable smart contracts are used for everything from automated insurance payouts to decentralized autonomous organizations and global capital markets. Ongoing upgrades (like sharding and Layer 2 scaling) are anticipated to continue to improve its scalability, versatility, and affordability, making Ethereum a foundation for the next generation of internet and financial infrastructure worldwide.
Although there are many alternatives, the Ethereum network is the oldest and largest smart contract platform in terms of market capitalization, availability of decentralized applications, and development activity. Smart contracts can be utilized across several different applications ranging from art to finance. Currently, one of the most popular applications is the use of smart contracts for underpinning the operability of DeFi, which consists of numerous highly interoperable protocols and applications. DeFi offers many opportunities for innovation and has the potential to create an open, transparent, and immutable financial infrastructure, with democratized access.
Staking
Staking on the Ethereum network is the process by which ETH holders participate in the blockchain’s PoS system by locking up their ETH to both secure the network and earn rewards. Validators are chosen to propose and attest to new blocks, facilitated by the ETH they have staked as collateral, which is designed to ensure the integrity of transactions and the overall security of the protocol. To operate a validator node directly, a minimum of 32 ETH is required, though smaller holders may participate through staking pools or via centralized platforms that aggregate deposits.
Rewards earned by ETH stakers depend on several factors, including the total amount of ETH staked on the network, validator uptime, overall network activity, and whether advanced reward mechanisms are used. The average annual percentage yield for ETH staking generally ranges from approximately 2% to 5%, depending on the staking method and platform. Rewards are distributed in ETH, compounding over time as new blocks are validated and transactions processed. Stakers who fail to maintain proper uptime or act maliciously may face penalties or even lose portions of their deposited ETH through “slashing,” a process designed to disincentivize bad behavior and maintain network trust.
Traditional staking involves locking ETH directly on the Ethereum protocol, where coins become temporarily inaccessible until unstaking or withdrawal periods are completed. Solo validators hold complete control but are responsible for technical maintenance, security, and managing the risks of downtime and slashing. Participating through trusted staking pools or custodial exchanges allow holders to stake without the technical burden or heavy capital requirements, though these options often involve trusting third-party operators and may introduce additional risks.
Liquid staking of ETH differs fundamentally from traditional staking methods by allowing stakers to retain liquidity and access their capital while still earning validation rewards. The process begins when the holder deposits their ETH into a liquid staking protocol, which then stakes those tokens with trusted network validators on their behalf. In exchange, the holder receives liquid staking tockets that represent both their staked position and accrued staking rewards. These LSTs can be freely moved, traded, and deployed across various DeFi applications, enabling broader utility than traditional staking where assets are locked and inaccessible until unbonding.
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The primary benefits of liquid staking include uninterrupted access to the underlying asset’s value and the ability to earn additional yields without forgoing staking rewards. Holders can use LSTs as collateral in lending protocols, participate in yield farming, or trade them on decentralized exchanges, all while accumulating rewards from the underlying stake. This flexibility enables increased capital efficiency and opens up opportunities for portfolio diversification, as holders can simultaneously secure the protocol’s network and enhance returns through multifaceted DeFi strategies. Moreover, liquid staking often lowers staking minimums, making network participation more accessible. However, liquid staking introduces new risks, such as reliance on smart contracts, potential “depegging” of LSTs from the underlying value of ETH, and higher systemic dependence on protocol integrity. While traditional staking mainly carries validator or slashing risks, liquid staking compounds this with additional protocol and market risks.
The timeline for liquid staking is highly streamlined and user-oriented. After connecting a crypto wallet and depositing tokens, the platform rapidly issues LSTs (often within minutes) that incrementally accrue rewards. Holders may withdraw their ETH stake at any time by returning the LSTs, with most platforms offering near-instant or short processing windows compared to traditional staking’s lengthy deactivation periods.
Use of Custodians and Storage of ETH Tokens
We do not self-custody and only utilize third-party qualified custodians to hold our Ethereum (the “Custodians”) that utilize risk management and operational best practices around items like hot vs. cold storage, access controls, custody technology and insurance.
We maintain multiple Custodians to reduce the risk of a single failure and we may expand to additional custodians as our treasury grows. Our accounts with a Custodian are all opened by the Company, this segregates our assets into an individual account owned by the Company and access is monitored and controlled by the Company. Our asset manager is given access to the Custodian accounts with established controls to ensure transactions require consensus of a minimum of two individuals when assets are being transferred between wallets and additional controls if an asset of the treasury is moved out of the Custodians’ control. The assets go through the Custodians’ trust company, which maintains its own insurance and is regulated by their respective state where the trust is incorporated in.
Management reviews the account balances and the total value held with a Custodian to allocate the Company’s holdings between multiple accounts and Custodians as part of our risk management process.
Hot storage and cold storage refer to different methods of storing ETH (and other cryptocurrencies) based on their internet connectivity and security profiles. Hot storage are software wallets connected to the internet, making them convenient for frequent transactions, sending, and receiving ETH. Cold storage maintain ETH private keys completely offline, offering significantly more protection from online threats. The Custodians hold a majority of ETH in cold storage and provide a user interface for the Company to manage the allocation of ETH between cold and hot storage for the wallets. The Company maintains more than 90% of its ETH treasury in cold wallets.
The Custodians have multiple, redundant cold storage sites, which are geographically distributed, including sites within the United States. The Custodians’ cold storage locations are monitored by 24x7 on-site security, video surveillance and alarms, hardened room structures, and access to these facilities is controlled by multi-person controls, multi-team access rules, and multi-factor authentication. The locations of the cold storage sites may change at the discretion of the Custodian and are kept confidential by the Custodian for security purposes.
The Custodians also maintain geographically dispersed backups of private keys, which are cryptographically generated into shards and stored in separate locations; multiple locations must be accessed to reconstruct a single key. The storage facilities are highly secured, and include 24x7 on-premises security presence, video surveillance, and alarms for unexpected entry. Access to facilities is controlled by multi-person controls, multi-team access rules, and multi-factor authentication.
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All of our Custodians have SOC type 2 reports that the Company has reviewed and we get regular bridge reports from our Custodians to help ensure the controls are being maintained. Our Custodians maintain their own insurance policies to cover our loss, which is in addition to the policies that we maintain ourselves. We currently have two qualified Custodians that we have approved for our treasury use and we are in the process of onboarding a third as part of our risk management process.
The Company is charged for storage fees, staking fees and transaction fees for services specifically requested by the Company or its Asset Manager. The contract terms of the agreements are typically for one to three years and can be terminated upon 30 days’ notice and payment of all fees due and one month of additional fees.
Government Regulation
The laws and regulations applicable to ETH and other digital assets are evolving and subject to interpretation and change.
Governments around the world have reacted differently to digital assets. Certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as the U.S., digital assets are subject to overlapping, uncertain and evolving regulatory requirements.
As digital assets have grown in both popularity and market size, the U.S. Executive Branch, Congress and a number of U.S. federal and state agencies, including the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission (“CFTC”), the SEC, the Financial Industry Regulatory Authority, the Consumer Financial Protection Bureau, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, and state financial regulators, have been examining the operations of digital asset networks, digital asset users and digital asset exchanges, with particular focus on the extent to which digital assets can be used to violate state or federal laws, including to facilitate the laundering of proceeds of illegal activities or the funding of criminal or terrorist enterprises, and the safety and soundness and consumer-protective safeguards of exchanges or other service-providers that hold, transfer, trade or exchange digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors. In addition, federal and state agencies, and other countries have issued rules or guidance regarding the treatment of digital asset transactions and requirements for businesses engaged in activities related to digital assets.
Depending on the regulatory characterization of ETH, the markets for ETH and cryptocurrency in general, and our activities in particular, our business and our Ethereum strategy may be subject to regulation by one or more regulators in the United States and globally. Ongoing and future regulatory actions may alter, to a materially adverse extent, the nature of digital assets markets, the participation of industry participants, including service providers and financial institutions in these markets, and our ability to pursue our Ethereum strategy. Additionally, U.S. state and federal and foreign regulators and legislatures have taken action against industry participants, including digital assets businesses, and enacted restrictive regimes in response to adverse publicity arising from hacks, consumer harm, or criminal activity stemming from digital assets activity.
The CFTC takes the position that some digital assets fall within the definition of a “commodity” under the Commodities Exchange Act of 1936, as amended (the “CEA”). Under the CEA, the CFTC has broad enforcement authority to police market manipulation and fraud in spot digital assets markets in which we may transact. Beyond instances of fraud or manipulation, the CFTC generally does not oversee cash or spot market exchanges or transactions involving digital asset commodities that do not utilize margin, leverage, or financing. In addition, CFTC regulations and CFTC oversight and enforcement authority apply with respect to futures, swaps, other derivative products and certain retail leveraged commodity transactions involving digital asset commodities, including the markets on which these products trade.
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The SEC and its staff have taken the position that certain other digital assets fall within the definition of a “security” under the U.S. federal securities laws. Public statements made by senior officials and senior members of the staff at the SEC indicate that the SEC does not consider specific digital assets, like Bitcoin, to be a security under the federal securities laws. However, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other digital assets.
In addition, because transactions in ETH provide a degree of anonymity, they are susceptible to misuse for criminal activities, such as money laundering. This misuse, or the perception of such misuse, could lead to greater regulatory oversight of ETH and Ethereum platforms, and there is the possibility that law enforcement agencies could close or blacklist such Ethereum platforms or other Ethereum-related infrastructure with little or no notice and prevent users from accessing or retrieving ETH held via such platforms or infrastructure. For example, the U.S. Treasury Department’s Office of Foreign Assets Control has issued updated advisories regarding the use of virtual currencies, added a number of digital asset exchanges and service providers to the Specially Designated Nationals and Blocked Persons list and engaged in several enforcement actions, including a series of enforcement actions that have either shut down or significantly curtailed the operations of several smaller digital asset exchanges associated with Russian and/or North Korean nationals. Additionally, in January 2025, the Consumer Financial Protection Bureau announced that it is seeking public input on privacy protections and surveillance in digital payments, particularly those offered through large technology platforms.
As noted above, activities involving ETH and other digital assets may fall within the jurisdiction of more than one financial regulator and various courts and such laws and regulations are rapidly evolving and increasing in scope. In the U.S., regulation on stablecoins was recently signed into U.S. federal law through the GENIUS Act which established the first comprehensive regulatory framework specifically for “payment stablecoins” — digital assets designed to maintain a stable value pegged to a fiat currency (typically the U.S. dollar) and intended for use in payments or transfers. The GENIUS Act aims to foster innovation in the stablecoin sector while ensuring financial stability, consumer protection, and compliance with anti-money laundering standards.
The regulatory landscape for digital assets continues to evolve rapidly across different jurisdictions, and we may become subject to new laws and regulations that could materially affect our business operations, compliance obligations, and financial performance. For a comprehensive discussion of the risks that existing and future regulations pose to our business, including specific regulatory developments that may materially affect our operations, see the section entitled “Risk Factors” in this Report.
Recent Events
Increases in Authorized Shares and Name Change
On July 24, 2025, at the 2025 Annual Meeting of the Company, the stockholders of the Company approved, among other things, an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to increase the Company’s authorized number of shares of common stock from one hundred million (100,000,000) shares to one billion (1,000,000,000) shares.
On July 24, 2025, immediately following the Annual Meeting, the Company filed a Certificate of Amendment to the Company’s Second Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware, which became effective on the same date, immediately upon filing. As a result of such filing, the Company’s authorized shares of common stock increased from 100,000,000 shares to 1,000,000,000 shares.
The Board of Directors (the “Board”) of the Company, approved an amendment to the Company’s Second Amended Restated Certificate of Incorporation, to change the Company’s name to ETHZilla Corporation (the “Name Change”). On August 12, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation, which went at 12:01 a.m. on August 18, 2025. Pursuant to Section 242(d)(1) of the General Corporation Law of the State of Delaware (“DGCL”), the Name Change did not require approval of the Company’s stockholders and did not affect the rights of the Company’s security holders.
At a special meeting of stockholders held on October 7, 2025, the stockholders of the Company approved an amendment to the Company’s Second Amended and Restated Certificate of Incorporation, to increase the Company’s authorized number of shares of common stock, par value $0.0001 per share from one billion (1,000,000,000) shares to five billion (5,000,000,000) shares.
On October 8, 2025, we filed a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation, as amended with the Secretary of State of the State of Delaware to increase the Company’s authorized number of shares of common stock, par value $0.0001 per share from one billion (1,000,000,000) shares to five billion (5,000,000,000) shares, which became effective when filed on October 8, 2025.
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Securities Purchase Agreement
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 13 - Stockholders’ (Deficit) Equity”, under “Securities Purchase Agreement”, on July 29, 2025, we entered into a securities purchase agreement (the “SPA”) with certain accredited institutional investors (the “Purchasers”) pursuant to which the Company agreed to sell and issue to the Purchasers in a private placement an aggregate of (i) 14,393,417 shares of common stock of the Company, par value $0.0001 per share, at an offering price of $26.50 per share (the “Stock Purchase Price”), and (ii) $26.499 per pre-funded warrant (collectively, the “Pre-Funded Warrants”) to purchase up to an aggregate of 1,749,585 shares of common stock (the “Pre-Funded Warrant Shares”) (together, the “Private Placement”).
Strategic Advisor Agreements and Warrants
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 13 - Stockholders’ (Deficit) Equity”, under “Securities Purchase Agreement”, on July 29, 2025, and in connection with the launch of the Company’s digital asset treasury strategy, the Company entered into a Strategic Advisor Agreement with each of Pink Sands Group, LLC, Cyber, Moode LLC, Moon Cat, LLC, Zorba Investments LLC, Purple Poseidon LLC, Tentacle Holdings LLC, PCAO LLC, Johnny Foxtrot LLC and New Island Advisors LLC (collectively, the “Strategic Advisors” and the “Strategic Advisor Agreements”). Pursuant to the Strategic Advisor Agreements, the Strategic Advisors agreed to provide the Company advice from time to time regarding the ETH treasury strategy, including on ETH purchase and staking strategies and such other areas as may be mutually determined by the Strategic Advisor and the Company from time to time (the “Services”). In consideration for agreeing to provide the Services, the Company granted on the same day the Strategic Advisors warrants to purchase an aggregate of 4,557,225 shares of the Company’s common stock (the “Initial Strategic Advisor Warrants”). Additionally, in the event the Company consummated a debt offering within sixty (60) days of the closing of the Private Placement, the Company agreed to grant additional warrants to purchase shares of the Company’s common stock to the Strategic Advisors pursuant to the Strategic Advisor Agreements, which debt funding occurred and which additional warrants were granted, as discussed in greater detail below.
The per share exercise price of each Strategic Advisor Warrant is equal to $27.75, which is $1.25 above the Stock Purchase Price.
Asset Management Agreement
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 13 - Stockholders’ (Deficit) Equity”, under “Securities Purchase Agreement”, in connection with the Private Placement, at the Closing (the “AMA Effective Date”), the Company entered into an Asset Management Agreement (the “Asset Management Agreement”) with Electric Treasury Edge, LLC (the “Asset Manager”). Pursuant to the Asset Management Agreement, the Asset Manager will provide discretionary investment management services with respect to, among other assets (including without limitation certain subsequently raised funds), the majority of the Company’s proceeds from the Private Placement (the “Account Assets”) in accordance with the terms of the Asset Management Agreement. The Asset Manager will pursue a long-bias strategy of digital assets primarily focused on Ethereum (the “ETH Strategy”). The custodians under the Asset Management Agreement will consist of cryptocurrency wallet providers mutually acceptable to the Company and the Asset Manager.
The Company shall pay the Asset Manager a monthly asset-based fee (the “Asset-based Fee”) equal to 2% per annum of the average daily net asset value of the Account Assets under management, payable in advance on the first business day of each calendar month; provided, however, that the minimum Asset-based Fee to be paid to the Asset Manager shall be $2,000,000 per year. Fees are prorated for partial periods. Staked or liquid-staked assets are not treated differently for fee purposes.
Amendment to Securities Purchase Agreements and Warrants
On July 28, 2025, the Company entered into an amendment to (i) the Securities Purchase Agreement, dated February 19, 2021, by and among the Company and the investors party thereto and (ii) the Securities Purchase Agreement, dated August 19, 2021, by and among the Company and the investors party thereto, by which the investors purchased at least a 50.1% interest in the shares of common stock based on the subscription amounts thereto, to remove a prohibition on variable rate transactions and reduce the exercise price of warrants (the “Existing Warrants”) to $26.50 (collectively, the “Amendments”).
Initial Senior Convertible Note Sales
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 8 - Debt”, under “Initial Senior Convertible Note Sales”, on August 8, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with investment funds managed by an institutional investor (the “Investor”), under which the Company agreed to sell and issue to the Investor senior secured convertible notes (the “August 2025 Convertible Notes”) in an aggregate principal amount of $156,250,000 (the “Principal Amount”) in exchange for cash equal to 96.0% of the Principal Amount (the “Debt Financing”). The Company closed the Debt Financing simultaneously with the signing of the Securities Purchase Agreement (the “August 2025 Note Funding Date”). The August 2025 Convertible Notes were issued in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act.
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The August 2025 Convertible Notes bear interest at a rate of 0.00% per annum for the first six months, and 4.00% per annum for the following six months through the maturity date, which is the third year anniversary of the issuance date of the August 2025 Convertible Notes or earlier conversion or redemption date. The interest rate will increase to a rate of 18.0% per annum upon the occurrence and during the continuance of an event of default under the August 2025 Convertible Notes. The August 2025 Convertible Notes are secured by $44.5 million of Ether (ETH) (the “August 2025 ETH Collateral”) and approximately $156.25 million in cash (the “August 2025 Cash Collateral”) which is included in restricted cash equivalents on our consolidated balance sheet.
At any time following the nine-month anniversary of the August 2025 Note Funding Date, the Investor has the right to require that the Company redeem all or any part of the outstanding August 2025 Convertible Notes. If at any time after the August 2025 Note Funding Date, (i) the loan to value ratio of the August 2025 Convertible Notes is greater than 85%, or (ii) upon the occurrence of any Trigger Event (as defined in the August 2025 Convertible Notes), the Investor has the right to require that the Company redeem all or any part of the outstanding note in cash at a price equal to 100% of the amount of such Convertible Note being redeemed.
The August 2025 Convertible Notes provide that the Investor may convert all or any portion of the principal amount of such Convertible Note, together with any accrued and unpaid interest thereon, at an initial conversion price of $34.45 (the “August 2025 Conversion Price”), which is subject to a one-time, downward only reset after the nine-month anniversary of the issuance date (the “One-Time Reset Date”) equal to the closing bid price of the common stock on the One-Time Reset Date to the extent such price is less than the August 2025 Conversion Price. The Investor is not permitted to convert the August 2025 Convertible Notes to the extent that the shares of common stock deliverable upon conversion thereof would exceed 19.99% of the Company’s outstanding shares immediately prior to executing the Securities Purchase Agreement (the “August 2025 Exchange Cap”) without prior stockholder approval. We were also required to seek stockholder approval for the issuance of the shares of common stock upon conversion of the August 2025 Convertible Notes in accordance with the Securities Purchase Agreement. On October 7, 2025, the stockholders of the Company approved the issuance of shares of common stock in excess of the August 2025 Exchange Cap.
The August 2025 Convertible Notes provide for certain covenants, including that the Company shall maintain, at all times, (i) a balance of $5 million or more held in accounts other than the controlled securities account entered into at the consummation of this transaction and (ii) a loan-to-value ratio of no more than 100%, in addition to other customary covenants and events of default that are typical for transactions of this type and certain affirmative and negative covenants.
Pursuant to the Securities Purchase Agreement, the Company has agreed to certain obligations to register and maintain the registration of the shares of common stock underlying the August 2025 Convertible Notes, including filing within 15 calendar days of the Closing Date, a resale registration statement to register for resale the shares underlying the August 2025 Convertible Notes, which was timely filed and has been declared effective to date.
The security documents consist of (i) a Pledge and Security Agreement entered into by the Company, certain subsidiaries of the Company and the collateral agent, which is an affiliate of the Investor (the “Collateral Agent”); (ii) a control agreement in respect of the August 2025 ETH Collateral entered into by the Company, the Collateral Agent and the custodian of such account, (iii) a control agreement in respect of the August 2025 Cash Collateral entered into by the Company, the Collateral Agent and the custodian of such account, and (iv) a guaranty agreement entered into by certain subsidiaries of the Company in favor of the Investor. The control agreement requires the Company to maintain cash and cash equivalents in an aggregate amount of approximately $504,000,000, which the Company is not allowed to withdraw without consent of the Collateral Agent. The Collateral Agent also has the right to direct activities related to any staking of the August 2025 ETH Collateral. In addition, the Company paid $150,000 in legal fees of the Investor’s counsel.
New Senior Convertible Note Sales
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 8 - Debt”, under “New Senior Convertible Note Sales”, on September 22, 2025, the Company entered into an Amendment and Waiver Agreement with the Investor (the “Amendment Agreement”), pursuant to which, among other things (a) the Company agreed to sell a new series of senior secured convertible notes to the Investor (the “September 2025 Convertible Notes”, and together with the August 2025 Convertible Notes, the “Convertible Notes”); (b) the Company and the Investor agreed to partially waive and modify certain terms of the August 2025 Convertible Notes and the Securities Purchase Agreement, including: (i) to reduce the interest rate from 4% to 2% (ii) excluding the September 2025 Convertible Notes from the anti-dilutive provisions of the August 2025 Convertible Notes, except in connection with the Existing Note Conversion Price Adjustment (defined and described below), (iii) permitting the Company to Stake (as defined in the Security Purchase Agreement) the collateral held in the Company’s crypto control accounts, (iv) allowing the Company to use the yield of any cash held in the controlled accounts (less the accrued and unpaid interest on the Convertible Notes and any other amounts then due and payable to the Investor), in the ordinary course of business, and (v) to permit during the 90 day period following the August 22, 2025 effective date of a resale registration statement filed to register the resale of shares of common stock issuable upon conversion of the August 2025 Convertible Notes, pursuant to which the Company was previously restricted from taking certain actions, one or more additional subsequent placements (not including any variable rate transaction) solely consisting of the sale of common stock (x) with gross proceeds not in excess of an aggregate of $1 billion, subject to certain pre-requisites, or (y) at any time if such applicable purchase price exceeds $40.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events).
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The September 2025 Convertible Notes were sold to the Investor on September 23, 2025, in the aggregate principal amount of $360 million (the “New Principal Amount”) in exchange for cash equal to 97.25% of the New Principal Amount (the “New Debt Financing”).
The Company closed the New Debt Financing on September 23, 2025 (the “New Debt Funding Date”). The September 2025 Convertible Notes were issued in a private placement in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act.
The September 2025 Convertible Notes bear interest at a rate of 2.00% per annum through the maturity date, which is August 8, 2028 or earlier conversion or redemption date. The interest rate will increase to a rate of 18.0% per annum upon the occurrence and during the continuance of an event of default under the September 2025 Convertible Notes. The September 2025 Convertible Notes are secured by $50 million of Ether (ETH) (the “September 2025 ETH Collateral”) and approximately $348,180,800 in cash (the “September 2025 Cash Collateral”) which is included in restricted cash equivalents on our consolidated balance sheet.
At any time after May 8, 2026, the Investor shall have the right to require that the Company redeem all or any part of the outstanding September 2025 Convertible Notes. If at any time after the New Debt Funding Date, (i) the loan to value ratio of the September 2025 Convertible Notes is greater than 85%, or (ii) upon the occurrence of any Trigger Event (as defined in the September 2025 Convertible Notes), the Investor shall have the right to require that the Company redeem all or any part of the outstanding note in cash at a price equal to 100% of the amount of such New Convertible Note being redeemed.
The September 2025 Convertible Notes provide that the Investor may convert all or any portion of the principal amount of such September 2025 Convertible Notes, together with any accrued and unpaid interest thereon, at an initial conversion price of $30.50 (the “Conversion Price”), which is subject to a downward only reset on May 8, 2026, and each three month anniversary thereafter (each a “Reset Date”) equal to the closing bid price of the common stock on each such Reset Date, to the extent such price is less than the Conversion Price. The Investor is not permitted to convert the September 2025 Convertible Notes to the extent that the shares of common stock deliverable upon conversion thereof would exceed 19.99% of the Company’s outstanding shares immediately prior to executing the Amendment Agreement (the “September 2025 Exchange Cap”) without prior stockholder approval. We are also required to seek stockholder approval for the issuance of the shares of common stock upon conversion of the September 2025 Convertible Notes in accordance with the Amendment Agreement.
As a result of the Conversion Price of the September 2025 Convertible Notes being less than the conversion price of the August 2025 Convertible Notes, the conversion price of the August 2025 Convertible Notes automatically adjusted to the Conversion Price on the New Debt Funding Date (the “Existing Note Conversion Price Adjustment”).
The September 2025 Convertible Notes also provide that, at any time after March 22, 2026, the Company may require holders to convert all or a portion of the outstanding principal into shares of common stock (a “Mandatory Conversion”) if certain conditions are satisfied. Specifically, the volume-weighted average price (“VWAP”) of the Company’s common stock on its principal trading market must exceed $44.785 (as adjusted for stock splits and similar events) for 30 consecutive trading days and no Equity Conditions (defined below) failure may exist. The Company may not effect more than one Mandatory Conversion during any 20-trading-day period and may not exercise its right if an event of default has occurred and is continuing. A Mandatory Conversion is subject to cancellation if the stock price falls below the minimum conversion price or if an Equity Conditions failure occurs prior to the conversion date, unless waived by the holder. In lieu of conversion of any portion of the notes that cannot be converted due to an Equity Conditions Failure, the Company may instead require the holder to exchange such portion into the right to receive the same number of shares issuable upon conversion, pursuant to Section 3(a)(9) of the Securities Act, on mutually agreeable terms. The “Equity Conditions” generally require, among other things, that the Company’s registration statement registering the resale of the common stock issuable upon conversion of the September 2025 Convertible Notes is effective or the shares are otherwise eligible for resale, that the common stock remains listed and tradable on an eligible market, that no event of default or material breach exists, that certain specific volume requirements have been met, that sufficient authorized shares are available, that no material, non-public information or unresolved disputes exist, and that the stockholders of the Company have approved the issuance of shares of common stock in excess of the September 2025 Exchange Cap.
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Additionally, the Convertible Notes provide that, if at any time and from time to time on or after the issuance date thereof, there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Company’s common stock, other than the 1-for-10 reverse stock split effective October 20, 2025 (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the Event Market Price (as defined below) is less than the Conversion Price then in effect (after giving effect to certain adjustments), then on the 16th Trading Day (as defined in Convertible Notes) immediately following such Stock Combination Event Date, the Conversion Price then in effect on such sixteenth (16th) Trading Day (after giving effect to certain adjustments) shall be reduced (but in no event increased) to the Event Market Price. “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the volume weighted average prices (VWAP) of the Company’s common stock for each of the five Trading Days with the lowest VWAP of the Company’s common stock during the 15 consecutive Trading Day period ending and including the Trading Day immediately preceding the 16th Trading Day after such Stock Combination Event Date, divided by (y) five.
Additionally, if the Company issues or sells shares of common stock after the New Debt Funding Date, at a price lower than the then-current conversion price of the September 2025 Convertible Notes, subject to certain excepted issuances, the conversion price of the September 2025 Convertible Notes will be adjusted downward to match the price of such newly issued shares.
Finally, if the Company issues or enters into an agreement to issue common stock, options, or convertible securities with a price that varies or may vary with the market price of the common stock (excluding certain at-the-market offerings and customary anti-dilution adjustments), subject to certain customary exceptions, the holders of the September 2025 Convertible Notes have the right, but not the obligation, to elect to use such “Variable Price” for purposes of converting the September 2025 Convertible Notes. The holder may make this election on a per-conversion basis and is not required to rely on the Variable Price for any future conversions.
The September 2025 Convertible Notes provide for certain covenants, including that the Company shall maintain, at all times, (i) a balance of $5 million or more held in accounts other than the controlled securities account entered into at the consummation of the transaction and (ii) a loan-to-value ratio of no more than 100%, in addition to other customary covenants and events of default that are typical for transactions of this type and certain affirmative and negative covenants.
Subsequent Strategic Advisor Warrants
As discussed in greater above under “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 8 - Debt”, under “Initial Senior Convertible Note Sales”, on September 22, 2025, the Company granted on the same day the Strategic Advisors warrants to purchase an aggregate of 4,557,225 shares of the Company’s common stock. We also agreed that in the event the Company consummated a debt offering within sixty (60) days of the closing of the transactions contemplated by that certain Securities Purchase Agreement entered into on July 29, 2025, which transactions closed on August 4, 2025, to grant additional warrants to purchase shares of the Company’s common stock to the Strategic Advisors pursuant to the Strategic Advisor Agreements with an exercise price equal to the greater of (i) the conversion price of such debt offering and (ii) the minimum price required by Nasdaq at the time of execution of any such debt offering plus $1.25.
Effective with the closing of the Debt Financing, we granted additional warrants to purchase an aggregate of 907,111 shares of the Company’s common stock to the Strategic Advisors (the “Subsequent Strategic Advisor Warrants”).
The per share exercise price of each Subsequent Strategic Advisor Warrant is equal to $34.45, which was the August 2025 Conversion Price of the August 2025 Convertible Notes.
Subsequent Strategic Advisor Warrants to purchase 95,700 shares of common stock were granted to PCAO, of which Mr. McAndrew Rudisill, the then Executive Chairman of the Company (current Executive Chairman and Chief Executive Officer), is the founder and managing partner, and therefore deemed to beneficially own the securities held by such entity.
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ATM Sales Agreement
On August 13, 2025, the Company entered into a Sales Agreement (the “Sales Agreement”) to sell shares of the Company’s common stock, par value $0.0001 per share from time to time through Clear Street, acting as sales agent. Pursuant to the prospectus supplement dated August 13, 2025 (the “Prospectus Supplement”) filed by the Company with the SEC, which supplements the base prospectus included in the Company’s shelf registration statement on Form S-3 (File No. 333-288194), initially filed with the SEC on June 20, 2025 and declared effective on June 26, 2025, the Company was able to offer and sell up to $500,000,000 of its shares of common stock through Clear Street pursuant to the Sales Agreement.
Upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, Clear Street could sell the common stock in negotiated transactions or transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on the principal market on which the common stock is listed or any other existing trading market for the common stock.
The Company will designate the maximum amount of common stock to be sold through Clear Street in any placement under the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, Clear Street has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations, to sell on the Company’s behalf all of the shares of common stock requested to be sold by the Company. The Company may instruct Clear Street not to sell common stock if the sales cannot be effected at or above a price designated by the Company in a placement notice. The Company or Clear Street may suspend the offering of common stock pursuant to the Sales Agreement upon proper notice to the other party. The Company and Clear Street each have the right, by giving 10 days’ notice as specified in the Sales Agreement, to terminate the Sales Agreement in each party’s sole discretion at any time. Clear Street, subject to mutual agreement between Clear Street and the Company, may also sell shares of common stock sold to it as principal by any other method permitted by law, including, but not limited to, privately negotiated transactions and block trades. The Company also may sell shares of common stock to Clear Street as principal for its own account, at a price agreed upon at the time of sale. If the Company sells common stock to Clear Street as principal, it will enter into a separate terms agreement setting forth the terms of such transaction.
The Sales Agreement provides that Clear Street will be entitled to aggregate compensation for its services of up to 3.0% of the gross sales price per share of all shares sold through Clear Street under the Sales Agreement. The Company has no obligation to sell any shares under the Sales Agreement. In addition, the Company has agreed to reimburse certain legal expenses incurred by Clear Street in connection with execution of the Sales Agreement in an amount up to $75,000, in addition to certain ongoing legal expenses.
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Stock Repurchase Program
On August 22, 2025, the Board of Directors of the Company authorized and approved a stock repurchase program for up to $250.0 million of the currently outstanding shares of the Company’s common stock. Subject to any future extension in the discretion of the Board of Directors of the Company, 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.
Under the stock repurchase program, shares may be repurchased from time to time in the open market or through negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws, including Rule 10b-18 of the Exchange Act. Repurchases will be 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 shares, general market conditions, cost of capital, the trading price of the common stock, alternative uses for capital, and the Company’s financial performance. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws.
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.
The repurchase program is expected to be funded using the Company’s working capital and from funds raised in “at-the-market” offerings or other future financings.
During the three months ended September 30, 2025, a total of 645,072 shares of common stock, for aggregate cost of $16,069,448 were repurchased by the Company. Subsequent to September 30, 2025, a total of 1,454,400 shares of common stock for an aggregate cost of $30,141,810 were repurchased by the Company.
Amended and Restated ATM Sales Agreement
As discussed above, on August 13, 2025, the Company entered into the Sales Agreement with Clear Street, acting as sales agent for the Company’s “at the market offering” program. On August 22, 2025, the Company entered into an Amended and Restated Sales Agreement (the “A&R Sales Agreement”) to sell from time to time through Clear Street, acting as sales agent, shares of the Company’s common stock, par value $0.0001 per share, having an aggregate offering price of up to $10.0 billion. The shares of common stock will be issued pursuant to the Company’s automatic shelf registration statement on Form S-3 (File No. 333-289811), filed with the SEC on August 22, 2025, a base prospectus dated August 22, 2025, included as part of the registration statement, and a prospectus supplement dated August 22, 2025, filed by the Company with the SEC pursuant to Rule 424(b) under the Securities Act.
Upon delivery of a placement notice and subject to the terms and conditions of the A&R Sales Agreement, Clear Street may sell the common stock in negotiated transactions or transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on the principal market on which the common stock is listed or any other existing trading market for the common stock.
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The Company will designate the maximum amount of common stock to be sold through Clear Street in any placement under the A&R Sales Agreement. Subject to the terms and conditions of the A&R Sales Agreement, Clear Street has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations, to sell on the Company’s behalf all of the shares of common stock requested to be sold by the Company. The Company may instruct Clear Street not to sell common stock if the sales cannot be effected at or above a price designated by the Company in a placement notice. The Company or Clear Street may suspend the offering of common stock pursuant to the A&R Sales Agreement upon proper notice to the other party. The Company and Clear Street each have the right, by giving 10 days’ notice as specified in the A&R Sales Agreement, to terminate the A&R Sales Agreement in each party’s sole discretion at any time. Clear Street, subject to mutual agreement between Clear Street and the Company, may also sell shares of common stock sold to it as principal by any other method permitted by law, including, but not limited to, privately negotiated transactions and block trades. The Company also may sell shares of common stock to Clear Street as principal for its own account, at a price agreed upon at the time of sale. If the Company sells common stock to Clear Street as principal, it will enter into a separate terms agreement setting forth the terms of such transaction.
The A&R Sales Agreement provides that Clear Street will be entitled to aggregate compensation for its services of up to 3.0% of the gross sales price per share of all shares sold through Clear Street under the A&R Sales Agreement. The Company has no obligation to sell any shares under the A&R Sales Agreement. In addition, the Company has agreed to reimburse certain legal expenses incurred by Clear Street in connection with execution of the A&R Sales Agreement in an amount up to $75,000, in addition to certain ongoing legal expenses.
The A&R Sales Agreement contains customary representations, warranties and covenants by the Company. The Company also agreed to provide indemnification and contribution to Clear Street against certain liabilities, including under the Securities Act and the Exchange Act. From time to time, in the ordinary course of business, Clear Street has provided, and in the future may provide, various financial advisory and investment banking services to the Company, for which they have received or will receive customary fees and reimbursement of expenses.
Either party can terminate the Sales Agreement under certain conditions, such as material adverse changes, failure to perform obligations, trading suspensions, or other market or regulatory events. Both the Company and Clear Street can also end the agreement at any time with 10 days’ notice.
During the three months ended September 30, 2025, we sold an aggregate of 739,050 shares of our common stock under the Sales Agreement for gross proceeds of approximately $40,990,338. The Company also paid a $1,513,000 fee to Clear Street related to the A&R Sales Agreement which is reflected as cost of capital.
Since September 30, 2025, we have sold an aggregate of 410,403 shares of our common stock (of which 405,735 have been issued) under the Sales Agreement for net proceeds of approximately $6,861,299, after deducting commissions.
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Separation and Release Agreement with Blair Jordan and Jordan Consulting
On September 4, 2025, Mr. Blair Jordan, the then Chief Executive Officer of the Company, and Blair Jordan Strategy and Finance Consulting Inc. (an entity owned by Mr. Jordan)(”Jordan Consulting”) entered into a Separation and Release Agreement with the Company (the “Jordan Separation Agreement”).
Pursuant to the Jordan Separation Agreement, the Company agreed to (a) pay Jordan Consulting $1,350,000 in cash, which would be the amount payable to Jordan Consulting pursuant to the terms of an Executive Consulting Agreement between the Company, Mr. Jordan and Jordan Consulting (the “Jordan Consulting Agreement”), in the event the Board of Directors of the Company decided that Mr. Jordan should step down from the role of Chief Executive Officer of the Company, and such departure was not considered a termination for just cause by the Company or a resignation for good reason by Mr. Jordan under the Jordan Consulting Agreement; (b) execute an assignment in order to transfer any and all rights and ownership to the design or domain of “Volaro” to Jordan Consulting; and (c) confirm that certain of Jordan Consulting’s options that have been granted were fully vested subject to stockholder approval.
Under the Jordan Separation Agreement, Mr. Jordan, Jordan Consulting and the Company, provided each general releases; the Company agreed to continue to indemnify and hold Mr. Jordan and Jordan Consulting harmless against any claims relating to the performance of the Jordan Consulting Agreement; and Mr. Jordan and Jordan Consulting agreed to certain confidentiality, non-disclosure, non-solicitation, non-disparagement (which were mutual), and cooperation covenants.
Transaction Agreement
On September 8, 2025, 180 SPV Treasury Vehicle I LLC, a wholly-owned subsidiary of the Company (“180 SPV”), entered into A Physically-Settled Spot and Forward Transaction Agreement (the “Transaction Agreement”) with Cumberland DRW LLC (“Counterparty”), to obtain up to $50.0 million from a Counterparty pursuant to the terms of the Transaction Agreement. The Transaction Agreement has a forward rate of 9.90% per annum through the settlement date, which is December 8, 2025 (the “Settlement Date”). The transaction was collateralized by approximately $80.8 million of ETH.
The proceeds from the Transaction Agreement have been used, and are expected to continue to be used by the Company to fund repurchases under the Company’s previously announced $250.0 million stock repurchase program. The Company has obtained a waiver from the holders of certain convertible notes issued by the Company on August 8, 2025 of certain of such holders’ rights such that the execution of the Transaction Agreement by 180 SPV will not result in the redemption of, or an event of default under, such convertible notes.
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Resignation of Stephen H. Shoemaker
On September 15, 2025, Stephen H. Shoemaker resigned as a member of the Board, which resignation was not the result of a disagreement with the Company on any matter relating to the registrant’s operations, policies or practices.
In connection with his resignation, the Board, with the recommendation of the Compensation Committee of the Board (the “Compensation Committee”), approved an extension of the expiration date of options to purchase 16,500 shares of common stock at an exercise price of $9.29 per share (the “Options”), which were previously granted to Mr. Shoemaker, and which, absent such extension, would have expired three months after his resignation, to June 17, 2035, the ten year anniversary of the grant date of such Options.
The Company also entered into a consulting agreement with Mr. Shoemaker on September 15, 2025 (the “Consulting Agreement”). Pursuant to the Consulting Agreement, Mr. Shoemaker agreed to provide consulting services as reasonably requested by the Company during the term of the Consulting Agreement, which is for three months, unless extended by the mutual agreement of the parties. In consideration for providing the services under the Consulting Agreement, the Company agreed to pay Mr. Shoemaker $29,166.66 per month, which is payable by way of the issuance of (a) shares of common stock of the Company equal to $14,583.33, divided by the closing sales price of the Company’s common stock on each monthly anniversary of the effective date of the Consulting Agreement during the term of the Consulting Agreement (or if such date is not a trading day, the last trading day prior to each such applicable date) (collectively, the “Consulting Shares”); and (b) $14,583.33 in cash. The Consulting Agreement contains customary confidentiality and other representations of Mr. Shoemaker.
Executive Employment Agreement with McAndrew Rudisill
On September 15, 2025, the Company entered into an Executive Employment Agreement with Mr. McAndrew Rudisill, the Company’s Chief Executive Officer and Executive Chairman (the “Rudisill Employment Agreement”).
Pursuant to the Rudisill Employment Agreement, the Company agreed to continue to engage Mr. Rudisill as Chairman of the Board and Chief Executive Officer of the Company, during the term of the agreement, which continues until the earlier of (i) Mr. Rudisill providing the Company 30 days written notice of his termination of the Rudisill Employment Agreement, or (ii) December 31, 2028; subject to up to two additional years of automatic renewals, if neither party provides the other intent of its non-renewal prior to December 31, 2028 or if automatically renewed, December 31, 2029.
In consideration for agreeing to provide services under the Rudisill Employment Agreement, we agreed: (a) to pay Mr. Rudisill a base salary of $450,000 per year, with such amount to be reviewed by the Board with the recommendation of the Compensation Committee, at least annually, and may be increased if the Board deems appropriate; (b) that Mr. Rudisill would be eligible to earn an annual discretionary bonus as established by the Board or Compensation Committee, which may consist of restricted stock units (RSUs) and/or cash payments; and (c) that Mr. Rudisill would be entitled to a change of control payment, equal to two percent (2%) of the greater of (i) the market capitalization of the Company on the closing date of a Change in Control (as defined below) or (ii) the total enterprise value (defined by the Company’s market capitalization on the closing date of a Change of Control, plus all outstanding debt, less cash). This Change in Control payment may consist of both RSU’s and/or cash, as determined by the Board or Compensation Committee. For the purposes of the Rudisill Employment Agreement, a “Change in Control” means either (i) a merger or consolidation involving the Company (or one of its subsidiaries where the Company issues shares), unless the transaction is solely for changing the Company’s domicile or results in the Company’s stockholders retaining more than 50% of the voting power in the surviving or parent corporation immediately after the transaction, or (ii) the sale, lease, transfer, exclusive license, or other disposition of all or substantially all of the Company’s or its subsidiaries’ assets or equity, including through the sale or disposition of subsidiaries holding substantially all such assets, except where the transfer is to a wholly-owned subsidiary, provided that transactions carried out principally for bona fide equity financing purposes, where the Company receives cash or debt is cancelled or converted (or a combination thereof), will not constitute a Change in Control.
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Separately, upon termination of the Rudisill Employment Agreement for any reason, the Company must promptly, and no later than 30 days after termination (or sooner if required by law), pay Mr. Rudisill (or his surviving spouse or estate) a lump sum covering any portion of his then current salary due through the termination date and reimbursement of eligible expenses incurred. Additionally, if Mr. Rudisill has been employed for more than 12 months, he will also receive severance payment equal to two times his base salary at the time of termination. In addition, if his employment ends within 36 months of the start date (September 15, 2025), he will receive a payment, payable in stock and/or cash as determined by the Board, equal to the greater of (a) 1% of the Company’s market capitalization; or (b) 1% of the total enterprise value (market capitalization plus debt, less cash) of the Company, at the time of termination. Payment of these severance benefits are conditioned on Mr. Rudisill executing a general release of claims against the Board relating to his employment or service with the Company.
The Rudisill Employment Agreement also contains customary confidentiality obligations and work made for hire language. In addition, Mr. Rudisill is eligible to receive certain employee benefits, including profit sharing, medical, disability and life insurance plans and programs, that are established and made generally available by the Company from time to time to its employees, subject, however, to the applicable eligibility requirements and other provisions of such plans and programs (including, without limitation, requirements as to position, tenure, location, salary, age and health).
Notwithstanding the terms of the Rudisill Employment Agreement, as discussed above, the Board and/or Compensation Committee may from time to time, in their discretion, increase Mr. Rudisill’s base salary or award discretionary bonuses to Mr. Rudisill, which may take the form of cash consideration or equity.
The Rudisill Employment Agreement superseded the offer letter previously provided to Mr. Rudisill to serve on the Company’s Board.
Purchase and Subscription Agreement
On October 22, 2025, we entered into a Purchase and Subscription Agreement (the “Satschel Agreement”) with Satschel, Inc., a Delaware corporation (“Satschel”). Satschel owns Liquidity.io, a regulated broker-dealer and operator of a Digital Alternative Trading System (ATS) platform (the “Platform”).
Pursuant to the Satschel Agreement, Satschel sold us shares of its Class A Common Stock representing 15% of its fully-diluted capitalization (the “Satschel Securities”), in consideration for (a) $5 million in cash; and (b) 556,174 shares of our common stock with an agreed value of $10 million, which are subject to a six month lock-up (the “Satschel Shares”).
The Satschel Agreement includes (i) customary representations of each of the parties; (ii) positive and negative covenants required to be met by Satschel following the Closing (defined below), relating to required quarterly budgets, financial reporting, minimum cash balances and notification of key personnel changes, as well as budget compliance, and restrictions on new business lines, capital expenditures, compensation adjustments, indebtedness, sales or dispositions of assets and operations, public listings and reverse mergers, issuances of securities, and amendments to Satschel’s governing documents, without the prior written consent of the Company, subject to certain exceptions; and (iii) customary indemnification requirements of the parties, subject to a $50,000 deductible and a $2 million cap, subject to certain customary exceptions.
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The Satschel Agreement also provides certain additional rights to the Company following the Closing, including (a) the exclusive right in perpetuity to list any digital tokens or assets issued on Ethereum Layer 2 protocols on the Platform; (b) a right of first refusal until the earlier of (i) five years following the Closing Date; and (ii) the date that Satschel becomes publicly-traded, to acquire any equity securities of Satschel that it may offer or sell; and (c) the right to appoint one member of the Board of Directors of Satschel, for so long as the Company owns any equity interests of Satschel.
The acquisition contemplated by the Satschel Agreement closed on October 22, 2025.
Liquidity.io delivers a fully regulated marketplace for trading private assets, combining Securities and Exchange Commission (SEC)-licensed exchange infrastructure with Ethereum L2 tokenization. The Platform enables institutional and accredited investors to access private secondaries, structured credit, and real-world assets (RWAs) through a single compliant marketplace with instant settlement and liquidity.
We believe this relationship with Satschel establishes a foundation for our anticipated future growth and delivers several key strategic benefits, including:
| ● | Expanded liquidity and market access: Enables the Company to leverage Liquidity.io’s ATS to convert future Company-issued tokenized RWAs into compliant, tradable instruments with both primary and secondary market liquidity. |
| ● | Regulatory integration: Supports end-to-end regulatory oversight, investor onboarding, and settlement, aligning the Company’s on-chain products with institutional compliance requirements. |
| ● | Strategic alignment: As part of the transaction, and as discussed above, the Company has invested $15 million (of cash and stock) to acquire a 15% interest in Satschel, with a right of first refusal to acquire additional equity in future funding rounds. In addition, we secured the exclusive right to list Ethereum L2 tokens on the Platform. |
Assignment and Settlement Agreement
On November 6, 2025, the Company and CannBioRex Pharma Limited, a company incorporated under the laws of England and Wales and an indirect wholly-owned subsidiary of the Company (“CannBioRex”), entered into an Assignment and Settlement Agreement (the “Oxford Assignment Agreement”) dated November 5, 2025, with the Chancellor, Masters and Scholars of the University of Oxford (“Oxford”) and Oxford University Innovation Limited, a wholly-owned subsidiary of Oxford University (“OUI”). Pursuant to the Agreement, we have agreed to (i) terminate a 2013 license agreement between OUI and the Company (then known as 180 Life Sciences Corp.), pursuant to which we were granted certain rights under OUI’s patent related to the treatment of Dupuytrens’s Disease (the “OUI Patent”) and the use of clinical data generated by Oxford in clinical trials; (ii) assign all of our intellectual property rights relating primarily to the treatment of Dupuytrens’s Disease, including a patent relating to the Dupuytren’s Contracture indication (the “Company IP”), to OUI; and (iii) terminate a series of research sponsorship, research support, and studentship agreements between Oxford, the Company, and CannBioRex (collectively, the “Research Agreements”).
The Oxford Assignment Agreement requires us to pay Oxford, within seven days after execution, an initial payment of $500,000 which has been paid, to be applied toward the repayment of $1,675,500 in unpaid research fees owed by CannBioRex to Oxford pursuant to the Research Agreements (the “Research Fees”). Pursuant to the Oxford Assignment Agreement, OUI has agreed to use its commercially reasonable best endeavors to promptly negotiate and finalize (and will not intentionally delay or interfere with) the sale of the OUI Patent and Company IP. If any party acquires ownership or exclusive rights in the Company IP within 36 months of the date of the Agreement, OUI will apply the amount received from such sale, first to the full repayment of the balance of the Research Fees to Oxford, and thereafter fifty percent of the remaining net revenues to the Company, up to a maximum net revenue share of $5 million.
The Oxford Assignment Agreement includes a mutual release and settlement of claims, customary representations of each of the parties, and mutual confidentiality provisions. In addition, we have agreed to indemnify OUI and Oxford against any third party claims against them by our shareholders or by Glenn Larsen (former chief executive officer of our subsidiary, 180 Therapeutics L.P.) arising from the Oxford Assignment Agreement, the termination of the License Agreement and Research Agreements, or the assignment of the Company IP to OUI.
Significant Financial Statement Components
General and Administrative
General and administrative expenses consist primarily of salaries and other staff-related costs, including stock-based compensation for shares of common stock issued and options granted to founders, directors, and personnel in executive, commercial, finance, accounting, legal, investor relations, facilities, business development, and human resources functions that include vesting conditions.
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Other significant general and administrative costs include costs relating to overhead costs, legal fees relating to corporate and patent matters, litigation, SEC filings, insurance, investor relations costs, fees for accounting and consulting services, stock-based compensation and other general and administrative costs. General and administrative costs are expensed as incurred, and we accrue amounts for services provided by third parties related to the above expenses by monitoring the status of services provided and receiving estimates from our service providers and adjusting our accruals as actual costs become known.
It is expected that the general and administrative expenses will increase over the next several years to support our continued research and development activities related to the iGaming business (as described above), the launch of commercial iGaming operations and the increased costs of operating as a public company. These increases are anticipated to include increased costs related to the hiring of additional personnel, developing commercial infrastructure, fees to outside consultants, lawyers and accountants, and increased costs associated with being a public company, as well as expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance and investor relations costs.
Other Income
Other income primarily represents fees earned for research and development work performed for other companies, some of which are related parties.
Interest Expense
Interest expense consists primarily of interest expense related to debt instruments.
Digital Asset Gains and Losses
Digital Asset Gains and losses represent unrealized and realized gains and losses from our digital asset holdings.
CONSOLIDATED RESULTS OF OPERATIONS
For the Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
| For the Three Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Revenue: | ||||||||
| Revenue | $ | 4,110,169 | $ | - | ||||
| Total Revenue | 4,110,169 | - | ||||||
| Operating Expenses: | ||||||||
| General and administrative | 224,604,532 | 596,172 | ||||||
| Total Operating Expenses | 224,604,532 | 596,172 | ||||||
| Loss From Operations | (220,494,363 | ) | (596,172 | ) | ||||
| Other (Expense) Income: | ||||||||
| Dividend income | 616,725 | - | ||||||
| Interest income | 327,211 | - | ||||||
| Other income | - | 76,639 | ||||||
| Interest expense | (319,909 | ) | (10,552 | ) | ||||
| Change in fair value of convertible debt | 3,724,344 | - | ||||||
| Change in fair value of available for sale securities | (74,788 | ) | - | |||||
| Digital asset gains and losses | 7,549,815 | - | ||||||
| Loss on settlement of liabilities | - | (2,304 | ) | |||||
| Total other income, net | 11,823,398 | 63,783 | ||||||
| Loss Before Income Taxes | (208,670,965 | ) | (532,389 | ) | ||||
| Income tax benefit | - | - | ||||||
| Net Loss From Continuing Operations | (208,670,965 | ) | (532,389 | ) | ||||
| Net Loss From Discontinued Operations | (8,071,091 | ) | (304,331 | ) | ||||
| Net Loss | $ | (216,742,056 | ) | $ | (836,720 | ) | ||
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During the three months ended September 30, 2025, the Company made a strategic shift in its operations to no longer pursue its pharmaceutical research operations or the Gaming Technology Platform. As such, these operations are presented as discontinued operations in the Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024.
General and Administrative
We incurred general and administrative expenses of $224,604,532 and $596,172 for the three months ended September 30, 2025 and 2024, respectively, representing an increase of $224,008,360 for the 2025 period, compared to the 2024 period. The increase in general and administrative expense was mainly due to an approximately $208,000,000 increase in stock compensation related to the issuance of options and warrants during the period. Additionally, the increase comprised of $9,000,000 due to adjustment in fair value for the Convertible Notes, $1,700,000 in bonus payment to prior management, $1,600,000 increase in director fees, a $900,000 increase in legal fees, a $900,000 increase in rent and lease expense, and a $596,000 increase in insurance expenses.
Other Income (Expense), Net
We incurred other income, net of $11,823,398 during the three months ended September 30, 2025, as compared to other income, net of $63,783 for the three months ended September 30, 2024, representing an increase in other income, net of $11,759,615. The increase is primarily attributable to a $7,549,815 change in value of digital assets, a $3,724,344 change in fair value of convertible debt, $616,725 in dividend income, and $327,211 in interest income which were offset by interest expense of $319,909 and change in available for sale securities of $74,788.
Net Loss
We had a net loss from continuing operations of $208,670,965 for the three months ended September 30, 2025, compared to a net loss of $532,389 for the three months ended September 30, 2024, representing an increase in net loss of $208,138,576, for the reasons discussed above.
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For the Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
| For the Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Revenue: | ||||||||
| Revenue | $ | 4,110,169 | $ | - | ||||
| Total Revenue | 4,110,169 | - | ||||||
| Operating Expenses: | ||||||||
| General and administrative | 227,954,479 | 3,471,965 | ||||||
| Total Operating Expenses | 227,954,479 | 3,471,965 | ||||||
| Loss From Operations | (223,844,310 | ) | (3,471,965 | ) | ||||
| Other (Expense) Income: | ||||||||
| Dividend income | 616,725 | - | ||||||
| Interest income | 340,085 | - | ||||||
| Other income | - | 1,789,443 | ||||||
| Interest expense | (319,909 | ) | (28,977 | ) | ||||
| Change in fair value of convertible debt | 3,724,344 | - | ||||||
| Change in fair value of available for sale securities | (74,788 | ) | - | |||||
| Digital asset gains and losses | 7,549,815 | - | ||||||
| Change in fair value of derivative liabilities | - | 58 | ||||||
| Gain on settlement of liabilities | - | 52,695 | ||||||
| Total other income, net | 11,836,272 | 1,813,219 | ||||||
| Income (Loss) Before Income Taxes | (212,008,038 | ) | (1,658,746 | ) | ||||
| Income tax benefit | - | - | ||||||
| Net Loss From Continuing Operations | (212,008,038 | ) | (1,658,746 | ) | ||||
| Net Loss From Discontinued Operations | (8,829,854 | ) | (235,937 | ) | ||||
| Net Loss | $ | (220,837,892 | ) | $ | (1,894,683 | ) | ||
During the three months ended September 30, 2025, the Company made a strategic shift in its operations to no longer pursue its pharmaceutical research operations or the Gaming Technology Platform. As such, these operations are presented as discontinued operations in the Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024, the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024.
General and Administrative
We incurred general and administrative expenses of $227,954,479 and $3,471,965 for the nine months ended September 30, 2025 and 2024, respectively, representing an increase of $224,482,514 for the 2025 period, compared to the 2024 period. The increase in general and administrative expense was mainly due to an approximately $209,000,000 increase in stock compensation related to the issuance of options and warrants during the period. Additionally, the increase included $9,000,000 due to the adjustment in fair value of our Convertible Notes, $1,700,000 in bonus payment to prior management, $1,800,000 of increase in director fees, $1,100,000 in legal fees, and a $900,000 increase in rent and lease expense.
Other Income (Expense), Net
We incurred other income, net of $11,836,272 during the nine months ended September 30, 2025, as compared to other income, net of $1,813,219 for the nine months ended September 30, 2024, representing an increase in other income, net of $10,023,053. The increase is primarily attributable to $7,549,815 change in value of digital assets, a $3,724,344 change in fair value of Convertible Notes, $616,725 in dividend income, and $340,085 in interest income which were offset by a decrease in other income of $1,789,443 related to proceeds received from AmTrust International Underwriters DAC (“AmTrust”), which was our premerger directors’ and officers’ insurance policy, in the prior year, interest expense of $319,909 and change in available for sale securities of $74,788.
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Net Loss From Continuing Operations
We had a net loss from continuing operations of $212,008,038 for the nine months ended September 30, 2025, compared to a net loss of $1,658,746 for the nine months ended September 30, 2024, representing an increase in net loss of $210,349,292, for the reasons discussed above.
Non-GAAP Financial Measures
Although we believe that net income or loss, as determined in accordance with U.S. GAAP, is the most appropriate earnings measure, we use EBITDA and Adjusted EBITDA as key profitability measures to assess the performance of our business. We believe these measures help illustrate underlying trends in our business and we use these measures to establish budgets and operational goals, and communicate internally and externally, in managing our business and evaluating its performance. We also believe these measures help investors compare our operating performance with its results in prior periods in a way that is consistent with how management evaluates such performance. EBITDA is a non-GAAP profitability measure that represents net income or loss for the period before the impact of the interest expense, income tax expense (benefit) and depreciation and amortization of property, plant and equipment and intangible assets. EBITDA eliminates potential differences in performance caused by variations in capital structures (affecting financing expenses), the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense).
Adjusted EBITDA is a non-GAAP profitability measure that represents EBITDA before certain items that are considered to hinder comparison of the performance of our businesses on a period-over-period basis or with other businesses. During the periods presented, we exclude from Adjusted EBITDA certain costs that are required to be expensed in accordance with GAAP, including non-cash stock-based compensation, business development and integration expenses, offering costs, non-cash adjustments to the fair value of earnout consideration, and non-cash adjustments to the fair value of outstanding warrants. Our management believes that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about certain material non-cash items and about unusual items that we do not expect to continue at the same level in the future.
Each of the profitability measures described below are not recognized under GAAP and do not purport to be an alternative to net income or loss determined in accordance with GAAP as a measure of our performance. Such measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for our results as reported under U.S. GAAP. EBITDA and Adjusted EBITDA exclude items that can have a significant effect on our profit or loss and should, therefore, be used only in conjunction with our GAAP profit or loss for the period. Our management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, these measures may not be comparable to other similarly titled measures of other companies.
EBITDA and Adjusted EBITDA are unaudited, and have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under U.S. GAAP. Some of these limitations are: EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future or contractual commitments; EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, capital expenditures or working capital needs; EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments; although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements. In addition, other companies in this industry may calculate EBITDA and Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure. The Company’s presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of each of these non-GAAP measures to the most comparable U.S. GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable U.S. GAAP financial measure. For more information on these non-GAAP financial measures, please see the below reconciliation of these non-GAAP financial measures to their GAAP counterparts.
The reconciliation of Net loss from continuing operations, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 is as follows:
| Net Loss From Continuing Operations | $ | (208,670,965 | ) | $ | (532,389 | ) | $ | (212,008,038 | ) | $ | (1,658,746 | ) | ||||
| Interest | 319,909 | 10,552 | 319,909 | 28,977 | ||||||||||||
| Taxes | - | - | - | - | ||||||||||||
| Depreciation and amortization | ||||||||||||||||
| EBITDA | (208,351,056 | ) | (521,837 | ) | (211,688,129 | ) | (1,629,769 | ) | ||||||||
| Stock-based compensation (1) | 208,241,459 | 16,456 | 208,922,667 | 274,826 | ||||||||||||
| Convertible debt offering costs (2) | 8,575,412 | - | 8,575,412 | - | ||||||||||||
| Adjusted EBITDA | $ | 8,465,815 | $ | (505,381 | ) | $ | 5,809,950 | $ | (1,354,943 | ) |
| (1) | Represents non-cash stock-based compensation expense associated with employee and non-employee equity awards, including Strategic Advisor Warrants and Additional Strategic Advisor Warrants, and employee stock options awarded in connection with closing the Private Placement, included in general and administrative expenses on the consolidation statements of operations and comprehensive income. | |
| (2) | Represents professional fees incurred in connection with the Convertible Notes which are included in general and administrative expenses on the consolidation statements of operations and comprehensive income. |
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Liquidity and Capital Resources
As of September 30, 2025 and December 31, 2024, we had cash, cash equivalents and restricted cash equivalents balances of $558,901,384 and $4,567,251, respectively, and a working capital of $506,159,940 and $1,636,486, respectively.
For the nine months ended September 30, 2025, cash used in operating activities from continuing operations totaled $18,286,323 compared to cash used in operating activities from continuing operations of $531,565 for the nine months ended September 30, 2024. Cash used in operating activities was $18,418,600 and cash used in operating activities was $546,177 for the nine months ended September 30, 2025 and 2024, respectively. Our cash used in operations for the nine months ended September 30, 2025 was primarily attributable to our net loss from continuing operations of $212,008,038, adjusted for non-cash expenses in the aggregate amount of $193,613,127 (mainly due to $208,922,667 of stock based compensation), as well as $108,588 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash provided by operations for the nine months ended September 30, 2024 was primarily attributable to our net loss from continuing operation of $1,658,746, adjusted for non-cash expenses in the aggregate amount of $222,073 as well as $905,108 of net cash used to fund changes in the levels of operating assets and liabilities.
For the nine months ended September 30, 2025, cash used in investing activities from continuing operations totaled $252,370,414 compared to cash used in investing activities from continuing operations of $0 for the nine months ended September 30, 2024. Cash used in investing activities related to the purchase of marketable securities of $8,890,596 and $243,479,818 for the purchase of cryptocurrency.
For the nine months ended September 30, 2025, cash provided by financing activities from continuing operations totaled $825,274,591 compared to cash used in financing activities from continuing operations of $996,005 for the nine months ended September 30, 2024. Cash used in financing activities from discontinued operations was $151,444, compared to cash used in financing activities of $13,973 from discontinued operations for the nine months ended September 30, 2024. Cash provided by financing activities was $825,123,147 and cash used in financing activities was $1,009,978 for the nine months ended September 30, 2025 and 2024, respectively. Cash provided by financing activities primarily related to cash proceeds from shares issued for cash and warrants, net of $286,843,926 (mainly due to the Private Placement), proceeds from convertible debt, net of $500,000,000 (in connection with the sale of the Convertible Notes), proceeds from collateralized loan of $50,000,000 and cash proceeds from the exercise of warrants of $5,605,706, which were offset by treasury stock purchases of $16,121,428 and repayment of loan payable – related party of $1,000,000 for the nine months ended September 30, 2025. Cash used in financing activities primarily related to the repayment of loan payable of $996,494 for the nine months ended September 30, 2024.
See also the Notes to Consolidated Financial Statements in “Part I – Item 1. Financial Statements”, for a more detailed discussion of our debt and obligations, including “Note 8 – Debt”.
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In August 2025, our Board of Directors implemented an Ethereum-focused treasury strategy, with ETH serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business. Our goal is to acquire and grow our overall ETH position and utilize professional treasury strategies to significantly increase our ETH holdings. We have not set a specific target for the maximum amount of ETH we seek to hold. Our treasury strategy focuses on increasing the amount of ETH through a combination of capital raising activities and treasury activities including staking, restaking, liquid staking and other DeFi activities. We expect that ETH will serve as our primary treasury reserve asset in the future. We aim to maximize ETH accumulation and value accretion, while maintaining robust controls and oversight over these digital assets. While our new strategy is expected to generate significant revenue and operating cash flow, there are no assurances that we will be successful with this strategy
We may also pursue additional offering transactions as needed to fund our operations and financing obligations. Future offering transactions may include common stock, warrant coverage, or other convertible securities, with such terms as approved by the Board of Directors of the Company, again, subject in all cases to applicable Nasdaq stockholder approval rules and guidance where applicable. Notwithstanding the above, as of the date of this Report, the Company has not agreed to any definitive funding terms or finalized any offering structures.
Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Recent Financing Transactions
Warrant Inducement Agreement and Related Transactions
On October 16, 2024, we entered into a warrant inducement agreement (the “Inducement Agreement”) with a holder (the “Holder”) of warrants to purchase up to 47,706 shares of common stock and (i) warrants to purchase up to 1,614 shares of common stock issued in July 2022; (ii) warrants to purchase up to 13,534 shares of common stock issued in December 2022; (iii) warrants to purchase up to 8,267 shares of common stock issued in April 2023; and (iv) warrants to purchase up to 24,292 shares of common stock issued in August 2023, each with an exercise price of $32.30 per share (collectively, the “Exercised Warrants”), pursuant to which the Holder agreed to exercise for cash the Exercised Warrants to purchase an aggregate of 95,007 shares of common stock at an exercise price of $34.80 per share ($2.50 greater than the $32.30 per share exercise price of such Exercised Warrants) during the period from the date of the Inducement Agreement until 1:15 p.m., Eastern Time, on October 16, 2024. On October 16 and 17, 2024, the Exercised Warrants were exercised in full for cash by the Holder and the Company received $3,306,240 before deducting financial advisory fees and other expenses payable by us.
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In consideration of the Holder’s agreement to exercise the Exercised Warrants in accordance with the Inducement Agreement, the Company agreed to issue new unregistered Warrants to Purchase Shares of Common Stock (the “New Warrants”) to purchase a number of shares of common stock equal to 200% of the number of shares of common stock issued upon exercise of the Exercised Warrants, i.e., warrants to purchase up to 190,014 shares of common stock (the “New Warrant Shares”). The New Warrants were immediately exercisable and had a term of exercise of five years.
The New Warrants had an exercise price of $15.00 per share. The exercise price and the number of shares of common stock issuable upon exercise of each New Warrant are subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, in certain circumstances, upon a fundamental transaction, a holder of New Warrants will be entitled to receive, upon exercise of the New Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the New Warrants immediately prior to the fundamental transaction.
The Company may not affect the exercise of New Warrants, and the applicable Holder will not be entitled to exercise any portion of any such New Warrant, which, upon giving effect to such exercise, would cause the aggregate number of shares of common stock beneficially owned by the holder of such New Warrant (together with its affiliates) to exceed 4.99% or 9.99%, as applicable, of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of such New Warrants.
The Company engaged A.G.P./Alliance Global Partners (“A.G.P.”) to provide exclusive financial services in connection with the transactions summarized above and, pursuant to a Financial Advisory Agreement between the Company and A.G.P., paid A.G.P. a financial advisory fee of $232,000, and an alternative transaction fee of $100,000. In addition, we reimbursed A.G.P. for its accountable legal expenses in connection with the exercise of the Exercised Warrants and the issuance of the Inducement Warrants of $65,000 and $10,000 non-accountable expenses. In addition, we paid A.G.P. $29,923, half of the financial advisory fees due in connection with a December 2023 warrant inducement. As of October 31, 2024, a total of $436,923 related to the aforementioned transaction has been paid to A.G.P and there is no balance outstanding.
December 2024 Offering
On December 27, 2024, we entered into a Securities Purchase Agreement with certain accredited investors, including the Holder (the “SPA”). Pursuant to the terms of the SPA, the Company agreed to sell, in a registered direct offering, an aggregate of 120,000 shares of the Company’s common stock (the “December 2024 Shares”) and, in a concurrent private placement, warrants to purchase up to 120,000 shares of common stock (the “December 2024 Warrants”). The combined purchase price per December 2024 Share and December 2024 Warrant was $24.10. The offerings closed on December 30, 2024.
The December 2024 Warrants were immediately exercisable on their grant date at an exercise price of $22.80 per share and expire five and a half years following the initial exercise date.
Pursuant to a placement agency agreement dated as of December 27, 2024, between the Company and Maxim Group LLC (the “Placement Agent”), the Company engaged the Placement Agent to act as the Company’s sole placement agent in connection with the registered direct offering. Pursuant to the placement agency agreement, the Company agreed to pay the Placement Agent a cash fee equal to seven percent (7.0%) of the gross proceeds received by the Company from the sale of the December 2024 Shares and December 2024 Warrants and to reimburse the Placement Agent for certain of its expenses in an aggregate amount of $50,000.
The net proceeds to the Company from the registered direct offering and concurrent private placement, after deducting the placement agent’s fees and expenses and the Company’s offering expenses were approximately $2.6 million. The Company intends to use the net proceeds from the transactions for working capital and general corporate purposes, which may include operationalizing and developing the Gaming Technology Platform and capital expenditures.
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July 2025 Securities Purchase Agreement
As discussed in greater detail above under “Recent Events—Securities Purchase Agreement”, on August 4, 2025, we sold the Purchasers (i) 14,393,417 shares of common stock of the Company at an offering price of $26.50 per share, and (ii) $26.499 per pre-funded warrant to purchase up to an aggregate of 1,749,585 shares of common stock in the Private Placement.
After paying the cash expenses of Clear Street and Maxim in connection with the Private Placement, we raised net proceeds of $245,035,447 in cash and $171,287,512 in contributed ETH, which we used to fund our digital asset purchases.
Amendment to Securities Purchase Agreements and Warrants
On July 28, 2025, the Company entered into an amendment to (i) the Securities Purchase Agreement, dated February 19, 2021, by and among the Company and the investors party thereto and (ii) the Securities Purchase Agreement, dated August 19, 2021, by and among the Company and the investors party thereto, by which the investors purchased at least 50.1% in interest of the shares of common stock based on the subscription amounts thereto, to remove a prohibition on variable rate transactions and reduce the exercise price of warrants to $26.50.
Convertible Note Sales
As discussed in greater detail above under “Recent Events —Initial Senior Convertible Note Sales and “—New Senior Convertible Note Sales” on August 8, 2025 and September 23, 2025, we sold $156.25 million and $360 million of Convertible Notes.
ATM Sales Agreement
As discussed in greater detail above under “Recent Events—ATM Sales Agreement” and “—Amended and Restated ATM Sales Agreement”, on August 13, 2025 we entered into a Sales Agreement with Clear Street, which was amended and restated on August 22, 2025.
During the three and nine months ended September 30, 2025, we sold an aggregate of 739,050 and 739,050 shares of our common stock under the Sales Agreement for gross proceeds of approximately $40,990,338 and $40,990,338, after deducting commissions. Of this amount, $0 is expected to be received in October 2025.
Since September 30, 2025, we have sold an aggregate of 410,403 shares of our common stock under the Sales Agreement for net proceeds of approximately $6,943,380, after deducting commissions.
Transaction Agreement
As discussed in greater detail above under “Recent Events—Transaction Agreement”, on September 8, 2025, we entered into the Transaction Agreement and borrowed $50 million from the Counterparty.
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Critical Accounting Estimates
The Company’s condensed consolidated financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of its assets, liabilities, revenue and expenses. The Company has identified certain estimates as critical to its business operations and the understanding of its past or present results of operations related to intangible assets. These estimates are considered critical because they had a material impact, or they have the potential to have a material impact, on the Company’s condensed consolidated financial statements and because they require management to make significant judgments, assumptions or estimates. The Company believes that the estimates, judgments and assumptions made when accounting for the items described below were reasonable, based on information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material.
Digital Assets
The Company’s digital assets include Ether, the native cryptocurrency of the Ethereum blockchain (“ETH”), liquid staking tokens(“LST”), and liquid staking incentive tokens.
Crypto assets within the scope of ASC 350-60 Intangibles—Goodwill and Other—Crypto Assets(“ASC 350-60):
ETH and liquid staking incentive tokens have been determined to fall within the scope of ASC 350-60. The company reflects crypto assets held at fair value on the consolidated balance sheets within the Digital Assets line item. Changes in the fair value of crypto assets are recognized in income, reflected within the Digital asset gains and losses within the consolidated statement of operations.
In determining the fair value of digital assets in accordance with ASC 820, Fair Value Measurement (“ASC 820”). The Company utilizes Coinbase as the principal market. The Company uses a first-in, first-out methodology to assign costs to digital assets.
Non-monetary receivable with an embedded derivative within the scope of ASC 310, Receivables (“ASC 310”) and ASC 815-15, Derivatives and Hedging – Embedded Derivatives (“815-15”):
The Company’s LST, comprised of weETH and pufETH, has been determined to fall within the scope of ASC 310 and ASC 815-15 and is accounted for as a non-monetary receivable with an embedded derivative. The host contract represents the holder’s right to receive ETH denominated in USD and is carried at cost.
The embedded derivative component is measured at fair value at each reporting date, using observable prices in the principal market in accordance with ASC 815-15 and ASC 820, Fair Value Measurement (“ASC 820”). Where quoted prices are directly available in active markets, the embedded derivatives are classified as Level 1 within the fair value hierarchy; if observable market prices are not available, management utilizes other relevant inputs and valuation techniques, which may result in Level 2 or Level 3 classification.
Upon redemption of liquid staking tokens for ETH, the Company derecognizes both the receivable and the embedded derivative, recognizing ETH at fair value. Any difference between the carrying amount and the fair value of ETH received is recognized as a gain or loss, which amounted to $24,199,453 for the period.
Management has exercised judgment in determining the principal market, fair value hierarchy, and bifurcation of embedded derivatives. There is diversity in industry practice regarding the measurement and recognition of liquid staking tokens and related rewards. The Company continually evaluates the principal market and the reliability of inputs to ensure that fair value measurements reflect current market conditions.
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ETH Staking
Beginning in August 2025, the Company used the proceeds from its capital raising activities to acquire and deploy ETH in staking activities, which can include native staking, liquid staking and restaking. The Company has entered into separate contractual agreements with various third-party entities to facilitate its ETH staking activities. The Company commenced both native staking in August of 2025 and commenced liquid staking in September 2025. The Company intends for staking to become a primary yield generation strategy of the Company within the current fiscal year.
Native Staking
The Company utilized one third-party asset manager to manage and stake ETH on its behalf as of September 30, 2025. Under these arrangements, the Company’s ETH is held by a qualified custodian and staked in the Ethereum protocol through a third-party validator operator (e.g., Coinbase). The validator operator manages the staking process and delegates the Company’s ETH to network validators. When selected by the Ethereum network, these validators earn staking rewards and transaction fees proportional to the amount of stake delegated.
ETH used in native staking is retained on the Company’s balance sheet as a crypto asset measured at fair value in accordance with ASC 350-60. The Company does not derecognize ETH when participating in native staking because it retains the ability to direct the use of the asset and obtain substantially all benefits.
The validator operator (e.g., Coinbase) is considered the customer, as it receives the Company’s staking capacity (the performance obligation) and, in exchange, provides staking rewards. The contract duration for native staking is typically determined by the daily reward cycle, consistent with the period in which enforceable rights and obligations exist under the Company’s agreements with validator operators. The Company has determined that a new contract is effectively renewed each day, such that contract inception changes daily. Revenue from native staking is recognized over time because the customer simultaneously receives and consumes the benefit of the Company’s performance throughout the daily reward cycle.
Revenue from native staking is recognized at the end of each daily period, when the Company’s right to staking rewards becomes determinable (i.e., when the constraint is lifted). The amount of revenue recognized is measured at the fair value of rewards at contract inception for that day, net of validator commissions, in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and ASC 820. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception. Subsequent changes in the fair value of ETH after initial recognition are recorded as unrealized gains or losses.
Because the Company is not the principal to the block validation service, but rather provides staking capacity to third parties, it does not control the full output of the reward-generating activity and instead receives net staking rewards after validator commissions are deducted. Staking revenue is presented on a net basis, reflecting only the portion of protocol rewards to which the Company is entitled. Asset manager fees are presented as separate operating expenses.
Liquid Staking
The Company participates in liquid staking arrangements, whereby ETH is deposited into third-party protocols (such as ether.fi or Puffer) in exchange for liquid staking tokens (e.g., weETH, pufETH). These tokens represent the right to redeem underlying ETH and accrued rewards, and may be transferred, traded, or used in other decentralized finance (DeFi) transactions, providing ongoing liquidity and access to additional yield opportunities. In certain arrangements, liquid staking tokens may also be restaked into additional protocols to earn incremental rewards.
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Upon deposit, the Company derecognizes the ETH and recognizes a non-financial receivable with an embedded derivative, reflecting the right to receive ETH and protocol rewards. The host contract is measured at cost (the value of ETH deposited), while the embedded derivative is bifurcated and measured at fair value through earnings, reflecting exposure to ETH price and protocol yield variability, in accordance with ASC 310 and ASC 815-15. Subsequent changes in the fair value of liquid staking tokens and embedded derivatives after initial recognition are not included in revenue but are recognized separately in earnings as unrealized gains or losses. Gains or losses realized upon redemption or sale of liquid staking tokens are recognized in accordance with ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”).
The protocol or platform (e.g., ether.fi or Puffer) to which the Company delegates its ETH is considered the customer, as it receives the Company’s staking capacity (the performance obligation) and, in exchange, provides staking rewards and incentive tokens (based on hitting certain ETH deposit thresholds). The contract duration for liquid staking is based on the ability of either party to terminate with 30 days’ notice; for accounting purposes, a new contract is considered to begin each day, reflecting the daily renewal of enforceable rights and obligations (i.e., a new 30 day contract is renewed on a daily basis). Revenue from liquid staking is recognized over time because the customer simultaneously receives and consumes the benefit of the Company’s performance throughout the duration of the contract.
Revenue from liquid staking is recognized at the end of each daily period, when the Company’s right to staking rewards and incentive tokens (e.g., PUFFER, ETHFI) becomes determinable (i.e., when the constraint is lifted). The amount of revenue recognized is measured at the fair value of rewards and incentive tokens at contract inception for that day, net of validator commissions, in accordance with ASC 606 and ASC 820. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception. Fair value for liquid staking tokens is determined based on the underlying ETH and accrued rewards to which the Company is entitled, rather than the quoted token price, because the redemption ratio between ETH and liquid staking tokens (e.g., weETH, pufETH) fluctuates over time as rewards accrue and protocol fees apply.
Because the Company is not the principal to the block validation service, but rather provides staking capacity to third parties, it does not control the full output of the reward-generating activity and instead receives net staking rewards after validator commissions are deducted. Asset manager or protocol fees are presented as separate operating expenses.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606.
To determine revenue recognition for contracts with customers, the Company performs the following five steps:
| 1. | identify the contract with the customer, |
| 2. | identify the performance obligations in the contract, |
| 3. | determine the transaction price, including variable consideration to the extent it is probable a significant future reversal will not occur, |
| 4. | allocate the transaction price to the respective performance obligations in the contract, and |
| 5. | recognize revenue when (or as) the Company satisfies the performance obligation. |
The Company recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange.
Native Staking Revenue
The validator operator (e.g., Coinbase) is considered the customer, as it receives the Company’s staking capacity (the performance obligation). The Company acts as an agent in native staking transactions, delegating ETH to third-party validator operators who perform the technical validation responsibilities.
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The contract duration for native staking is defined by the daily reward cycle under the Company’s agreements. Native staking rewards are recognized as revenue over time and at the end of each contract period (typically daily) when the Company’s share of rewards is determinable. The fair value of staking rewards, which are received as noncash consideration, is measured using quoted prices from the principal market at contract inception of each daily period, in accordance with ASC 606 and ASC 820. Subsequent changes in the fair value of ETH after initial recognition are recorded as unrealized gains or losses. The amount of revenue recognized is presented net of validator or other protocol fees.
Liquid Staking Revenue
The protocol or platform (e.g., ether.fi or Puffer) is considered the customer, as it receives the Company’s staking capacity (the performance obligation). The Company acts as an agent in liquid staking transactions, delegating ETH to third-party protocols or platforms who perform the technical validation responsibilities.
The contract duration for liquid staking is based on the ability of either party to terminate the contract with 30 days’ notice without cause. The Company has determined that a new 30-day contract is effectively renewed each day, such that contract inception changes daily. Revenue from staking rewards and incentive tokens is recognized over time and at the end of each day when the Company’s proportional share of rewards is determinable, measured at fair value at contract inception for that day, net of validator commissions. Fair value is based on the underlying ETH and accrued rewards, not the market price of the liquid staking tokens. The ratio between ETH and liquid staking tokens changes over time as rewards accrue and protocol economics adjust; this variability does not affect the timing of revenue recognition but is considered in determining fair value at contract inception. Rewards represent noncash consideration and are measured using quoted prices in the principal market at contract inception.
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed with the SEC pursuant to the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) (principal executive officer) and Chief Accounting Officer (CAO) (principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosures.
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 the period covered by this Report (September 30, 2025). Based on their evaluation, our principal executive officer and principal financial and accounting officer concluded that, as of September 30, 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 regarding required disclosures as of September 30, 2025.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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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.
Remediation Plan
Management continues to take steps to develop and enhance its internal controls over financial reporting, and has implemented the following controls to remediate the above material weakness:
| ● | Implement an added layer of technical review by an internal financial reporting director for one time significant entries to ensure appropriate classification is assessed. |
Management will consider the material weakness to be fully remediated once the controls have been operating effectively for sufficient contiguous reporting periods, and after Management has validated the effective operation of the controls through testing.
Inherent Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be a party to litigation that arises in the ordinary course of our business; however, we are not currently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us or contemplated to be brought against us.
Prior litigation and other legal proceedings which have now been settled are described in, and incorporated by reference in, this “Item 1. Legal Proceedings” of this Form 10-Q from, “Part I – Item 1. Financial Statements” in the Notes to Condensed Consolidated Financial Statements in “Note 12 – Commitments and Contingences”, under the heading Legal Matters.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2024, filed with the Commission on March 31, 2025 (the “Form 10-K”), under the heading “Risk Factors”, except as discussed below, and investors should review the risks provided in the Form 10-K, and below, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K, under “Risk Factors” and below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial conditions and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.
Risks Relating to Our Transaction Agreement and Convertible Notes
The Transaction Agreement is collateralized by a significant amount of our ETH.
While the Transaction Agreement provides for an aggregate amount of up to $80 million, it is collateralized by approximately $125 million of ETH. Upon an event of default under the Transaction Agreement, the Counterparty may enforce its security interest over such ETH and take ownership thereof in an amount sufficient to repay all obligations under the Transaction Agreement. If that were to occur, any investment in the Company (including, but not limited to, any investment in our common stock) could lose value or become worthless.
Our stockholders may experience significant dilution as a result of conversion of our Convertible Notes.
As of the date of this Report we have outstanding Convertible Notes in the principal amount of approximately $516 million. The Convertible Notes currently have a Conversion Price of $30.10 per share of common stock. The Convertible Notes provide that, if at any time and from time to time on or after the issuance date thereof, there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Company’s common stock, other than the 1-for-10 reverse stock split effective October 20, 2025 and the Event Market Price is less than the Conversion Price then in effect (after giving effect to certain adjustments), then on the 16th Trading Day (as defined in Convertible Notes) immediately following such Stock Combination Event Date, the Conversion Price then in effect on such sixteenth (16th) Trading Day (after giving effect to certain adjustments) shall be reduced (but in no event increased) to the Event Market Price. Event Market Price means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the volume weighted average prices (VWAP) of the Company’s common stock for each of the five Trading Days with the lowest VWAP of the Company’s common stock during the 15 consecutive Trading Day period ending and including the Trading Day immediately preceding the 16th Trading Day after such Stock Combination Event Date, divided by (y) five.
Additionally, if the Company issues or sells shares of common stock at a price lower than the then-current conversion price of the Convertible Notes, subject to certain excepted issuances, the conversion price of the Convertible Notes will be adjusted downward to match the price of such newly issued shares. Finally, if the Company issues or enters into an agreement to issue common stock, options, or convertible securities with a price that varies or may vary with the market price of the common stock (excluding certain at-the-market offerings and customary anti-dilution adjustments), subject to certain customary exceptions, the holders of the Convertible Notes have the right, but not the obligation, to elect to use such “Variable Price” for purposes of converting the Convertible Notes. The holder may make this election on a per-conversion basis and is not required to rely on the Variable Price for any future conversions.
Our stockholders may experience significant dilution as a result of the conversion of the Convertible Notes.
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The Convertible Notes contain covenants that limit our flexibility.
The Convertible Notes rank senior to all other indebtedness and are secured by a first priority security interest, and contain certain participation rights and covenants that impose certain restrictions on us, including covenants that limit our ability to issue additional securities that would dilute or conflict with the Convertible Notes during specified periods. These restrictions could limit our ability to raise additional capital or pursue strategic opportunities, potentially impacting our operating and financial flexibility. These restrictions may limit our ability to obtain additional financing on favorable terms, which could adversely affect our operating and financial flexibility.
The Convertible Notes are secured by a significant portion of our assets.
The Convertible Notes are secured by $80.8 million of Ether (ETH) and approximately $500 million in cash. As a result of the above, the holders of the Convertible Notes, in the event of the occurrence of a default under the Convertible Notes, may enforce their security interests over our assets which secure such obligations, may take control of our assets and operations, and/or force us to curtail or abandon certain of our current business plans and operations. If that were to happen, any investment in the Company (including, but not limited to, any investment in our common stock) could lose value or become worthless.
The Investor may require we repay the Convertible Notes after May 8, 2026.
At any time after May 8, 2026, the Investor shall have the right to require that the Company redeem all or any part of the outstanding Convertible Notes. Additionally, if at any time (i) the loan to value ratio of the Convertible Notes is greater than 85%, or (ii) upon the occurrence of any Trigger Event (as defined in the Convertible Notes), the Investor has the right to require that the Company redeem all or any part of the outstanding Convertible Notes in cash at a price equal to 100% of the amount of such Convertible Note being redeemed. We may not have available cash to pay the redemption price of the Convertible Notes, may be forced to borrow additional funds to repay such redemption price, which may not be available on favorable terms, if at all, or may be forced to sell equity to pay such redemption price, which sales may cause significant dilution to existing stockholders. In the event we are unable to pay the redemption price of such Convertible Notes, if called for redemption, we could face penalties and such requirement to redeem such convertible notes or our failure to redeem such convertible notes, could have a material adverse effect on our operations and/or cash flow, and cause the value of our securities to decline in value or become worthless. In addition, the Convertible Notes are secured by $656.25 million in cash and $94.5 million of ETH and our failure to redeem the Convertible Notes could enable the Investor to take ownership of such cash and ETH, which could in turn have a material adverse effect on the Company and cause the value of our securities to decline in value or become worthless.
We will need to raise additional funding in the future to repay the Convertible Notes and amounts owed under the Transaction Agreement.
As of the date of this Report, we owe approximately $50 million under the Transaction Agreement and $516 million in Convertible Notes. We will need to raise additional funding to repay those amounts when due, December 8, 2025 and September 23, 2028, respectively. Since our inception, we have funded our operations mainly with the proceeds from equity and debt financing. We have experienced liquidity issues due to, among other reasons, our limited ability to raise adequate capital on acceptable terms. We have historically relied upon the sale of equity and debt funding that is convertible into shares of our common stock to fund our operations and have devoted significant efforts to reduce that exposure.
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We expect that, wherever possible, the 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, preferred stock or warrants to purchase shares of our common stock. The 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 transactions which 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, preferred stock or warrants to purchase such shares of common stock. In addition, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market in the future. These actions will result in dilution of the ownership interests of existing stockholders, 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 us, because the shares may be issued to parties or entities committed to supporting existing management.
Such potential dilution may be exacerbated by increases in our authorized shares of common stock and/or decreases in our outstanding shares of common stock.
Risks Related to our Ethereum Treasury Strategy and ETH Holdings
ETH is a highly volatile asset, and fluctuations in the price of ETH are likely to influence our financial results and the market price of our ETH.
Ethereum is a highly volatile asset, and fluctuations in the price of ETH are likely to influence our financial results and the market price of our common stock. ETH is the native digital asset and unit of account on the Ethereum network. The market value of ETH is not related to any specific company, government or asset. The valuation of ETH depends on a number of factors, including future expectations for the value of the Ethereum network, the number of ETH transactions, and the overall usage of ETH as an asset. This means that a significant amount of the value of ETH is speculative, which could lead to increased volatility. Our financial results and the market price of our common stock would be adversely affected, and our business and financial condition would be negatively impacted if the price of ETH decreased substantially (as it has in the past, such as during 2022), including as a result of:
| ● | decreased user and investor confidence in ETH, including due to the various factors described in this risk factor section; |
| ● | investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, miners and investors; (ii) actual or expected significant dispositions of ETH by large holders, including the expected liquidation of digital assets associated with entities that have filed for bankruptcy protection and the transfer and sale of ETH associated with significant hacks, seizures, or forfeitures; and (iii) actual or perceived manipulation of the spot or derivative markets for ETH or spot ETH exchange-traded products, or ETPs; |
| ● | negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, ETH or the broader digital assets industry, for example, (i) public perception that ETH can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine, or to fund criminal or terrorist activities, such as the purported use of digital assets by Hamas to fund its terrorist attack against Israel in October 2023; (ii) expected or pending civil, criminal, regulatory enforcement or other high profile actions against major participants in the Ethereum ecosystem; (iii) additional filings for bankruptcy protection or bankruptcy proceedings of major digital asset industry participants, such as the bankruptcy proceeding of FTX Trading and its affiliates; (iv) the actual or perceived environmental impact of ETH and related activities, including environmental concerns raised by private individuals, governmental and non-governmental organizations, and other actors related to the energy resources consumed in the ETH related processes; and (v) changes in government regulations; |
| ● | changes in consumer preferences and the perceived value or prospects of ETH; |
| ● | competition from other digital assets (including Bitcoin) that are more well known, exhibit better speed, security, scalability, or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets; |
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| ● | a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for ETH purchase and sale transactions, such as the crash of the stablecoin Terra USD in 2022, to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of ETH or adversely affect investor confidence in digital assets generally; |
| ● | developments relating to the ETH protocol that may impact (i) its security, speed, scalability, usability, or value, (ii) failures to upgrade the protocol to adapt to security, technological, legal or other challenges, and (iii) changes to the ETH protocol that introduce software bugs, security risks or other elements that adversely affect ETH; |
| ● | disruptions, failures, unavailability, or interruptions in service of trading venues for ETH, such as, for example, the announcement by the digital asset exchange FTX Trading that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the recent SEC enforcement action brought against Binance Holdings Ltd., which initially sought to freeze all of its assets during the pendency of the enforcement action; |
| ● | the filing for bankruptcy protection by, liquidation of, or market concerns about the financial viability of digital asset custodians, trading venues, lending platforms, investment funds, or other digital asset industry participants, such as the filing for bankruptcy protection by digital asset trading venues FTX Trading and BlockFi and digital asset lending platforms Celsius Network and Voyager Digital Holdings in 2022, the ordered liquidation of the digital asset investment fund Three Arrows Capital in 2022, the announced liquidation of Silvergate Bank in 2023, the government-mandated closure and sale of Signature Bank in 2023, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by the Nevada Department of Business and Industry in 2023, and the exit of Binance Holdings Ltd. from the U.S. market as part of its settlement with the Department of Justice and other federal regulatory agencies; |
| ● | regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of ETH, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry; |
| ● | reductions in staking rewards of ETH, or increases in the costs associated with ETH staking, including increases in electricity costs and hardware and software used in staking, which could further increase the costs associated with ETH staking, any of which may cause a decline in support for the Ethereum protocol; |
| ● | ETH staking exposes us to slashing risks, defined as a punitive mechanism built into the Ethereum network, designed to penalize validators and their delegators for misbehavior or failing to follow network rules, which could result in the loss of our staked ETH; |
| ● | transaction congestion and fees associated with processing transactions of ETH or lengthened periods to exit ETH staking or other delays to unstaking or withdrawing ETH from staking protocols; |
| ● | macroeconomic changes, such as changes in the level of interest rates and inflation, fiscal and monetary policies of governments, trade restrictions, and fiat currency devaluations; |
| ● | developments in mathematics or technology, including in digital computing, algebraic geometry and quantum computing, that could result in the cryptography used by the Ethereum blockchain becoming insecure, ineffective or obsolete; and |
| ● | changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, the adverse impacts attributable to the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict, and the broadening of the Israel-Hamas conflict to other countries in the Middle East. |
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Our ETH strategy has not been tested over an extended period of time or under different market conditions.
ETH has a relatively limited history of existence and operations compared to traditional commodities. There is a limited established performance record for the price of ETH and, in turn, a limited basis for evaluating an investment in ETH. Although past performance is not necessarily indicative of future results, if ETH had a more established history, such history might (or might not) provide information on which to evaluate our ETH strategy.
We are continually examining the risks and rewards of our strategy to acquire and hold ETH and to stake such ETH to generate staking rewards. This strategy has not been tested over an extended period of time or under different market conditions. For example, although we believe ETH has the potential to serve as a hedge against inflation in the long term, the short-term price of ETH has declined in recent periods during which the inflation rate increased. If ETH prices were to decrease or our ETH strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our listed securities would be materially adversely impacted.
Our ability to achieve the growth objectives of our ETH strategy depends in significant part on our ability to continue raising capital to purchase ETH. If we are unable to obtain equity, equity-linked or debt financing on favorable terms or at all, we may not be able to successfully execute on our ETH strategy.
Staking introduces a risk of loss of ETH, which could adversely affect the value of our common stock.
We stake a portion of our ETH through one or more trusted staking providers. Staking introduces a risk of loss of ETH. None of our ETH, including staked ETH, are subject to the protections enjoyed by depositors or customers of institutions with Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC) membership. The Ethereum network imposes three types of sanctions for validator misbehavior or inactivity, which would result in a portion of staked ETH being destroyed or “burned”: penalties, slashing and inactivity leaks.
A validator may face penalties if it fails to take certain actions, such as providing a timely attestation to a block proposed by another validator. Under this scenario, a validator’s staked ETH could be burned in an amount equal to the reward to which it would have been entitled for performing the actions.
A more severe sanction (i.e., “slashing”) is imposed if a validator commits malicious acts related to the proposal or attestation of blocks with invalid transactions. Slashing can result in the validator having a portion of its staked ETH immediately burned. After this initial slashing, the validator is queued for forceful removal from the Ethereum network’s validator “pool,” and more of the validator’s stake is burned over a period regardless of whether the validator makes any further slashable errors, at which point the validator is automatically removed from the validator pool.
Staked ETH may also be burned through a process known as an “inactivity leak,” which is triggered if the Ethereum protocol has gone too long without finalizing a new block. For a new block to be successfully added to the blockchain, validators that account for at least two-thirds of all staked ETH must agree on the validity of a proposed block. This means that if validators representing more than one-third of the total staked ETH are offline, no new blocks can be finalized. To prevent this, an inactivity leak causes the ETH staked by the inactive validators to gradually “bleed away” until these inactive validators represent less than one-third of the total stake, thereby allowing the remaining active validators to finalize proposed blocks. This provides a further incentive for validators to remain online and continue performing validation activities.
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There can be no guarantee that penalties, slashing or inactivity leaks and resulting losses will not occur as a result of activities that employ any portion of our assets in actions where any portion of our ETH becomes subject to the Ethereum proof-of-stake validation or is used to earn additional ETH or generate income or other earnings (“Staking Activities”). Furthermore, a staking provider’s liability to us is limited, and a staking provider may lack the assets or insurance in order to support the recovery of any losses incurred. There can be no guarantee that we would recover any of our staked assets, or the value thereof, if it is subject to sanctions imposed by the Ethereum network.
Staked ETH tokens will be inaccessible for a variable period of time, determined by a range of factors, which could result in certain liquidity risk to us.
Under current Ethereum network protocols, staked ETH tokens are permitted to be un-staked by the holder of such ETH tokens. However, as part of the “activating” and “exiting” processes of staking, staked ETH tokens will be inaccessible for a variable period of time determined by a range of factors, including agreements we may enter into or network congestion, resulting in certain liquidity risks to us.
“Activation” is the funding of a validator to be included in the active set, thereby allowing the validator to participate in the Ethereum network’s proof-of-stake consensus protocol. “Exit” is the request to exit from the active set and no longer participate in the Ethereum Network’s proof-of-stake consensus protocol. As part of these “activating” and “exiting” processes of staking on the Ethereum network, any staked ETH will be inaccessible for a period of time. The duration of activating and exiting periods are dependent on a range of factors, including agreements we may enter into or network conditions. However, depending on demand, un-staking can take between hours, days or weeks to complete. This can result in certain liquidity risk to us.
We are dependent on third parties to effectively execute our staking activities.
Staking may be carried out by our custodians, their affiliates, or third-party staking providers, the amount of staking rewards that our staking activity will generate will be dependent on the performance of the staking provider, including the adequacy and reliability of the hardware and software utilized by the staking provider. If the staking providers experience service outages or otherwise are unable to optimally execute the staking of our ETH, our staking rewards may be adversely affected.
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 lose substantial value (which would obviously hurt Lido economically), it nevertheless poses risks associated with such a concentration of control (including centralization concerns). If Lido, or a bad actor with a similar sized stake, were to attempt to interfere with transaction finality or block confirmations, it could negatively affect the use and adoption of the Ethereum network, the value of ETH, and thus the value of our ETH treasury.
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ETH and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty.
ETH and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of ETH or the ability of individuals or institutions such as us to own or transfer ETH.
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 ETH or the ability of individuals or institutions such as us to own or transfer ETH.
It is not possible to predict whether, or when, new laws will be enacted that change the legal framework governing digital assets or provide additional authorities to the SEC or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and ETH specifically. The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of ETH, as well as our ability to hold or transact in ETH, and in turn adversely affect listed securities.
Moreover, the risks of engaging in an ETH 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 ETH in particular, may also impact the price of ETH and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of ETH may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to ETH, institutional demand for ETH as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for ETH as a store of value or means of payment, and the availability and popularity of alternatives to ETH. Even if growth in ETH adoption occurs in the near or medium-term, there is no assurance that ETH usage will continue to grow over the long-term.
Because ETH has no physical existence beyond the record of transactions on the Ethereum blockchain, a variety of technical factors related to the Ethereum blockchain could also impact the price of ETH. For example, malicious attacks, inadequate staking fees to incentivize validating of ETH transactions, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Ethereum blockchain and negatively affect the price of ETH. The liquidity of ETH may also be reduced and damage to the public perception of ETH may occur if financial institutions were to deny or limit banking services to businesses that hold ETH, provide ETH-related services or accept ETH as payment, which could also decrease the price of ETH.
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The market price of ETH is highly volatile and may be adversely affected by factors beyond our control, including competition from other crypto assets and relative-adoption trends, any of which could negatively affect the value of our ETH holdings and our common stock price.
The price of ETH depends on supply-and-demand dynamics in global, largely unregulated or differently regulated markets and is subject to extreme volatility. ETH competes for users, developers, capital and transaction “blockspace” with other crypto assets and networks (including Bitcoin and alternative Layer-1 and Layer-2 protocols), with stablecoins and their underlying settlement rails, and with non-blockchain payment and computing systems. If users, developers, liquidity providers, applications, or institutions favor other networks or assets—whether due to perceived performance, scalability, fees, user experience, security, programmability, available applications, token incentives, or business/regulatory considerations—the relative demand for ETH could decline. Adoption metrics relevant to ETH’s value (e.g., active addresses, developer activity, validator participation and staking yields, Layer-2 usage, stablecoin and DeFi activity on Ethereum, and enterprise or government use) may increase or decrease over time and may do so at different rates than comparable metrics on other networks. ETH’s price may also be adversely affected by protocol-level changes (including Ethereum Improvement Proposals that alter issuance, burn, fees or economics), hard forks or chain splits, software bugs or vulnerabilities, validator/slashing events, material disruptions or exploits in applications or Layer-2 systems that depend on Ethereum, changes in MEV (maximal extractable value) dynamics, changes in transaction fees or demand for blockspace, actions by large holders or market makers, market manipulation, exchange or stablecoin failures, changes in interest rates or macroeconomic conditions, regulatory or enforcement developments (including with respect to staking, custody, market structure or the legal classification of ETH), tax treatment, and changes in access to banking or payment services for crypto market participants. Any of these factors—especially if they lead to faster growth or improved economics for competing crypto assets relative to ETH—could cause the price of ETH to decline or underperform other crypto assets. A decline in the price of ETH, or underperformance relative to other assets, would reduce the value of our ETH holdings and could adversely affect the market price of our common stock.
The further development and acceptance of cryptocurrency networks, including the ETH network, which represent a relatively new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of cryptocurrency networks, including the ETH network, may adversely affect an investment in the Company.
Cryptocurrency such as ETH may be used, among other things, to buy and sell goods and services or to transfer and store value by users. The cryptocurrency networks are a new and rapidly evolving industry of which the ETH network is a prominent, but not unique, part. The growth of the cryptocurrency industry in general, and the ETH network in particular, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency industry, as well as the ETH network, include:
| ● | continued worldwide growth in the adoption and use of ETH and other cryptocurrencies, including those competitive with ETH; |
| ● | government and quasi-government regulation of ETH and other cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the ETH network or similar cryptocurrency systems; |
| ● | the maintenance and development of the open-source software protocol of the ETH network; |
| ● | changes in consumer demographics and public tastes and preferences; | |
| ● | the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; and; |
| ● | general economic conditions and the regulatory environment relating to cryptocurrencies and cryptocurrency service providers. |
A decline in the popularity or acceptance of the ETH network and other cryptocurrency networks may harm the price of our common stock. There is no assurance that the ETH network, or the service providers necessary to accommodate it, will continue in existence or grow. Furthermore, there is no assurance that the availability of and access to cryptocurrency service providers will not be negatively affected by government regulation or supply and demand of ETH.
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Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.
Cryptocurrency markets, including the spot market for ETH, are growing rapidly. Digital asset trading venues are relatively new and largely unregulated or may not be complying with existing regulations. These markets are local, national and international and include a broadening range of cryptocurrencies and participants. Significant trading may occur on systems and platforms with minimum predictability. Spot markets may impose daily, weekly, monthly or customer-specific transactions or withdrawal limits or suspend withdrawals entirely, rendering the exchange of ETH for fiat currency difficult or impossible. Participation in spot markets requires users to take on credit risk by transferring ETH or another cryptocurrency from a personal account to a third-party’s account.
Digital asset trading platforms do not appear to be subject to, or may not comply with, regulation in a manner similar to other regulated trading platforms, such as national securities exchanges or designated contract markets. Many digital asset trading platforms are unlicensed, are unregulated, operate without extensive supervision by governmental authorities, and do not provide the public with significant information regarding their ownership structure, management team, corporate practices, cybersecurity, and regulatory compliance. In particular, those located outside the United States may be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Digital asset trading platforms may be out of compliance with existing regulations.
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.
Our common stock may trade at a substantial premium or discount to the value of the ETH we hold, and our stock price may be more volatile than the price of ETH.
The market price of our common stock reflects many factors that do not affect the spot price of ETH and may therefore diverge materially—positively or negatively—from the per-share value of our ETH holdings (net of cash, other assets and liabilities). 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 trade at a premium or discount to the value of our ETH holdings for extended periods, and may be more volatile than the price of ETH. Accordingly, investors could lose all or a substantial part of their investment even if the market price of ETH does not decline, and may not benefit commensurately from increases in the market price of ETH.
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The availability of spot ETPs for ETH and other digital assets may adversely affect the market price of ETH 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.
The value of ETH may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the value of our common stock.
Momentum pricing typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, is impacted by appreciation in value. Momentum pricing may result in speculation regarding future appreciation in the value of digital assets, which inflates prices and leads to increased volatility. As a result, ETH may be more likely to fluctuate in value due to changing investor confidence in future appreciation or depreciation in prices, which could adversely affect the price of ETH, and, in turn, our stock price.
We have recently shifted a portion of our business strategy towards a focus on ETH, and we may be unable to successfully implement this new strategy.
We have shifted a portion of our business strategy towards ETH, including potential investments in ETH, including through, currently, only staking, but potentially in the future, restaking, liquid staking and other decentralized finance activities. There is no assurance that we will be able to successfully implement this new strategy or operate ETH-related activities at the scale or profitability currently anticipated. The ETH network operates with a Proof-of-Stake 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 ETH and related staking activities. This also requires that we implement different security protocols, and treasury management practices. 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 in key management could result in significant loss of funds and reduced rewards. As a result, our shift towards ETH could have a material adverse effect on our business and financial condition.
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Our shift towards an ETH-focused strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.
Our shift towards an ETH-focused strategy, including currently, through staking, but potentially in the future, through restaking, liquid staking, and other decentralized finance activities, exposes us to significant operational risks. ETH’s Proof-of-Stake consensus mechanism requires that we operate validator nodes, employ secure key management and implement slashing protection. It also requires that we maintain constant up time to ensure that we are eligible for staking rewards and to avoid penalties. In addition, the ETH ecosystem rapidly evolves, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup. The upgrades and protocol changes may require that we incur unanticipated costs and it could cause temporary service disruptions. 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 ETH strategy and may prevent us from realizing positive returns and could severely hurt our financial condition.
Our Ethereum treasury strategy may subject us to enhanced regulatory oversight.
As noted above, several spot ETH ETPs have received approval from the SEC to list their shares on a U.S. national securities exchange with continuous share creation and redemption at net asset value (NAV). Even though we are not, and do not function in the manner of, a spot ETH ETP, it is possible that we nevertheless could face regulatory scrutiny from the SEC or other federal or state agencies due to our ETH holdings.
In addition, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to the ongoing conflict between Russia and Ukraine. While we have implemented and maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws and regulations and take care to only acquire our ETH through entities subject to anti-money laundering regulation and related compliance rules in the United States, if we are found to have purchased any of our ETH from bad actors that have used ETH to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and any further transactions or dealings in ETH by us may be restricted or prohibited.
We have issued, and may in the future issue additional, convertible debentures, which are and are expected to be collateralized by some or all of our ETH holdings, and we may utilize other financial instruments, such as OTC swaps, that may be so collateralized. We may also consider pursuing strategies to create income streams or otherwise generate funds using our ETH holdings. These types of ETH-related transactions are the subject of enhanced regulatory oversight. These and any other ETH-related transactions we may enter into, beyond simply acquiring and holding ETH, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations.
Additional laws, guidance and policies may be issued by domestic and foreign regulators following the filing for Chapter 11 bankruptcy protection by FTX Trading, one of the world’s largest cryptocurrency exchanges, in November 2022. U.S. and foreign regulators have also increased, and are highly likely to continue to increase, enforcement activity, and are likely to adopt new regulatory requirements in response to FTX Trading’s collapse. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting ETH, as well as enforcement actions involving or impacting our trading venues, counterparties and custodians, may impose significant costs or significantly limit our ability to hold and transact in ETH.
In addition, private actors that are wary of ETH or the regulatory concerns associated with ETH may in the future take further actions that may have an adverse effect on our business or the market price of our common stock.
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The concentration of our ETH holdings enhances the risks inherent in our ETH treasury strategy.
The vast majority of our assets are concentrated in our ETH holdings or result 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 treasury assets. If there is a significant decrease in the price of ETH, we may experience a more pronounced impact on our financial condition than if we invested our cash in a more diverse portfolio of treasury assets.
Our ETH holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the ETH market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our ETH at favorable prices or at all. For example, a number of ETH trading venues temporarily halted deposits and withdrawals in 2022. As a result, our ETH holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, ETH we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the FDIC or the SIPC. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered ETH or otherwise generate funds using our ETH holdings, including in particular during times of market instability or when the price of ETH has declined significantly. If we are unable to sell our ETH, enter into additional capital raising transactions, including capital raising transactions, using ETH as collateral, or otherwise generate funds using our ETH holdings, or if we are forced to sell our ETH at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
A “fork” in the Ethereum protocol could adversely affect the value of our ETH holdings.
The Ethereum network operates using open-source protocols, meaning that any user can become a node by downloading the Ethereum Client and participating in the Ethereum network, and no permission of a central authority or body is needed to do so. In addition, anyone can propose a modification to the Ethereum network’s source code and then propose that the Ethereum network community support the modification. These proposed modifications to the Ethereum network’s source code, if adopted, can lead to forks.
Forks in the Ethereum protocol may lead to disruptions, security risks or declines in ETH value. A “fork” occurs when a change to the Ethereum network’s source code creates two incompatible versions of the blockchain, resulting in separate networks. Forks may be planned (e.g., upgrades to the Ethereum protocol like the Merge or Dencun) or unplanned (e.g., due to software bugs or validator disagreement). Planned forks are designed to improve performance or introduce new features, but they may introduce bugs, security vulnerabilities, or unexpected economic consequences. Unplanned forks can arise from client software inconsistencies or protocol failures, causing network instability or fragmentation. In either case, forks may result in operational outages, user confusion, replay attacks and reduced validator participation, all of which could undermine confidence in the Ethereum network and adversely affect the price of ETH. Our ETH holdings, staking activities and related treasury strategy could be materially negatively impacted in the event of such a fork.
A disruption of the Internet may affect the operation of the cryptocurrency networks, which may adversely affect the cryptocurrency industry and an investment in the Company.
The cryptocurrency networks rely on the Internet. A significant disruption of Internet connectivity could disrupt the cryptocurrency networks’ functionality until such disruption is resolved. A disruption in the Internet could adversely affect an investment in the Company. In particular, some variants of cryptocurrencies have experienced a number of denial-of-service attacks, which have led to temporary delays in block creation and cryptocurrency transfers.
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Cryptocurrencies are also susceptible to border gateway protocol hijacking, or BGP hijacking. Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and miners are connected to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on any cryptocurrency network, participants may lose faith in the security of cryptocurrency, which could affect cryptocurrency’s value and consequently the value of our common stock.
Any Internet failures or Internet connectivity-related attacks that impact the ability to transfer cryptocurrency could have a material adverse effect on the price of cryptocurrency and the value of an investment in the Company.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our ETH, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our ETH and our financial condition and results of operations could be materially adversely affected.
Substantially all of the ETH and ETH equivalents we own are held in custody accounts at institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our ETH. ETH and other blockchain-based cryptocurrencies and the entities that provide services to participants in the ETH ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
| ● | a partial or total loss of our ETH in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our ETH; |
| ● | harm to our reputation and brand; |
| ● | improper disclosure of data and violations of applicable data privacy and other laws; or |
| ● | significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure. |
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Ethereum blockchain ecosystem or in the use of the ETH network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to ETH, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. 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-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the ETH industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
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The launch of central bank digital currencies (“CBDCs”) may adversely impact our business.
The introduction of a government-issued digital currency could eliminate or reduce the need or demand for private-sector issued crypto currencies or significantly limit their utility. Certain national governments around the world have announced plans to introduce, and in the future could introduce, CBDCs, which could in turn limit the size of the market opportunity for cryptocurrencies, including ETH.
Intellectual property disputes related to the open-source structure of digital asset networks expose us to risks related to software development, security vulnerabilities and potential disruptions to digital asset technology could threaten our ability 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 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 not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power 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.
We plan to regularly transfer digital assets, and 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 revert or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.
We face significant competition in the growing digital asset industry and our business, operating results, and financial condition may be adversely affected if we are unable to compete effectively.
We operate in a competitive environment and compete against other companies and other entities with similar strategies, including companies with significant holdings in Bitcoin, ETH and other digital assets, and our business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
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The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of ETH and adversely affect our business.
As a result of our ETH strategy, our assets are concentrated in our ETH holdings. Accordingly, the emergence or growth of digital assets other than ETH may have a material adverse effect on our financial condition. There are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets. Additionally, the Ethereum network has completed multiple major upgrades and may undertake additional upgrades in the future. If the mechanisms for validating transactions in other alternative digital assets are perceived as superior to the Ethereum network, those digital assets could gain market share relative to ETH.
Other alternative digital assets that compete with ETH in certain ways include “stablecoins,” which are designed to maintain a constant price because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an alternative to ETH and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s CBDC project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, ETH and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of ETH to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
Changes in the accounting treatment of our ETH holdings or digital asset holdings could have significant accounting impacts, including increasing the volatility of our results.
We have adopted Accounting Standards Update (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 relating to our ETH holdings.
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 ETH treasury strategy in the Second 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 are required 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, which may create significant volatility in our reported earnings and 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 creates a gain for financial reporting purposes even if we would otherwise incur an economic or tax loss with respect to such transaction, which also may result in significant volatility in our reported earnings.
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Due in particular to the volatility in the price of ETH, we expect our early adoption of ASU 2023-08 to increase the volatility of our financial results and it could significantly affect the carrying value of our ETH on our balance sheet. 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 more than what we experienced in prior periods.
Absent federal regulations, there is a possibility that ETH may be classified as a “security.” Any classification of ETH as a “security” would subject us to additional regulation and could materially impact the operation of our business.
Neither the SEC nor any other U.S. federal or state regulator has publicly stated whether they agree that ETH is a “security.” Despite the Executive Order titled “Strengthening American Leadership in Digital Financial Technology” which includes as an objective, “protecting and promoting the ability of individual citizens and private sector entities alike to access and … to maintain self-custody of digital assets,” ETH has not yet been classified with respect to U.S. federal securities laws. Therefore, while (for the reasons discussed below) we believe that ETH is not a “security” within the meaning of the U.S. federal securities laws, and registration of the Company under The Investment Company Act of 1940, as amended (the “Investment Company Act”), is therefore not required under the applicable securities laws, we acknowledge that a regulatory body or federal court may determine otherwise. Our belief, even if reasonable under the circumstances, would not preclude legal or regulatory action based on such a finding that ETH is a “security” which would require us to register as an investment company under the Investment Company Act.
We have also adapted our process for analyzing the U.S. federal securities law status of ETH and other cryptocurrencies over time, as guidance and case law have evolved. As part of our U.S. federal securities law analytical process, we take into account a number of factors, including the various definitions of “security” under U.S. federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases, as well as court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be a security for purposes of U.S. federal securities laws. Our position that ETH is not a “security” is premised, among other reasons, on our conclusion ETH does not meet the elements of the Howey test. Among the reasons for our conclusion that ETH is not a security is that holders of ETH do not have a reasonable expectation of profits from our efforts in respect of their holding of ETH. Also, ETH ownership does not convey the right to receive any interest, rewards, or other returns.
We acknowledge, however, that the SEC, a federal court or another relevant entity could take a different view. The regulatory treatment of ETH is such that it has drawn significant attention from legislative and regulatory bodies, in particular the SEC which has previously stated it deemed ETH a security. Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that ETH, or any other digital asset we might hold is a “security.” As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if ETH was determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations, financial condition and prospects.
The classification of digital assets that we will hold as a commodity could subject us to additional Commodity Futures Trading Commission (CFTC) regulation, resulting in significant compliance costs or the cessation of certain operations.
Under current interpretations, ETH is classified as a commodity under the Commodity Exchange Act and is 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 ETH and ETH derivatives are classified and traded.
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If ETH is 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.
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 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.
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 treasury strategy, the manner in which our ETH is custodied, our ability to engage in transactions with affiliated parties, and our operating and investment activities generally, are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our ETH holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding ETH.
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 Sections 3(a)(1)(A) and (C) of the Investment Company Act, a company generally will be deemed to be an “investment company” if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the Investment Company Act generally provides that notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of the Investment Company Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the Investment Company Act.
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Recently, we have begun focusing on pursuing opportunities to expand our portfolio into digital assets and the value of our ETH holdings is an amount in excess of 40% of our total assets. Since we believe ETH is not an investment security, we do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the Investment Company Act.
With respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are deemed not to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the Investment Company Act because, on a consolidated basis with respect to wholly-owned subsidiaries but otherwise on an unconsolidated basis, no more than 45% of the value of the Company’s total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, and cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the Investment Company Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company, and securities issued by qualifying companies that are controlled primarily by the Company.
ETH and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the Investment Company Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the Investment Company Act, which would increase the percentage of securities held by us for Investment Company Act purposes. The SEC has requested information from a number of participants in the digital assets ecosystem, regarding the potential application of the Investment Company Act to their businesses. For example, in an action unrelated to the Company, in February 2022, the SEC issued a cease-and-desist order under the Investment Company Act to BlockFi Lending LLC, in which the SEC alleged that BlockFi was operating as an unregistered investment company because it issued securities and also held more than 40% of its total assets, excluding cash, in investment securities, including the loans of digital assets made by BlockFi to institutional borrowers.
If we were deemed to be an investment company, Rule 3a-2 under the Investment Company Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, the grace period may not be available at the time that we seek to rely on Rule 3a-2; however, Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the Investment Company Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations. If we were to be deemed an investment company in the future, restrictions imposed by the Investment Company Act — including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons — likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
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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, treasury and prospects.
ETH is created and transmitted through the operations of the peer-to-peer Ethereum network, a decentralized network of computers running software following the Ethereum protocol. If the Ethereum network is disrupted or encounters any unanticipated difficulties, the value of Ethereum could be negatively impacted.
If the Ethereum network is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the Ethereum network may be disrupted, which in turn may prevent us from depositing or withdrawing ETH from our accounts with our custodian or otherwise effecting ETH transactions. Such disruptions could include, for example: the price volatility of ETH; the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians, or others; the closing of ETH trading platforms due to fraud, failures, security breaches, or otherwise; or network outages or congestion, power outages, or other problems or disruptions affecting the Ethereum network.
In addition, digital asset validating operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for validating operations. Additionally, validators may be forced to cease operations during an electricity shortage or power outage.
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 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.
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 ETH. A successful cyberattack or security breach could materially and adversely impact our financial position, reputation and ability to conduct future lending activities.
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Our ETH strategy exposes us to risk of non-performance by providers and counterparties.
Our ETH strategy exposes us to the risk of non-performance by providers and counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a provider or counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of ETH, a loss of the opportunity to generate funds, or other losses.
Our primary provider risk with respect to our ETH is custodian performance obligations under the various custody arrangements we have entered into, in particular, are reliant on our custodial relationships and agreements with Coinbase Inc. and its affiliates. Any failures of our custodians to perform could have an impact on our business, prospects, financial condition and operating results. In addition, in the event of a termination of one or more of our custody agreements, 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 ETH, nor have such events adversely impacted our access to our ETH, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
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 ETH and ETH equivalents will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our ETH holdings, we would become subject to additional counterparty risks. Any significant non-performance by providers and counterparties, including in particular the custodians with which we custody substantially all of our ETH, may adversely affect our prospects, financial condition and operating results.
We face risks relating to the custody of our ETH, including the loss or destruction of private keys required to access our ETH and cyberattacks or other data loss relating to our ETH.
We hold our ETH with regulated custodians that have duties to safeguard our private keys. Our custodial services contracts do not restrict our ability to reallocate our ETH among our custodians, and our ETH holdings may be concentrated with a single custodian from time to time. In light of the significant amount of ETH we hold, we may seek to engage additional custodians to achieve a greater degree of diversification in the custody of our ETH 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 ETH, 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 ETH, 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 ETH holdings may cover none or only a small fraction of the value of the entirety of our ETH holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our ETH. Moreover, our use of custodians exposes us to the risk that the ETH our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such ETH. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our ETH. The legal framework governing digital asset ownership and rights in custodial or insolvency contexts remains uncertain and continues to evolve, which could result in unexpected losses, protracted recovery processes or adverse treatment in insolvency proceedings.
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ETH is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the ETH is held. While the ETH blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the ETH held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the ETH held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a result of a cyberattack. ETH, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
As part of our ETH treasury management strategy, we engage in staking, restaking, and other permitted activities that involve the use of “smart contracts” or decentralized applications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, potentially leading to a loss of our ETH. Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application. Smart contracts and decentralized applications may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of ETH or other digital assets. Exploits, including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the future.
Risks Related to our Common Stock
Our common stock may be highly volatile due to the continuous trading of ETH, and investors could experience significant losses.
We hold significant amounts of ETH as part of our treasury assets. Unlike our common stock, which trades on the Nasdaq Stock Market during limited trading hours, ETH is traded on digital asset exchanges 24 hours a day, seven days a week. As a result, the market price of ETH may fluctuate substantially during periods when Nasdaq is closed, including overnight, on weekends, and on holidays.
Because the market price of our common stock may be influenced by the value of ETH, there may be periods when investors are unable to sell our stock during times of significant ETH price volatility. In addition, our stock may experience material changes in price between the prior day’s closing price and the next day’s opening price, particularly following periods of large ETH price movements outside standard market hours. These factors could result in substantial volatility in our stock price and potential losses for investors.
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 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 our shares of common stock.
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Holders of our convertible securities may engage in hedging or short-selling activities, which could put downward pressure on our stock price and limit potential appreciation.
Certain holders of our convertible notes, warrants, or other convertible securities may engage in short-selling or other hedging strategies in connection with their convertible holdings. Such strategies may include selling shares of our common stock short, entering into derivative transactions, or otherwise hedging their economic exposure to the price of our common stock.
These activities could create significant downward pressure on the market price of our common stock, particularly if large positions are held or if the conversion or exercise prices of these securities are substantially above the prevailing stock price. In addition, while these holders maintain short positions or are hedging their exposure, the market price of our common stock may not appreciate materially above the conversion or exercise price of such holders’ convertible securities, potentially limiting gains for other stockholders.
Such short-selling and hedging activities may also increase the volatility of our stock, adversely affect the trading market for our common stock, and impair our ability to raise additional capital at favorable prices. These factors could have a material adverse effect on the market price of our common stock and our ability to achieve financing, strategic, or operational objectives.
We currently have an illiquid and volatile market for our common stock, and the market for our common stock is and may remain illiquid and volatile in the future.*
We currently have a highly sporadic, illiquid and volatile market for our common stock, which market is anticipated to remain sporadic, illiquid and volatile in the future. During the last 52 weeks our common stock has traded as high as $174.60 per share and as low as $6.58 per share (each adjusted retroactively for the Reverse Stock Split effective October 20, 2025). The market price of our common stock may continue to be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates, and market conditions, as well as the items below, could have a significant impact on the future market price of our common stock:
| ● | “short squeezes”; |
| ● | comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media; |
| ● | large stockholders exiting their position in our securities or an increase or decrease in the short interest in our securities; |
| ● | actual or anticipated fluctuations in our financial and operating results; |
| ● | regulatory or legal developments in the U.S. and other countries; |
| ● | the recruitment or departure of key personnel; |
| ● | the trading price of ETH; |
| ● | litigation matters, including amounts which may or may not be recoverable pursuant to our officer and director insurance policies, regulatory actions affecting the Company and the outcome thereof; |
| ● | actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; |
| ● | disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; |
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| ● | significant lawsuits, including patent or stockholder litigation; |
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | regulatory developments; |
| ● | general economic, political, and market conditions and overall fluctuations in the financial markets in the U.S. and abroad; and |
| ● | investors’ general perception of us and our business. |
Our common stock is listed on the Nasdaq Capital Market under the symbol “ETHZ.” Our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Additionally, general economic, political and market conditions, such as recessions, inflation, war, interest rates or international currency fluctuations may adversely affect the market price of our common stock. Due to the limited volume of our shares which trade, we believe that our stock prices (bid, ask and closing prices) may not be related to our actual value, and not reflect the actual value of our common stock. You should exercise caution before making an investment in us.
Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our company. For example, during 2022, the closing sales prices of our common stock ranged from a post-split adjusted high of $14,820.40 per share to a low of $235.60 per share, during fiscal 2023, the closing sales prices of our common stock ranged from a high of $1,007.00 per share to a low of $32.10 per share and during fiscal 2024, the closing sales prices of our common stock ranged from a post-split adjusted high of $64.70 per share to a low of $11.80 per share. During this time, we do not believe that we have experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume; however, we have sold equity which was dilutive to existing stockholders. These broad market fluctuations may adversely affect the trading price of our securities. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent our stockholders from readily selling their shares of our common stock and may otherwise negatively affect the liquidity of our common stock.
Additionally, as a result of the illiquidity of our common stock, investors may not be interested in owning our common stock because of the inability to acquire or sell a substantial block of our common stock at one time. Such illiquidity could have an adverse effect on the market price of our common stock. In addition, a shareholder may not be able to borrow funds using our common stock as collateral because lenders may be unwilling to accept the pledge of securities having such a limited market. An active trading market for our common stock may not develop or, if one develops, may not be sustained.
In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Risks Related to our Repurchase Program
Our stock repurchases are discretionary and even if effected, they may not achieve the desired objectives.
On August 22, 2025, the Board of Directors of the Company 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 of the Company, 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 2,099,472 shares of common stock for an average purchase price of $22.00.
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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.
General Risks
Sales of our common stock through our ATM Sales Agreement, or the perception that such sales may occur, could cause the market price of our common stock to fall.
As discussed in greater detail above under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Events—ATM Sales Agreement” and “—Amended and Restated ATM Sales Agreement”, on August 13, 2025 we entered into a Sales Agreement with Clear Street, which was amended and restated on August 22, 2025, pursuant to which we may offer and sell the shares of common stock from time to time to Clear Street acting as our sales agent. Continued sales of our common stock, if any, under the ATM Sales Agreement 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. From August 13, 2025 to September 30, 2025, we sold 739,050 shares of common stock for an average purchase price of $55.46 per share, and since September 30, 2025, we have sold 410,403 shares of common stock for an average purchase price of $16.72 per share.
Future sales of our common stock are not guaranteed, and there are no firm commitments to receive funding under the ATM Sales Agreement. 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 conversion of our Convertible Notes or as a result of future equity or debt offerings.
We have outstanding Convertible Notes in the aggregate principal amount of approximately $516 million. The Convertible Notes are convertible into shares of common stock in accordance with the terms thereof, and include various reset and anti-dilution provisions. Our stockholders may experience significant dilution as a result of the conversion of the Convertible Notes.
In order to raise additional capital, we may in the future offer, through our ATM Sales Agreement 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 Sales Agreement 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.
If we make any 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; |
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| ● | 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.
If the Company fails to expand its ETH staking operations and/or commercialize its plans to securitize real world assets (RWA), 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’.
We were previously a ’shell company’, which is a company that has no or nominal operations; and (B) either: (1) no or nominal assets; (2) assets consisting solely of cash and cash equivalents; or (3) assets consisting of any amount of cash and cash equivalents and nominal other assets, prior to completion of our November 2020 initial business combination. In the future we could again be deemed a ’shell company’, including if we fail to take significant steps to expand and implement our ETH staking operations and/or commercialize our plans to securitize real world assets (RWA), and allow such RWAs to be monetized through tokenized tradable instruments with both primary and secondary market liquidity, in the future, or fail to undertake alternative business operations and/or if our expected Ether 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. We are a former shell company. As a result, our securities cannot be resold under Rule 144 unless certain conditions are met. These conditions are: the issuer of the securities has ceased to be a shell company; the issuer is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act; the issuer has filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports; and one year has elapsed since the issuer has filed current ‘Form 10 information’ with the Commission reflecting its status as an entity that is no longer a shell company. If in the future we become a ’shell company’ again, Rule 144 of the Securities Act 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.
Regulatory uncertainties related to the tokenization and securitization of real-world assets may adversely affect our business and could result in significant compliance costs, enforcement actions, or limitations on our operations.
Our current business model involves the securitization of real-world assets and the issuance of digital, tokenized instruments representing interests in such assets, which may be traded in primary and secondary markets. The regulatory framework governing digital asset securities, asset-backed tokens, and other forms of tokenized instruments is rapidly evolving and remains uncertain in many respects, both in the United States and abroad. Regulatory authorities, including the SEC, the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority (“FINRA”), and state securities regulators, have taken differing and sometimes inconsistent views as to the classification and treatment of digital assets.
In particular, there is a risk that our activities or those of liquidity.io, which we own 10% of the entity which owns, could be deemed to involve the offer or sale of “securities” under the Securities Act, the operation of an “exchange” or “broker-dealer” under the Exchange Act, or the conduct of an “investment company” or “investment adviser” under the 1940 Act or the Investment Advisers Act of 1940. If any of our tokenized products or related activities were determined to cause us or our subsidiaries to be an investment company under the 1940 Act, we could become subject to extensive and burdensome registration, disclosure, governance, and operational requirements that we do not currently satisfy. Alternatively, we may be required to alter, limit, or cease certain operations or token offerings to avoid being deemed an investment company.
Additionally, new laws, regulations, or regulatory guidance could materially change the manner in which digital or tokenized asset transactions are structured or conducted. We may also become subject to enforcement actions, investigations, or litigation if regulators determine that our activities or the tokenized instruments we issue or facilitate violate existing securities, commodities, or investment company laws. Any such determination could result in civil or criminal penalties, the requirement to rescind prior token issuances, significant legal and compliance costs, reputational harm, and the inability to continue offering certain products or operating in certain jurisdictions.
Because the legal treatment of tokenized securities and other digital asset instruments remains uncertain, our business, prospects, and financial condition could be materially and adversely affected by changes in regulatory interpretations or enforcement priorities, or by our inability to timely adapt to evolving compliance requirements.
* * * * * *
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Separately, the risk factor from the Form 10-K entitled “We may not receive any additional amounts under our pre-merger directors’ and officers’ insurance policy in connection with certain litigation matters and may be forced to repay $2.57 million previously received”, is no longer a material risk to the Company, as the Company has entered into a settlement agreement with AmTrust, as discussed in greater detail above under Note 12 Commitments and Contingencies—Legal Matters— Declaratory Relief Action Against the Company by AmTrust International, in the footnotes to our unaudited condensed consolidated financial statements included above under “Part I – Financial Information” – “Item 1. Financial Statements”; the risk factor entitled “We will need additional capital which may not be available on commercially acceptable terms, if at all, which raises questions about our ability to continue as a going concern.”, is no longer applicable and has been replaced by a risk factor above; the risks under the headings “Risks Relating to Our Life Sciences Operations” and “Risks Relating to Our Planned Online Casino Operations”, are no longer relevant as we have written off our prior legacy life science assets and Gaming Technology Platform, and the risk factors entitled “Elray Resources, Inc., beneficially owns a significant percentage of our common stock and as such exercises significant voting control over us, which limits other stockholders’ abilities to influence corporate matters and could delay or prevent a change in corporate control.”, and “Our outstanding public warrants are significantly out of the money.”, are no longer relevant.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
There have been no sales of unregistered securities during the quarter ended September 30, 2025 which have not previously been reported in a Current Report on Form 8-K, except:
On August 11, 2025, a holder of warrants to purchase 175 shares of common stock of the Company, with an exercise price of $26.50 per share, exercised such warrants for cash.
On August 11, 2025, a holder of warrants to purchase 10,000 shares of common stock of the Company, with an exercise price of $22.80 per share, exercised such warrants for cash.
The exercise of the warrants was exempt from registration pursuant to Section 4(a)(2) of the Securities Act, since the foregoing did not involve a public offering and the holders were accredited investors. The resale of the shares of common stock issuable upon exercise of the warrants discussed above have been registered under the Securities Act.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets forth share repurchase activity for the respective periods:
| Total Number | Approximate | |||||||||||||||
| of Shares | Dollar Value of | |||||||||||||||
| Purchased as | Shares that | |||||||||||||||
| Part of | May Yet Be | |||||||||||||||
| Publicly | Purchased | |||||||||||||||
| Total Number | Average | Announced | Under the | |||||||||||||
| of Shares | Price Paid Per | Plans or | Plans or | |||||||||||||
| Period | Purchased | Share | Programs(1) | Programs(1) | ||||||||||||
| July 1 –July 31, 2025 | — | $ | — | — | $ | — | ||||||||||
| August 1 – August 31, 2025 | — | $ | — | — | $ | 250,000,000 | ||||||||||
| September 1 - September 30, 2025 | 739,050 | $ | 55.46 | 739,050 | $ | 233,930,552 | ||||||||||
| Total | 739,050 | $ | 55.46 | 739,050 | 233,930,552 | |||||||||||
| (1) | On August 22, 2025, the Board of Directors of the Company authorized and approved a stock repurchase program for up to $250.0 million of the currently outstanding shares of the Company’s common stock. Subject to any future extension in the discretion of the Board of Directors of the Company, 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. Under the stock repurchase program, shares may be repurchased from time to time in the open market or through negotiated transactions at prevailing market rates, or by other means in accordance with federal securities laws. Repurchases will be 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. Open market purchases are expected to be conducted in accordance with the limitations set forth in Rule 10b-18 of the Exchange Act and other applicable laws and regulations. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. |
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5.
| (a) | The below events occurred within four business days of the filing date of this periodic report and as such, the Company is disclosing the occurrence of the events below under “Item 1.01 Entry Into a Material Definitive Agreement” and “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers”, instead of a stand-alone Current Report on Form 8-K: |
Item 1.01 Entry Into a Material Definitive Agreement.
As previously reported in the Current Report on Form 8-K filed by the Company with the SEC on August 22, 2025, on August 22, 2025, the Company entered into an Amended and Restated Sales Agreement (the “A&R Sales Agreement”) to sell from time to time through Clear Street LLC (the “Initial Agent”), acting as sales agent, shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock).
On November 14, 2025, the Company entered into an Amended and Restated Sales Agreement (the “Sales Agreement”) with the Initial Agent and TCBI Securities, Inc., doing business as Texas Capital Securities (“Texas Capital Securities”, and together with the Initial Agent, the “Agents”), which amended and restated the A&R Sales Agreement to include Texas Capital Securities as a sales agent. There were no other material changes to the terms of the A&R Sales Agreement.
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Texas Capital Securities and its affiliates may in the future provide various investment banking, commercial banking, financial advisory and other financial services for the Company and its affiliates, for which services they may in the future receive, customary fees. In the course of its business, Texas Capital Securities may actively trade the Company’s securities for its own account or for the accounts of customers, and, accordingly, Texas Capital Securities may at any time hold long or short positions in such securities.
The foregoing information is being provided to supplement and update the Company’s automatic shelf registration statement on Form S-3 (File No. 333-289811), filed with the SEC on August 22, 2025 (the “Registration Statement”), a base prospectus dated August 22, 2025, included as part of the Registration Statement, as supplemented by the prospectus supplement dated as of August 22, 2025, relating to the Company’s “at the market offering” program.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Chief Executive Officer Salary
On November 12, 2025, the Board of Directors, after recommendation by the Compensation Committee of the Board of Directors, approved an increase in the annual salary of McAndrew Rudisill, the Company’s Chief Executive Officer, from $450,000 to $650,000, effective as of the date of the consent.
Board of Directors Compensation
On November 12, 2025, the Board of Directors, after recommendation by the Compensation Committee of the Board of Directors, approved an increase in the yearly compensation payable to non-employee members of the Board of Directors of the Company from $350,000 to $450,000 per year.
Restricted Stock Awards
On November 12, 2025, the Company granted, after recommendation by the Compensation Committee of the Company’s Board of Directors and approval by the Board of Directors, 4,816,685 shares of restricted common stock to its officers, directors, certain employees and its outside legal counsel. Included in the grants were the grant of 1,365,000 shares of common stock to McAndrew Rudisill, the Company’s Chief Executive Officer and Chairman; the grant of 887,500 shares of common stock to Ryan Smith, the Company’s Lead Director; the grant of 952,500 shares of common stock to Jason New, a member of the Board of Directors; the grant of 649,748 shares of common stock to Andrew Suckling, a member of the Board of Directors; the grant of 649,748 shares of common stock to Crystal Heter, a member of the Board of Directors of the Company; and the grant of 109,312 shares of common stock to John Saunders, who was appointed as Chief Financial Officer of the Company on the same date, to be effective on the business day following the filing date of this Report. The Company issued an aggregate of 3,728,838 shares of restricted common stock, to reflect net vesting for tax withholding purposes which substantially reduces the grant award by the grantees’ effective tax rates as required by law.
All of the awarded shares vest 1/2 on the grant date and 1/2 on January 2, 2026, subject to the terms of the Notice of Restricted Stock Grants and Restricted Stock Grant Agreements entered into between the Company and each recipient to evidence such awards. The grants were made under, and subject to the terms of, the Company’s 2025 Omnibus Incentive Plan (the “2025 Plan”). The award agreements evidencing such awards allow the recipients to pay the withholding taxes due in connection with such grants in award shares or other shares of common stock held by the recipients.
| (c) | Rule 10b5-1 Trading Plans. Our directors and executive officers may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act. During the quarter ended September 30, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f)) adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” |
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Item 6. Exhibits.
The following exhibits are filed herewith or incorporated by reference herein:
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| * | Filed herewith. |
| ** | Furnished herewith. |
| £ | Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2)(ii) of Regulation S-K. A copy of any omitted schedule or Exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that ETHZilla Corporation. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or Exhibit so furnished. |
| # | Indicates management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ETHZILLA CORPORATION | ||
| Date: November 14, 2025 | By: | /s/ McAndrew Rudisill |
| McAndrew Rudisill | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 14, 2025 | By: | /s/ Eric R. Van Lent |
| Eric R. Van Lent | ||
| Chief Accounting Officer | ||
| (Principal Financial and Accounting Officer) |
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Exhibit 10.32
Restricted Stock Grant Number RSA-11-25-XXX
ETHZILLA CORP.
2025 OMNIBUS INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK GRANT
Capitalized but otherwise undefined terms in this Notice of Restricted Stock Grant and the attached Restricted Stock Grant Agreement shall have the same defined meanings as in the ETHZilla Corporation 2025 Omnibus Incentive Plan (as amended and restated from time to time) (the “Plan”).
| Grantee Name: | [NAME] | ||
| Address: | |||
You have been granted shares of restricted Common Stock (the “Restricted Stock” or the “Shares”) subject to the terms and conditions of the Plan and the attached Restricted Stock Grant Agreement, as follows:
| Date of Grant: | November 12, 2025 |
| Vesting Commencement Date: | November 12, 2025 |
| Price Per Share: | ______________ |
| Total Number of Shares Granted: | [SHARES] |
| Total Value of Shares Granted: | ______________ |
| Total Purchase Price: | $0, Issued In Consideration For Services |
| Agreement Date: | [DATE] |
| Vesting Schedule: | The Shares shall vest at the rate of 1/2 of such Shares on each of November 12, 2025 and 1/2 on January 2, 2026, subject to the terms of the attached Restricted Stock Grant Agreement. |
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
ETHZILLA CORPORATION
2025 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK GRANT AGREEMENT
This RESTRICTED STOCK GRANT AGREEMENT (“Agreement”), dated as of the Agreement Date specified on the Notice of Restricted Stock Grant is made by and between ETHZilla Corporation, a Delaware corporation (the “Company”), and the grantee named in the Notice of Restricted Stock Grant (the “Grantee,” which term as used herein shall be deemed to include any successor to Grantee by will or by the laws of descent and distribution, unless the context shall otherwise require).
BACKGROUND
Pursuant to the Plan, the Board (or an authorized Committee thereof), approved the issuance to Grantee, effective as of the date set forth above, of an award of the number of shares of Restricted Stock as is set forth in the attached Notice of Restricted Stock Grant (which is expressly incorporated herein and made a part hereof, the “Notice of Restricted Stock Grant”) at the purchase price per share of Restricted Stock (the “Purchase Price”), if any, set forth in the attached Notice of Restricted Stock Grant, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and undertakings hereinafter set forth, the parties agree as follows:
1. Grant and Purchase of Restricted Stock. The Company hereby grants to Grantee, and Grantee hereby accepts the Restricted Stock set forth in the Notice of Restricted Stock Grant, subject to the payment by Grantee of the total purchase price, if any, set forth in the Notice of Restricted Stock Grant.
2. Stockholder Rights.
(a) Voting Rights. Until such time as all or any part of the Restricted Stock are forfeited to the Company under this Agreement, if ever, Grantee (or any successor in interest) has the rights of a stockholder, including voting rights, with respect to the Restricted Stock subject, however, to the transfer restrictions or any other restrictions set forth in the Plan.
(b) Dividends and Other Distributions. During the period of restriction, Participants holding Restricted Stock are entitled to all regular cash dividends or other distributions paid with respect to all shares while they are so held. If any such dividends or distributions are paid in shares, such shares will be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid.
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
3. Vesting of Restricted Stock.
(a) The Restricted Stock are restricted and subject to forfeiture until vested. The Restricted Stock which have vested and are no longer subject to forfeiture are referred to as “Vested Shares.” All Restricted Stock which have not become Vested Shares are referred to as “Nonvested Shares.”
(b) Except as otherwise provided herein, the Restricted Stock shall vest and become nonforfeitable in accordance with the vesting schedule specified in the Notice of Restricted Stock Grant.
(c) If Grantee’s service with the Company ceases for any reason, including voluntary resignation, termination by the Company with or without Cause, Disability, death, or otherwise, all Nonvested Shares shall immediately vest and become nonforfeitable as of the date of such termination, except to the extent otherwise expressly provided in this Agreement. In the event of a Change in Control (as defined in the Plan), any remaining Nonvested Shares shall immediately vest and become nonforfeitable.
(d) In the event that Grantee is an executive officer or employee of the Company at the time of termination, any Nonvested Shares will vest and become nonforfeitable upon the termination of Grantee’s status as an executive officer of the Company, either (i) by the Company other than for Cause (as defined below); or (ii) by the Grantee, for “good reason”, as defined or described in any employment or service agreement between the Company and the Grantee, and only to the extent such employment or service agreement provides for a “good reason” termination. Except as expressly set forth herein, or in any employment or service agreement between the Company and Grantee, any Nonvested Shares will be automatically forfeited to the Company for no consideration upon the later of (a) the termination of Grantee’s employment with the Company; and (b) the termination of Grantee’s status as an executive officer of the Company.
(e) Terms used in Section 3 and Section 4 have the following meanings:
(i) “Cause” has the meaning ascribed to such term or words of similar import in Grantee’s written employment or service contract with the Company or its subsidiaries and, in the absence of such agreement or definition, means Grantee’s (i) conviction of, or plea of nolo contendere to, a felony or crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company or its subsidiaries, or any affiliate, customer or vendor; (iii) personal dishonesty, incompetence, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with Grantee’s duties or willful failure to perform Grantee’s responsibilities in the best interests of the Company or its subsidiaries; (v) illegal use or distribution of drugs; (vi) violation of any material rule, regulation, procedure or policy of the Company or its subsidiaries, the violation of which could have a material detriment to the Company; or (vii) material breach of any provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by Grantee for the benefit of the Company or its subsidiaries, all as reasonably determined by the Board of Directors of the Company, which determination will be conclusive.
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
(f) Nonvested Shares may not be sold, transferred, assigned, pledged, or otherwise disposed of, directly or indirectly, whether by operation of law or otherwise.
4. Forfeiture of Nonvested Shares. Except as provided herein, if Grantee’s service with the Company ceases for any reason (including voluntary resignation, Disability, death, or termination by the Company with or without Cause), all Nonvested Shares shall immediately vest and become nonforfeitable as of the date of such termination. Any Nonvested Shares that do not vest pursuant to this Section shall be automatically forfeited to the Company for no consideration; unless the Board (or an authorized committee thereof) provides otherwise.
(a) Legend. Each certificate representing Restricted Stock granted pursuant to the Notice of Restricted Stock Grant may bear a legend substantially as follows:
“THE SALE OR OTHER TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE ETHIZILLA CORPORATION 2025 OMNIBUS INCENTIVE PLAN (AS AMENDED AND RESTATED FROM TIME TO TIME) AND IN A RESTRICTED SHARE GRANT AGREEMENT. A COPY OF SUCH PLAN AND SUCH AGREEMENT MAY BE OBTAINED FROM ETHIZILLA CORPORATION.”
(b) Escrow of Nonvested Shares. The Company has the right to retain the certificates representing Nonvested Shares in the Company’s possession until such time as all restrictions applicable to such shares have been satisfied.
(c) Removal of Restrictions. The Participant is entitled to have the legend removed from certificates representing Vested Shares.
5. Recapitalizations, Exchanges, Mergers, Etc. The provisions of this Agreement apply to the full extent set forth herein with respect to any and all shares of capital stock of the Company or successor of the Company which may be issued in respect of, in exchange for, or in substitution for the Restricted Stock by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise which does not terminate this Agreement. Except as otherwise provided herein, this Agreement is not intended to confer upon any other person except the parties hereto any rights or remedies hereunder.
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
6. Grantee Representations.
Grantee represents to the Company the following:
(a) Restrictions on Transfer. Grantee acknowledges that the Restricted Stock to be issued to Grantee must be held indefinitely unless subsequently registered and qualified under the Securities Act of 1933, as amended (the “Securities Act”) or unless an exemption from registration and qualification is otherwise available. In addition, Grantee understands that the certificate representing the Restricted Stock will be imprinted with a legend which prohibits the transfer of such Restricted Stock unless they are sold in a transaction in compliance with the Securities Act or are registered and qualified or such registration and qualification are not required in the opinion of counsel acceptable to the Company.
(b) Relationship to the Company; Experience. Grantee either has a preexisting business or personal relationship with the Company or any of its officers, directors or controlling persons or, by reason of Grantee’s business or financial experience or the business or financial experience of Grantee’s personal representative(s), if any, who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent, directly or indirectly, has the capacity to protect Grantee’s own interests in connection with Grantee’s acquisition of the Restricted Stock to be issued to Grantee hereunder. Grantee and/or Grantee’s personal representative(s) have such knowledge and experience in financial, tax and business matters to enable Grantee and/or them to utilize the information made available to Grantee and/or them in connection with the acquisition of the Restricted Stock to evaluate the merits and risks of the prospective investment and to make an informed investment decision with respect thereto.
(c) Grantee’s Liquidity. In reaching the decision to invest in the Restricted Stock, Grantee has carefully evaluated Grantee’s financial resources and investment position and the risks associated with this investment, and Grantee acknowledges that Grantee is able to bear the economic risks of the investment. Grantee (i) has adequate means of providing for Grantee’s current needs and possible personal contingencies, (ii) has no need for liquidity in Grantee’s investment, (iii) is able to bear the substantial economic risks of an investment in the Restricted Stock for an indefinite period and (iv) at the present time, can afford a complete loss of such investment. Grantee’s commitment to investments which are not readily marketable is not disproportionate to Grantee’s net worth and Grantee’s investment in the Restricted Stock will not cause Grantee’s overall commitment to become excessive.
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
(d) Access to Data. Grantee acknowledges that during the course of this transaction and before deciding to acquire the Restricted Stock, Grantee has been provided with financial and other written information about the Company. Grantee has been given the opportunity by the Company to obtain any information and ask questions concerning the Company, the Restricted Stock, and Grantee’s investment that Grantee felt necessary; and to the extent Grantee availed himself/herself of that opportunity, Grantee has received satisfactory information and answers concerning the business and financial condition of the Company in response to all inquiries in respect thereof.
(e) Risks. Grantee acknowledges and understands that (i) an investment in the Company constitutes a high risk, (ii) the Restricted Stock are highly speculative, and (iii) there can be no assurance as to what investment return, if any, there may be. Grantee is aware that the Company may issue additional securities in the future which could result in the dilution of Grantee’s ownership interest in the Company.
(f) Valid Agreement. This Agreement when executed and delivered by Grantee will constitute a valid and legally binding obligation of Grantee which is enforceable in accordance with its terms.
(g) Residence. The address set forth on the Notice of Restricted Stock Grant is Grantee’s current address and accurately sets forth Grantee’s place of residence.
(h) Tax Consequences. Grantee has reviewed with Grantee’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Grantee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Grantee understands that Grantee (and not the Company) is responsible for Grantee’s own tax liability that may arise as a result of the transactions contemplated by this Agreement. Grantee understands that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the purchase price for the Restricted Stock and the fair market value of the Restricted Stock as of the date any restrictions on the Restricted Stock lapse. Grantee understands that Grantee may elect to be taxed at the time the Restricted Stock is purchased rather than when and as the restrictions lapse by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days from the date of purchase. The form for making this election can be found at https://www.irs.gov/pub/irs-pdf/f15620.pdf.
GRANTEE ACKNOWLEDGES THAT IT IS GRANTEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY ANY ELECTION UNDER SECTION 83(b), EVEN IF GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON GRANTEE’S BEHALF.
Page 6 of 11
ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
7. No Employment Contract Created. The issuance of the Restricted Stock is not to be construed as granting to Grantee any right with respect to continuance of employment or any service with the Company or any of its subsidiaries. The right of the Company or any of its subsidiaries to terminate at will Grantee’s employment or terminate Grantee’s service at any time (whether by dismissal, discharge or otherwise), with or without cause, is specifically reserved, subject to any other written employment or other agreement to which the Company and Grantee may be a party.
8. Tax Withholding. The Company has the power and the right to deduct or withhold, or require Grantee to remit to the Company, an amount sufficient to satisfy Federal, state and local taxes (including the Grantee’s FICA obligation) required by law to be withheld with respect to the grant and vesting of the Restricted Stock. Notwithstanding the foregoing, at the option of the Grantee in writing (which may be via email) prior to the date of any vesting of any Restricted Stock, the Company shall withhold (or “net”) shares of Common Stock (valued at their Fair Market Value on the date of the withholding of such shares) from the shares of Common Stock due to the Grantee upon such vesting in satisfaction of the Grantee’s tax withholding obligations with respect to the vesting of such award or part thereof. In lieu of the withholding discussed in the immediately preceding paragraph, the Grantee may deliver shares of Common Stock (valued at their Fair Market Value on the date of vesting of such shares) owned by the Grantee to the Company for cancellation in order to satisfy the Grantee’s tax withholding obligations with respect to the vesting of any award hereunder.
9. Interpretation. The Restricted Stock are being issued pursuant to the terms of the Plan, and are to be interpreted in accordance therewith. The Board (or an authorized committee thereof) will interpret and construe this Agreement and the Plan, and any action, decision, interpretation or determination made in good faith by the Board (or an authorized committee thereof) will be final and binding on the Company and Grantee.
10. Notices. All notices or other communications which are required or permitted hereunder will be in writing and sufficient if (i) personally delivered or sent by telecopy, (ii) sent by nationally-recognized overnight courier or (iii) sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:
(a) if to the Grantee, to the address (or telecopy number) set forth on the Notice of Grant; and
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ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
(b) if to the Company, to its principal executive office as specified in any report filed by the Company with the Securities and Exchange Commission or to such address as the Company may have specified to the Grantee in writing, Attention: Corporate Secretary;
or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication will be deemed to have been given (i) when delivered, if personally delivered, or when telecopied, if telecopied, (ii) on the first Business Day (as hereinafter defined) after dispatch, if sent by nationally-recognized overnight courier and (iii) on the fifth Business Day following the date on which the piece of mail containing such communication is posted, if sent by mail. As used herein, “Business Day” means a day that is not a Saturday, Sunday or a day on which banking institutions in the city to which the notice or communication is to be sent are not required to be open.
11. Specific Performance. Grantee expressly agrees that the Company will be irreparably damaged if the provisions of this Agreement and the Plan are not specifically enforced. Upon a breach or threatened breach of the terms, covenants and/or conditions of this Agreement or the Plan by Grantee, the Company will, in addition to all other remedies, be entitled to a temporary or permanent injunction, without showing any actual damage, and/or decree for specific performance, in accordance with the provisions hereof and thereof. The Board (or an authorized committee thereof) has the power to determine what constitutes a breach or threatened breach of this Agreement or the Plan. Any such determinations will be final and conclusive and binding upon Grantee.
12. No Waiver. No waiver of any breach or condition of this Agreement will be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.
13. Grantee Undertaking. Grantee hereby agrees to take whatever additional actions and execute whatever additional documents the Company may in its reasonable judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on Grantee pursuant to the express provisions of this Agreement.
14. Modification of Rights. The rights of Grantee are subject to modification and termination in certain events as provided in this Agreement and the Plan.
15. Governing Law. This Agreement is governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to its conflict or choice of law principles that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.
16. Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same instrument. Facsimile execution and delivery of this Agreement is legal, valid and binding execution and delivery for all purposes.
17. Entire Agreement. This Agreement (including the Notice of Restricted Stock Grant) and the Plan, constitute the entire agreement between the parties with respect to the subject matter hereof, and supersedes all previously written or oral negotiations, commitments, representations and agreements with respect thereto.
Page 8 of 11
ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
18. Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provisions of this Agreement, and this Agreement will be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
19. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the Restricted Stock. You should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
20. Compliance With Law. You agree that the Company shall have unilateral authority to amend this Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Restricted Stock.
21. Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
22. Other Documents. You hereby acknowledge receipt of or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the document containing the Plan information specified in Section 10(a) of the Securities Act (“Prospectus”).
23. WAIVER OF JURY TRIAL. THE GRANTEE HEREBY EXPRESSLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
[Signature Page Follows]
Page 9 of 11
ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Restricted Share Grant Agreement as of the date first written above.
| ETHZILLA CORPORATION | ||
| By: | ||
| Name: | ||
| Title | ||
| GRANTEE: | ||
| Name: | ||
Page 10 of 11
ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
SPOUSE’S CONSENT TO AGREEMENT
(Required where Grantee resides in a community property state)
I acknowledge that I have read the Agreement and the Plan and that I know and understand the contents of both. I am aware that my spouse has agreed therein to the imposition of certain forfeiture provisions and restrictions on transferability with respect to the Restricted Stock that are the subject of the Agreement, including with respect to my community interest therein, if any, on the occurrence of certain events described in the Agreement. I hereby consent to and approve of the provisions of the Agreement, and agree that I will abide by the Agreement and bequeath any interest in the Restricted Stock which represents a community interest of mine to my spouse or to a trust subject to my spouse’s control or for my spouse’s benefit or the benefit of our children if I predecease my spouse.
| Dated: | ||
| Signature: | ||
| Print Name: |
Page 11 of 11
ETHZilla Corporation
2025 Omnibus Incentive Plan
Restricted Stock Grant Agreement
Exhibit 10.34
ETHZIlla CORPORATION
AMENDED AND RESTATED SALES AGREEMENT
November 14, 2025
Clear Street LLC
TCBI Securities, Inc., d/b/a Texas Capital Securities
As Agents
Clear Street LLC
4 World Trade Center
New York, New York 10006
TCBI Securities, Inc.,
d/b/a Texas Capital Securities
2000 McKinney Avenue, Suite 700
Dallas, TX 75201
Ladies and Gentlemen:
WHEREAS, ETHZilla Corporation, a Delaware corporation (formerly 180 Life Sciences Corp.) (the “Company”), entered into an Amended and Restated Sales Agreement, dated as of August 22, 2025 (“Existing Agreement”), with Clear Street LLC (“Clear Street”), and the Company and Clear Street desire to amend and restate the Existing Agreement in its entirety as set forth in this agreement (this “Agreement”) to provide for, among other things, the addition of TCBI Securities, Inc., doing business as Texas Capital Securities (“TCS” and, together with Clear Street, the “Agents”).
The Company confirms its agreement with the Agents as follows:
1. Issuance and Sale of Shares. The Company agrees that, from time to time during the term of this Agreement, on the terms and subject to the conditions set forth herein and any Terms Agreement (as defined below), it may issue and sell to or through the Agents, acting as agent and/or principal, shares (the “Shares”) of common stock, par value $0.0001 per share (the “Common Shares”). The issuance and sale of Shares through the Agents will be effected pursuant to the Registration Statement (as defined below). The Company acknowledges and agrees that sales of Shares under this Agreement may be made through the respective affiliates of the Agents.
The Company has filed, in accordance with the provisions of the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations thereunder (the “Rules and Regulations”), with the U.S. Securities and Exchange Commission (the “Commission”), an “automatic shelf registration statement” as defined under Rule 405 on Form S-3 (File No. 333-289811), including a base prospectus, relating to certain securities, including the Common Shares, to be issued from time to time by the Company, and which incorporates by reference documents that the Company has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder (the “Exchange Act Rules and Regulations”). The Company has prepared a prospectus supplement specifically relating to the Shares (the “Prospectus Supplement”) to the base prospectus included as part of such registration statement. The Company has furnished to the Agents, for use by the Agents, copies of the prospectus included as part of such registration statement, as supplemented by the Prospectus Supplement. Except where the context otherwise requires, such registration statement, and any post-effective amendment thereto, as amended when it became effective, including all documents filed as part thereof or incorporated by reference therein, and including any information contained in a Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations or deemed to be a part of such registration statement pursuant to Rule 430B or 462(b) of the Rules and Regulations, or any subsequent registration statement on Form S-3 filed pursuant to Rule 415(a)(6) under the Securities Act by the Company with respect to the Shares, is herein called the “Registration Statement.” Any registration statement and amendments thereto filed pursuant to Rule 462(b) of the Securities Act and relating to the offering covered by the Registration Statement is herein called a “Rule 462(b) Registration Statement” and, after such filing, the “Registration Statement” shall include any Rule 462(b) Registration Statement. The base prospectus, including all documents incorporated therein by reference, included in the Registration Statement, as it may be supplemented by the Prospectus Supplement, in the form in which such prospectus and/or Prospectus Supplement have most recently been filed by the Company with the Commission pursuant to Rule 424(b) of the Rules and Regulations, together with any “issuer free writing prospectus,” as defined in Rule 433 of the Rules and Regulations (“Rule 433”), relating to the Shares that (i) is consented to by the Agents in writing (including any free writing prospectus prepared by the Company solely for use in connection with the offering contemplated by a particular Terms Agreement) (hereinafter referred to as a “Permitted Free Writing Prospectus”), (ii) is required to be filed with the Commission by the Company or (iii) is exempt from filing pursuant to Rule 433(d)(5)(i), in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g), is herein called the “Prospectus.” Any reference herein to the Registration Statement, the Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be incorporated by reference therein. For purposes of this Agreement, all references to the Registration Statement, the Prospectus or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to the Electronic Data Gathering Analysis and Retrieval System (“EDGAR”).
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2. Agency and Principal Transactions.
(a) Each time that the Company wishes to issue and sell Shares hereunder through the Agents, each acting as agent (each, an “Agency Transaction”), it will notify the designated Agent by email notice (or other method mutually agreed to in writing by the parties) (a “Placement Notice”) containing the parameters in accordance with which it desires the Shares to be sold, which shall at a minimum include the number of Shares to be issued, the time period during which sales are requested to be made, any limitation on the number of Shares that may be sold in any one Trading Day (as defined in Section 3) and any minimum price below which sales may not be made, a form of which containing such minimum sales parameters necessary is attached hereto as Schedule 1. The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 2 (with a copy to each of the other individuals from the Company listed on such schedule), and shall be addressed to each of the individuals from such Agent set forth on Schedule 2, as such Schedule 2 may be amended from time to time. The Placement Notice shall be effective upon receipt by such Agent unless and until (i) in accordance with the notice requirements set forth in Section 4, such Agent declines in writing to accept the terms contained therein for any reason, in its sole discretion, (ii) the entire amount of the Shares have been sold, (iii) in accordance with the notice requirements set forth in Section 4, the Company suspends, amends, supersedes, or terminates the Placement Notice for any reason, in its sole discretion, (iv) the Company issues a subsequent Placement Notice with parameters superseding those on the earlier dated Placement Notice, or (v) this Agreement has been terminated under the provisions of Section 11. The amount of any discount, commission or other compensation to be paid by the Company to such Agent in connection with the sale of Shares shall be calculated in accordance with the terms set forth in Schedule 3. It is expressly acknowledged and agreed that neither the Company nor such Agent will have any obligation whatsoever with respect to an Agency Transaction or any Shares to be placed as part thereof unless and until the Company delivers a Placement Notice to an Agent and such Agent does not decline (and the Company does not suspend or terminate) such Placement Notice pursuant to the terms set forth above, and then only upon the terms specified therein and herein. In the event of a conflict between the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.
(b) The Company may also offer to sell the Shares directly to one or more of the Agents, as principal, in which event such parties shall enter into a separate agreement (each, a “Terms Agreement”) in substantially the form of Schedule 2(b) hereto (with such changes thereto as may be agreed upon by the Company and the Agent(s)), relating to such sale in accordance with Section 3(b) hereof (each such transaction being referred to as a “Principal Transaction”).
(c) Under no circumstances shall the Company cause or request the offer or sale of any Shares if, after giving effect to the sale of such Shares, the aggregate number or gross sales proceeds of Shares sold pursuant to this Agreement would exceed the lesser of: (a) the number of authorized but unissued Common Shares (less Common Shares issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from the Company’s authorized capital stock), (b) the number or dollar amount of Common Shares that the Company’s board of directors or a duly authorized committee thereof is authorized to issue and sell from time to time, or (c) the dollar amount of Common Shares for which the Company has filed a Prospectus (the lesser of (a)-(c), the “Maximum Amount”). Under no circumstances shall the Company cause or request the offer or sale of any Shares pursuant to this Agreement at a price lower than the minimum price authorized from time to time by the Company’s board of directors or a duly authorized committee thereof. Notwithstanding anything to the contrary contained herein, the parties hereto acknowledge and agree that compliance with the limitations set forth in this Section 2 on the number or dollar amount of Shares that may be issued and sold under this Agreement or any Terms Agreement from time to time shall be the sole responsibility of the Company, and that the Agents shall have no obligation in connection with such compliance.
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(d) The Company and each Agent agrees that an offer to sell, any solicitation of an offer to buy, or any sales of Shares shall only be effected by or through one Agent on any single given day, and the Company shall in no event request that the other Agent sell the Shares on the same day.
3. Sale of Shares by the Agents.
(a) Subject to the terms and conditions herein set forth, upon the Company’s delivery of a Placement Notice with respect to an Agency Transaction, and unless the sale of the Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement, an Agent, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Capital Market (or any successor principal market on which the Common Shares are listed or quoted, the “Exchange”) to sell such Shares up to the amount specified, and otherwise in accordance with the terms of such Placement Notice. An Agent may sell Shares in an Agency Transaction (A) in privately negotiated transactions with the consent of the Company; (B) as block transactions; or (C) by any other method permitted by law deemed to be “at the market” offering as defined in Rule 415 of the Rules and Regulations, including without limitation sales made through the Exchange or on any other existing trading market for the Common Shares. Each Agent will provide written confirmation to the Company (including by email correspondence to each of the individuals of the Company set forth on Schedule 2) no later than the opening of the Trading Day (as defined below) immediately following the Trading Day on which such Agent has made sales of Shares hereunder setting forth the number of Shares sold on such day, the volume-weighted average price of the Shares sold, and the Net Proceeds (as defined below) payable to the Company. In the event the Company engages an Agent for a sale of Shares in an Agency Transaction that would constitute a “block” within the meaning of Rule 10b-18(a)(5) of the Exchange Act Rules and Regulations, the Company will provide such Agent, at such Agent’s request and upon reasonable advance notice to the Company, on or prior to the Settlement Date (as defined below), the opinions of counsel, accountant’s letter and officers’ certificates set forth in Section 8, each dated the Settlement Date, and such other documents and information as such Agent shall reasonably request. Each Agent shall not purchase Shares for its own account as principal unless expressly authorized to do so by the Company in a Terms Agreement. The Company acknowledges and agrees that (i) there can be no assurance that the Agents will be successful in selling Shares, and (ii) no Agent will incur liability or obligation to the Company or any other person or entity if such Agent does not sell Shares for any reason other than a failure by such Agent to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such Shares as required under this Section 3. Notwithstanding anything to the contrary contained herein, the sale of Shares in privately negotiated transactions cannot exceed 5% of the number of Common Shares that may be sold pursuant to this Agreement. For the purposes hereof, “Trading Day” means any day on which the Company’s Common Shares are purchased and sold on the Exchange.
(b)(i) If the Company wishes to issue and sell the Shares to an Agent pursuant to this Agreement in a Principal Transaction, it will notify such Agent of the proposed terms of the Principal Transaction. If such Agent, acting as principal, wishes to accept such proposed terms (which it may decline to do for any reason in its sole discretion) or, following discussions with the Company, wishes to accept amended terms, the Company and such Agent shall enter into a Terms Agreement setting forth the terms of such Principal Transaction.
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(ii) The terms set forth in a Terms Agreement shall not be binding on the Company or an Agent unless and until the Company and such Agent have each executed and delivered such Terms Agreement accepting all of the terms of such Terms Agreement. In the event of a conflict between the terms of this Agreement and the terms of a Terms Agreement, the terms of such Terms Agreement shall control.
(iii) Each sale of the Shares to an Agent in a Principal Transaction shall be made in accordance with the terms of this Agreement and a Terms Agreement, which shall provide for the sale of such Shares to, and the purchase thereof by, such Agent. A Terms Agreement may also specify certain provisions relating to the reoffering of such Shares by such Agent. The commitment of such Agent to purchase the Shares pursuant to any Terms Agreement shall be deemed to have been made on the basis of the representations, warranties and agreements of the Company contained, and shall be subject to the terms and conditions set forth, in this Agreement and such Terms Agreement. Any such Terms Agreement shall specify the number of the Shares to be purchased by such Agent pursuant thereto, the price to be paid to the Company for such Shares, any provisions relating to rights of, and default by, such Agent in the reoffering of the Shares, and the time, date (each such time and date being referred to herein as a “Principal Settlement Date”) and place of delivery of and payment for such Shares.
(c) Notwithstanding any other provision of this Agreement, the Company shall not offer, sell or deliver, or request the offer or sale, of any Shares pursuant to this Agreement (whether in an Agency Transaction or a Principal Transaction) and, by notice to the Agents given by telephone (confirmed promptly by email), shall cancel any instructions for the offer or sale of any Shares, and no Agent shall be obligated to offer or sell any Shares, (i) during any period in which the Company is, or could be deemed to be, in possession of material non-public information, or (ii) at any time from and including the date on which the Company shall issue a press release containing, or shall otherwise publicly announce, its earnings, revenues or other results of operations (an “Earnings Announcement”) through and including the time that the Company files a Quarterly Report on Form 10-Q or an Annual Report on Form 10-K that includes consolidated financial statements as of and for the same period or periods, as the case may be, covered by such Earnings Announcement.
4. Suspension of Sales.
(a) The Company or an Agent may, upon notice to the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) or by telephone (confirmed immediately by email correspondence to each of the individuals of the other party set forth on Schedule 2), suspend any sale of Shares; provided, however, that such suspension shall not affect or impair either party’s obligations with respect to any Shares sold hereunder prior to the receipt of such notice. Each of the parties agrees that no such notice under this Section 4 shall be effective against the other unless it is made to one of the individuals named on Schedule 2, as such schedule may be amended in writing from time to time.
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(b) If either an Agent or the Company has reason to believe that the exemptive provisions set forth in Rule 101(c)(1) of Regulation M under the Exchange Act are not satisfied with respect to the Common Shares, it shall promptly notify the other party, and such Agent may, at its sole discretion, suspend sales of the Shares under this Agreement.
(c) Notwithstanding any other provision of this Agreement, during any period in which the Registration Statement is no longer effective under the Securities Act, the Company shall promptly notify the Agents, the Company shall not request the sale of any Shares, and the Agents shall not be obligated to sell or offer to sell any Shares.
5. Settlement.
(a) Settlement of Shares. Unless otherwise agreed in writing between the parties with respect to any Placement, settlement for sales of Shares in an Agency Transaction will occur on the Trading Day following the date on which such sales are made (each, an “Agency Settlement Date”; the earlier of the first such Agency Settlement Date and the first Principal Settlement Date, the “First Delivery Date”; and any Agency Settlement Date and Principal Settlement Date, a “Settlement Date”). The amount of proceeds to be delivered to the Company on a Settlement Date against receipt of the Shares sold (the “Net Proceeds”) will be equal to the aggregate sales price received by the designated Agent at which such Shares were sold, after deducting (i) such Agent’s commission, discount or other compensation for such sales payable by the Company pursuant to Section 2 or pursuant to any applicable Terms Agreement, (ii) any other amounts due and payable by the Company to such Agent hereunder pursuant to Section 7(f) (Expenses), and (iii) any transaction fees imposed by any governmental or self-regulatory organization in respect of such sales.
(b) Delivery of Shares. On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically transfer the Shares being sold by crediting the designated Agent’s or its designee’s account (provided such Agent shall have given the Company written notice of such designee prior to the Settlement Date) at The Depository Trust Company through its Deposit/Withdrawal at Custodian system or by such other means of delivery as may be mutually agreed upon by the parties, which in all cases shall be freely tradeable, transferable, registered shares in good deliverable form. On each Settlement Date, the designated Agent will deliver the related Net Proceeds in same day funds to an account designated by the Company prior to the Settlement Date. The Company agrees that if the Company (or its transfer agent, if applicable) defaults on its obligation to deliver Shares on a Settlement Date, in addition to and in no way limiting the rights and obligations set forth in Section 9(a) (Indemnification and Contribution), it will (i) hold such Agent harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and (ii) pay to such Agent any commission, discount, or other compensation to which it would otherwise have been entitled absent such default.
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6. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Agents that as of (i) the date of this Agreement, (ii) each date on which the Company executes and delivers a Terms Agreement, (iii) the date and time of each sale of any Shares pursuant to this Agreement (each of clauses (ii) and (iii), a “Time of Sale”), (iv) each Settlement Date, and (v) each Bring-Down Date (as defined below):
(a) Compliance with Registration Requirements. The Registration Statement is an “automatic shelf registration statement” as defined under Rule 405 of the Securities Act that has been filed with the Commission not earlier than three (3) years prior to the date hereof; such Registration Statement, and any post-effective amendment thereto, shall have become effective under the Securities Act prior to the issuance of any Placement Notice by the Company. The Company has complied to the Commission’s satisfaction with all requests of the Commission for additional or supplemental information. The Company meets the requirements for use of Form S-3 under the Securities Act. The sale of the Shares hereunder meets the requirements of General Instruction I.B.1. of Form S-3.
(b) No Misstatement or Omission. At the respective times the Registration Statement and any amendments thereto became or become effective as to the Agents, the Registration Statement and any amendments thereto conformed or will conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and did not or will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendments or supplements thereto, at the time the Prospectus or any amendment or supplement thereto was or will be issued, conformed or will conform in all material respects to the requirements of the Securities Act and the Rules and Regulations and did not or will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were or will be made, not misleading. The foregoing representations and warranties in this paragraph (b) shall not apply to information contained in or omitted from the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon, and in conformity with, the Agent Information (as defined below).
(c) No Stop Orders. No stop order suspending the effectiveness of the Registration Statement, nor any order preventing or suspending the use of the Prospectus, has been issued and no proceeding for that purpose or pursuant to Section 8A of the Securities Act has been initiated or threatened by the Commission.
(d) Documents Incorporated by Reference. The documents incorporated by reference in the Registration Statement and the Prospectus, when they were filed with the Commission (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), conformed in all material respects to the requirements of the Exchange Act Rules and Regulations and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein, or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Registration Statement or the Prospectus, when such documents are filed with Commission, will conform in all material respects to the requirements of the Exchange Act and the Exchange Act Rules and Regulations and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The foregoing representations and warranties in this paragraph (d) shall not apply to information contained in or omitted from the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon, and in conformity with, the Agent Information.
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(e) Distribution of Offering Materials. The Company has not, directly or indirectly, distributed and will not distribute any offering material in connection with the offering and sale of the Shares other than the Registration Statement or the Prospectus.
(f) Status of Issuer. (i) (A) At the time of filing the Registration Statement, (B) at the time of the most recent amendment to the Registration Statement for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), and (C) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) under the Securities Act) made any offer relating to the Shares in reliance on the exemption of Rule 163 under the Securities Act, if any, the Company was a “well-known seasoned issuer” as defined in Rule 405 under the Securities Act; and (ii) at the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares, if any, the Company was not an “ineligible issuer” as defined in Rule 405 under the Securities Act. The Company agrees to notify the Agents promptly if the Company becomes an “ineligible issuer.”
(g) Organization and Good Standing. The Company and 180 SPV Treasury Vehicle I, LLC and 180 Life Corp. (which are the only “significant subsidiaries” (as defined under Rule 1-02 of Regulation S-X) of the Company as of the date of this Agreement) have been duly organized and are validly existing as corporations or other legal entities in good standing (or the foreign equivalent thereof) under the laws of their respective jurisdictions of organization. The Company, 180 SPV Treasury Vehicle I, LLC and 180 Life Corp. are duly qualified to do business and are in good standing as foreign corporations or other legal entities in each jurisdiction in which such qualification is required and have all power and authority (corporate or other) necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not have a Material Adverse Effect. For purposes of this Agreement, “Material Adverse Effect” means any change, event, circumstance, development, condition, occurrence or effect that, individually or in the aggregate, (i) was, is, or would reasonably be expected to be, materially adverse to the business, financial condition, properties, assets, liabilities, stockholders’ equity or results of operations of the Company and its subsidiaries, taken as a whole, (ii) would result in a materially adverse effect on the legality, validity or enforceability of this Agreement or (iii) materially delay or materially impair the ability of the Company to perform, or prevents the Company from performing, with its obligations under this Agreement or to consummate any transactions contemplated by this Agreement or the Prospectus. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than those listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the most recently ended fiscal year and other than (i) those subsidiaries not required to be listed on Exhibit 21.1 by Item 601 of Regulation S-K under the Exchange Act and (ii) those subsidiaries formed since the last day of the most recently ended fiscal year.
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(h) The Sales Agreement; Terms Agreement. The Company has corporate power and authority to enter into and perform its obligations under this Agreement and any Terms Agreement and to consummate the transactions contemplated herein and therein. This Agreement has been duly authorized, executed and delivered by the Company. Any Terms Agreement will have been duly authorized, executed and delivered by the Company.
(i) The Shares. The Shares to be issued and sold by the Company hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided in this Agreement or any Terms Agreement, (i) will be duly and validly issued, fully paid and non-assessable, (ii) will be free and clear of any pledge, lien, encumbrance, security interest or other claim, and (iii) will conform to the descriptions thereof in the Registration Statement and the Prospectus. The issuance of the Shares will not, (a) obligate the Company to offer to issue, or issue, Common Shares or other securities to any person pursuant to any preemptive rights, rights of first refusal, rights of participation or similar rights, or (b) result in any adjustment (automatic, at the election of any person or otherwise) of the exercise, conversion, exchange or reset price under, or any other anti-dilution adjustment pursuant to, any outstanding securities of the Company or (c) be subject to any preemptive right, right of first offer, or any similar right of any person.
(j) Capitalization. The Company’s disclosure of its authorized, issued and outstanding capital stock in the Prospectus is accurate in all material respects as of the date indicated therein. All of the issued and outstanding Common Shares have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding shares of capital stock of the Company were issued in violation of any preemptive or other similar rights of any securityholder of the Company which have not been waived, and such shares were issued in compliance in all material respects with applicable state and federal securities law and any rights of third parties. Except as disclosed in the Prospectus, there are no outstanding rights (including, without limitation, pre-emptive or other similar rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interest in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; the capital stock of the Company conforms in all material respects to the description thereof contained in the Prospectus; and all the outstanding shares of capital stock or other equity interests of each subsidiary owned, directly or indirectly, by the Company have been duly and validly authorized and issued, are fully paid and non-assessable (except, in the case of any foreign subsidiary, for directors’ qualifying shares) and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party.
(k) No Restrictions on Subsidiaries. Except as described in the Prospectus, no subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.
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(l) No Conflicts. The execution, delivery and performance of this Agreement by the Company, the issuance and sale of the Shares and the consummation of the other transactions contemplated by this Agreement will not (i) violate any provision of the Second Amended and Restated Certificate of Incorporation or Seconded Amended and Restated Bylaws of the Company, in each case, as currently in effect, (ii) conflict with or result in a violation of or default (with or without notice or lapse of time, or both) under, result in the creation or imposition of any lien, charge or encumbrance upon or give rise to a right of termination, cancellation or acceleration of any obligation, a change of control right or to a loss of a benefit under any agreement or instrument, credit facility, indenture, deed of trust, mortgage, lease, license, judgment, order, statute, law, ordinance, rule or regulations, applicable to the Company or any of its subsidiaries or their respective properties or assets, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any of its subsidiaries is subject (including federal and state securities laws and regulations) and the rules and regulations of the Exchange, or by which any property or asset of the Company or any of its subsidiaries is bound or affected, except, in the case of clauses (ii) and (iii), as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect.
(m) No Consents Required. Except for the registration of the Shares under the Securities Act and applicable state securities laws, and such consents, approvals, authorizations, orders and registrations or qualifications as may be required by the Financial Industry Regulatory Authority (“FINRA”) and the Exchange in connection with the sale of the Shares under this Agreement or any Terms Agreement and the listing of the Shares on the Exchange, no consent, approval, authorization or order of, or filing, qualification or registration (each an “Authorization”) with, any court, governmental or regulatory agency or body, foreign or domestic, which has not been made, obtained or taken and is not in full force and effect, is required for the execution, delivery and performance of this Agreement or any Terms Agreement by the Company, the issuance and sale of the Shares or the consummation of the transactions contemplated hereby and thereby; and no event has occurred that allows or results in, or after notice or lapse of time or both would allow or result in, revocation, suspension, termination or invalidation of any such Authorization or any other impairment of the rights of the holder or maker of any such Authorization.
(n) Independent Auditors. M&K CPA’s, PLLC, who has certified certain financial statements of the Company and its subsidiaries included or incorporated by reference in the Prospectus, is an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of Article 2-01 of Regulation S-X and the rules of the Public Company Accounting Oversight Board (United States) (the “PCAOB”). Marcum LLP, who has certified certain financial statements of the Company and its subsidiaries as of December 31, 2023 and for the year ended December 31, 2023 included or incorporated by reference in the Prospectus, was formerly an independent registered public accounting firm with respect to the Company and its subsidiaries within the meaning of Article 2-01 of Regulation S-X and the rules of the PCAOB.
(o) Financial Statements. The financial statements, together with the related notes, included or incorporated by reference in the Prospectus fairly present in all material respects the financial position and the results of operations and changes in financial position of the Company and its consolidated subsidiaries at the respective dates or for the respective periods therein specified. Such statements and related notes have been prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved except as may be set forth in the related notes included or incorporated by reference in the Prospectus. The financial statements, together with the related notes, included or incorporated by reference in the Prospectus comply in all material respects with Regulation S-X. No other financial statements or supporting schedules or exhibits are required by Regulation S-X to be described or included or incorporated by reference in the Prospectus. There is no pro forma or as adjusted financial information which is required to be included or incorporated by reference in the Prospectus, in accordance with Regulation S-X, which has not been included or incorporated as so required. All information contained in the Prospectus regarding “non-GAAP financial measures” (as defined in Regulation G) complies with Regulation G and Item 10 of Regulation S-K, to the extent applicable.
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(p) eXtensible Business Reporting Language. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Prospectus fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.
(q) No Material Adverse Change. Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included or incorporated by reference in the Prospectus, (i) any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or action, order or decree of any court or governmental or regulatory authority, other than as set forth or contemplated in the Prospectus; (ii) any change in the capital stock (other than the issuance of Common Shares upon exercise of stock options and warrants described as outstanding in the Prospectus or any award under any Exempt Plan and the grant of options and other awards under any Exempt Plan) or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock; or (iii) any material adverse changes, or any development involving a prospective material adverse change, in or affecting the business, properties, assets, general affairs, management, financial position, prospects, stockholders’ equity or results of operations of the Company and its subsidiaries taken as a whole, other than as set forth or contemplated in the Prospectus.
(r) Legal Proceedings. Except as set forth in the Prospectus, there is no action, suit, proceeding, arbitration, claim, investigation, charge, complaint or inquiry pending or, to the Company’s knowledge, threatened against the Company or any of its subsidiaries which, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect, nor are there any orders, writs, injunctions, judgments or decrees outstanding of any court or government agency or instrumentality and binding upon the Company or any of its subsidiaries that have had or would reasonably be expected to have a Material Adverse Effect. Neither the Company nor any subsidiary, nor to the knowledge of the Company, any director or officer of the Company or any subsidiary, is, or within the last ten years has been, the subject of any action involving a claim of violation of or liability under federal or state securities laws relating to the Company or such subsidiary or a claim of breach of fiduciary duty relating to the Company or such subsidiary, which, individually or in the aggregate, has or would reasonably be expected to result in a Material Adverse Effect.
(s) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in violation of its Second Amended and Restated Certificate of Incorporation or Second Amended and Restated Bylaws (or analogous governing instrument, as applicable), (ii) in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) in violation in any respect of any law, ordinance, governmental rule, regulation or court order, decree or judgment to which it or its property or assets may be subject, except, in the case of clauses (ii) and (iii) above, for any such violation or default that could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
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(t) Licenses or Permits. Neither the Company nor any of its subsidiaries is in violation of, or has received any notices of violations with respect to, any laws, statutes, ordinances, rules or regulations of any governmental body, court or government agency or instrumentality, except for violations which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect. The Company and its subsidiaries have all required licenses, permits, certificates and other authorizations (collectively, “Governmental Authorizations”) from such federal, state or local government or governmental agency, department or body that are currently necessary for the operation of the business of the Company and its subsidiaries as currently conducted, except where the failure to possess currently such Governmental Authorizations has not had and is not reasonably expected, individually or in the aggregate, to have a Material Adverse Effect. Neither the Company nor any subsidiary has received any written (or, to the Company’s knowledge, oral) notice regarding any revocation or material modification of any such Governmental Authorization, which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, has or would reasonably be expected to result in a Material Adverse Effect.
(u) Investment Company Act. Neither the Company nor any of its subsidiaries is or, after giving effect to the offer and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (the “Investment Company Act”).
(v) No Stabilization. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.
(w) Intellectual Property. The Company and its subsidiaries own, or have rights to use, all material inventions, patent applications, patents, trademarks, trade names, service names, service marks, copyrights, trade secrets, know how (including unpatented and/or unpatentable proprietary of confidential information, systems or procedures) and other intellectual property as described in the Prospectus necessary for, or used in the conduct of their respective businesses (including as described in the Prospectus) (collectively, “Intellectual Property”), except where any failure to own or have rights to use such Intellectual Property has not had, and would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Intellectual Property owned by the Company and its subsidiaries has not been adjudged by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part. To the Company’s knowledge: (i) there are no third parties who claim any ownership rights to any Intellectual Property owned by the Company and its subsidiaries; and (ii) there is no infringement by third parties of any Intellectual Property owned by the Company and its subsidiaries, except, in each case of (i) and (ii), which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect. No action, suit, or other proceeding is pending, or, to the Company’s knowledge, is threatened in writing: (A) challenging the Company’s or its subsidiaries’ rights in or to any Intellectual Property owned by the Company and its subsidiaries; (B) challenging the validity, enforceability or scope of any Intellectual Property; or (C) alleging that the Company or any of its subsidiaries infringes, misappropriates, or otherwise violates any patent, trademark, trade name, service name, copyright, trade secret or other intellectual property rights of others, except, in each case of (A) through (C), which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect. Except, in each case, which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries have complied with the terms of each agreement pursuant to which Intellectual Property has been licensed to the Company or any of its subsidiaries, and to the Company’s knowledge all such agreements are in full force and effect. The Company and its subsidiaries have taken all commercially reasonable steps to protect and maintain the Intellectual Property owned by the Company and its subsidiaries, except where any failure to so protect or maintain, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect.
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(x) Regulatory Permits. The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the Prospectus, except where the failure to possess such permits would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
(y) IT Systems. The Company and its subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform in all material respects as required in connection with the operation of the business of the Company and its subsidiaries as currently conducted, and, to the Company’s actual knowledge, are free and clear of all material Trojan horses, time bombs, malware and other malicious code. The Company and its subsidiaries have implemented and maintained commercially reasonable physical, technical and administrative controls designed to maintain and protect the confidentiality, integrity, availability, privacy and security of all sensitive, confidential or regulated data (“Confidential Data”) used or maintained in connection with their businesses and Personal Data (defined below), and the integrity, availability continuous operation, redundancy and security of all IT Systems. “Personal Data” means the following data used in connection with the Company’s and its subsidiaries’ businesses and in their possession or control: (i) a natural person’s name, street address, telephone number, e-mail address, photograph, social security number or other tax identification number, driver’s license number, passport number, credit card number or bank information; (ii) information that identifies or may reasonably be used to identify an individual; (iii) any information that would qualify as “protected health information” under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”); and (iv) any information that would qualify as “personal data,” “personal information” (or similar term) under the Privacy Laws. To the Company’s knowledge, there have been no breaches, outages or unauthorized uses of or accesses to the Company’s IT Systems, Confidential Data, or Personal Data that would require notification under Privacy Laws (as defined below).
(z) Compliance with Data Privacy Laws. The Company and its subsidiaries are, and at all prior times were, in material compliance with all applicable state, federal and foreign data privacy and security laws and regulations regarding the collection, use, storage, retention, disclosure, transfer, disposal, or any other processing (collectively “Process” or “Processing”) of Personal Data, including without limitation HIPAA, all other local, state and federal laws relating to the regulation of the Company or its subsidiaries, and the regulations promulgated pursuant to such statutes and any state (collectively, the “Privacy Laws”). To ensure material compliance with the Privacy Laws, the Company and its subsidiaries have in place, comply with, and take all appropriate steps necessary to ensure compliance in all material respects with their policies and procedures relating to data privacy and security, and the Processing of Personal Data and Confidential Data (the “Privacy Statements”). The Company and its subsidiaries have, except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, at all times since inception provided accurate notice of their Privacy Statements then in effect to its customers, employees, third party vendors and representatives. None of such disclosures made or contained in any Privacy Statements have been materially inaccurate, misleading, incomplete, or in material violation of any Privacy Laws.
(aa) Compliance with Health Care Laws. The Company and its subsidiaries are in compliance in all material respects with all Health Care Laws to the extent applicable to the current business of the Company and its subsidiaries or any of their respective activities. For purposes of this Agreement, “Health Care Laws” means: (i) the Federal Food, Drug, and Cosmetic Act (21 U.S.C. Section 301 et seq.) and the Public Health Service Act (42 U.S.C. Section 201 et seq.), and the regulations promulgated thereunder; (ii) all applicable federal, state, local and foreign health care fraud and abuse laws, including, without limitation, the Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b)); (iii) HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. Section 17921 et seq.); (iv) the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010; (vii) licensure, quality, safety and accreditation requirements under applicable federal, state, local or regulatory bodies; (viii) all other local, state, federal, national, supranational, relating to the regulation of the Company or its subsidiaries, and (ix) the regulations promulgated pursuant to such statutes and any state or non-U.S. counterpart thereof. Neither the Company nor any of its subsidiaries has received written or, to the Company’s knowledge, oral notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any court or arbitrator or governmental or regulatory authority or third party alleging that any product operation or activity is in material violation of any Health Care Laws nor, to the Company’s knowledge, is any such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action threatened. The Company and its subsidiaries have filed, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Health Care Laws, and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and accurate on the date filed in all material respects (or were corrected or supplemented by a subsequent submission). Neither the Company nor any of its subsidiaries is a party to any corporate integrity agreements, monitoring agreements, consent decrees, settlement orders, or similar agreements with or imposed by any governmental or regulatory authority. Additionally, neither the Company nor any of its subsidiaries nor any of their respective employees, officers, directors, or, to the knowledge of the Company, agents has been excluded, suspended or debarred from participation in any U.S. federal health care program or human clinical research or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that would reasonably be expected to result in debarment, suspension, or exclusion.
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(bb) Bank Holding Company Act. Neither the Company nor any of its subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(cc) Title to Real and Personal Property. Each of the Company and its subsidiaries has good and marketable title to all personal property owned by it that is material to the business of the Company and its subsidiaries taken as a whole, free and clear of all liens, encumbrances and defects except such as are disclosed in the Prospectus, do not materially and adversely affect the value of such property and do not materially and adversely interfere with the use made and proposed to be made of such property by the Company or its subsidiaries, as the case may be. Any real property and buildings held under lease by the Company or its subsidiaries is held under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or its subsidiaries, as the case may be. The Company does not own any real property.
(dd) Compliance with ERISA; No Labor Dispute. Except as would not be reasonably likely to result in a Material Adverse Effect, each Benefit Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (“ERISA”), the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and other applicable laws, rules and regulations. The Company and its subsidiaries are in compliance with all applicable federal, state and local laws, rules and regulations regarding employment, except for any failures to comply that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. There is no labor dispute, strike or work stoppage against the Company or its subsidiaries pending or, to the knowledge of the Company, threatened which, individually or in the aggregate, would reasonably be expected to interfere with the business activities of the Company, except where such dispute, strike or work stoppage is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. For purposes of this Agreement, “Benefit Plan” or “Benefit Plans” means employee benefit plans as defined in Section 3(3) of ERISA, and all other employee benefit practices or arrangements, including, without limitation, any such practices or arrangements providing severance pay, sick leave, vacation pay, salary continuation for disability, retirement benefits, deferred compensation, bonus pay, incentive pay, stock options or other stock-based compensation, hospitalization insurance, medical insurance, life insurance, scholarships or tuition reimbursements, maintained by the Company or to which the Company or any of its subsidiaries is obligated to contribute for employees or former employees of the Company and its subsidiaries.
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(ee) Environmental Laws and Hazardous Materials. The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits and other Governmental Authorizations required under applicable Environmental Laws to conduct their business and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. None of the Company nor any of its subsidiaries has received since January 1, 2024, any written notice or other communication (in writing or otherwise), whether from a governmental authority or other person, that alleges that the Company or any subsidiary is not in compliance with any Environmental Law and, to the knowledge of the Company, there are no circumstances that may prevent or interfere with the Company’s or any subsidiary’s compliance in any material respects with any Environmental Law in the future, except where such failure to comply would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company: (i) no current or (during the time a prior property was leased or controlled by the Company) prior property leased or controlled by the Company or any subsidiary has received since January 1, 2024, any written notice or other communication relating to property owned or leased at any time by the Company, whether from a governmental authority, or other person, that alleges that such current or prior owner or the Company or any subsidiary is not in compliance with or violated any Environmental Law relating to such property and (ii) the Company has no material liability under any Environmental Law.
(ff) Taxes. Each of the Company and 180 SPV Treasury Vehicle I, LLC have filed all federal, state and foreign income Tax Returns and other Tax Returns required to have been filed under applicable law (or extensions have been duly obtained) and has paid all Taxes required to have been paid by it, except for those which are being contested in good faith and except where failure to file such Tax Returns or pay such Taxes would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No assessment in connection with United States federal tax returns has been made against the Company without subsequently being paid, settled or withdrawn. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or reassessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect. No audits, examinations, or other proceedings with respect to any material amounts of Taxes of the Company and its subsidiaries are presently in progress or have been asserted or proposed in writing without subsequently being paid, settled or withdrawn. There are no liens on any of the assets of the Company. At all times since inception, the Company has been and continues to be classified as a corporation for U.S. federal income tax purposes. Neither the Company nor any of its subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the period specified in Section 897(c)(1)(A)(ii) of the Code. For purposes of this Agreement, (i) “Tax” or “Taxes” means any and all federal, state, local, foreign and other taxes, levies, fees, imposts, duties and charges of whatever kind (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto), whether or not imposed on the Company or its subsidiaries (if any) including, without limitation, taxes imposed on, or measured by, income, franchise, profits or gross receipts, and also ad valorem, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premium, windfall profits, transfer and gains taxes and customs duties; and (ii) “Tax Returns” means returns, reports, information statements and other documentation (including any additional or supporting material) filed or maintained, or required to be filed or maintained, in connection with the calculation, determination, assessment or collection of any Tax and shall include any amended returns required as a result of examination adjustments made by the Internal Revenue Service or other Tax authority.
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(gg) Insurance. The Company carries or is entitled to the benefits of insurance in such amounts and covering such risks that is customary for comparably situated companies and is adequate for the conduct of its business and the value of its real and personal properties (owned or leased) and tangible assets, and each of such insurance policies is in full force and effect and the Company is in compliance in all material respects with the terms of such insurance policies. Other than customary end-of-policy notifications from insurance carriers, since January 1, 2024, the Company has not received any notice or other communication regarding any actual or possible: (i) cancellation or invalidation of any material insurance policy or (ii) refusal or denial of any coverage, reservation of rights or rejection of any material claim under any insurance policy.
(hh) Accounting Controls; Disclosure Controls. The Company maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that is designed to comply with the requirements of the Exchange Act applicable to the Company and provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including policies and procedures sufficient to provide reasonable assurance (i) that the Company maintains records that in reasonable detail accurately and fairly reflect the Company’s transactions and dispositions of assets, (ii) that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, (iii) that receipts and expenditures are made only in accordance with authorizations of management and the Board and (iv) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements. Except as disclosed in the Prospectus, the Company has not identified any material weaknesses in the design or operation of the Company’s internal control over financial reporting. The Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are designed to provide reasonable assurance that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.
(ii) No Registration Rights. No person or entity has the right to require registration of Common Shares or other securities of the Company or any of its subsidiaries because of the filing or effectiveness of the Registration Statement or otherwise, except for persons and entities who have expressly waived such right in writing or who have been given timely and proper written notice and have failed to exercise such right within the time or times required under the terms and conditions of such right. Except as described in the Prospectus, there are no persons with registration rights or similar rights to have any securities registered by the Company or any of its subsidiaries under the Securities Act.
(jj) No Broker’s Fees. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement or any Terms Agreement) that would give rise to a valid claim against the Company or any of its subsidiaries or the Agents for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Shares or any transaction contemplated by this Agreement or by any Terms Agreement.
(kk) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(ll) Listing. Except as disclosed in the Prospectus, the Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Common Shares are registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act and are listed on the Exchange, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Shares under the Exchange Act or delisting the Common Shares from the Exchange, nor has the Company received any notification that the Commission or the Exchange is contemplating terminating such registration or listing. All of the Shares that have been or may be sold under this Agreement or any Terms Agreement have been approved for listing on the Exchange, subject only to official notice of issuance (if applicable); the Company has taken all necessary actions to ensure that, upon and at all times after the Exchange shall have approved the Shares for listing, it will be in compliance with all applicable corporate governance requirements set forth in the Exchange’s listing rules that are then in effect.
(mm) Sarbanes-Oxley Act. The Company is, and since January 1, 2024 has been, in compliance in all material respects with all applicable requirements of the Sarbanes-Oxley Act of 2002 and applicable rules and regulations promulgated by the SEC thereunder.
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(nn) Anti-Bribery and Anti-Money Laundering. Neither the Company nor any of its subsidiaries, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company or any such subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, or (iii) otherwise violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(oo) Statistical and Market Data. The statistical and market related data included or incorporated by reference in the Prospectus are based on or derived from sources that the Company believes to be reliable and accurate, and such data agree with the sources from which they are derived.
(pp) Sanctions. Neither the Company nor any of its subsidiaries, directors, officers, or employees, nor, to the knowledge of the Company, any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries is currently the subject or the target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, His Majesty’s Treasury or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company or any of its subsidiaries located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, the so-called Donetsk People’s Republic, so-called Luhansk People’s Republic, any other Covered Region of Ukraine identified pursuant to Executive Order 14065, the Crimea region and non-government controlled areas of the Zaporizhzhia and Kherson Regions of Ukraine, Cuba, Iran, North Korea and Syria (each, a “Sanctioned Country”); and the Company will not directly or indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person that, at the time of such funding or facilitation, is the subject or target of Sanctions, (ii) to fund or facilitate any activities of or business in any Sanctioned Country, or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. For the past five years, the Company and its subsidiaries have not knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.
(qq) Crypto Assets and Related Third-Party Arrangements.
(i) The Company owns, directly or indirectly, and has good and valid title to all material Crypto Assets reflected in its financial statements or otherwise held in connection with its business, free and clear of all liens, encumbrances, pledges, and security interests, other than as disclosed in the Prospectus.
(ii) The Company holds Crypto Assets either (i) in digital wallets or cold storage under its sole control, or (ii) through custodial arrangements with Coinbase Global, Inc. (the “Custodian”), which is subject to a written agreement with the Company that includes provisions addressing fiduciary duties (as applicable), asset segregation, loss and theft protections, incident reporting, and compliance with applicable law. To the Company’s knowledge, the Custodian is duly authorized or registered, as required, under applicable U.S. federal or state law to perform digital asset custody services and complies in all material respects with applicable regulatory requirements.
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(iii) The Company has authorized Electric Treasury Edge, LLC (the “Asset Manager”) to manage or invest its Crypto Assets pursuant to an Asset Management Agreement dated as of August 4, 2025 (the “Asset Management Agreement”). The Asset Management Agreement (x) does not transfer beneficial ownership of the Crypto Assets, (y) preserves the Company’s right to withdraw or liquidate such assets upon reasonable notice, and (z) requires periodic performance and risk reporting. The Company conducts diligence on such service providers, monitors their activity, and maintains the ability to audit transactions and balances.
(iv) The Company has implemented internal controls, security protocols, and oversight procedures designed to safeguard its Crypto Assets, manage operational and custodial risks, and ensure accurate recordkeeping.
(v) The Company is in compliance with all applicable laws, rules, and regulations (including those administered by the SEC, Commodities Futures Trading Commission, FinCEN, OFAC, and applicable state regulators) governing the holding, custody, transfer, and management of Crypto Assets. To the Company’s knowledge, no part of its Crypto Assets portfolio has been used in violation of applicable Money Laundering Laws, counter-terrorist financing, or economic Sanctions laws.
(vi) The Company has not received any written notice from any governmental or regulatory authority asserting that its Crypto Asset activities, or those of any of the Custodian or the Asset Manager, are or have been in violation of law. The Company accounts for its Crypto Assets and related arrangements in accordance with GAAP, including current accounting guidance, and its disclosures reflect the nature of custodial relationships, risk of loss, and any arrangements that affect legal control.
For purposes of this Agreement, “Crypto Assets” means digital assets that are issued or transferred using distributed ledger or blockchain technology, including but not limited to cryptocurrencies (e.g., Bitcoin, Ethereum), stablecoins, and other fungible or non-fungible tokens held or used by the Company.
(rr) No Associated Persons; FINRA Matters. Neither the Company nor any of its affiliates (within the meaning of FINRA Rule 5121(f)(1)) directly or indirectly controls, is controlled by, or is under common control with, or is an associated person (within the meaning of Article I, Section 1(ee) of the By-laws of FINRA) of, any member firm of FINRA.
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(ss) No Acquisitions or Dispositions. Except as are described in the Prospectus, there are no contracts, letters of intent, term sheets, agreement, arrangements or understandings with respect to the direct or indirect acquisition or disposition by the Company of material interests in real or personal property.
(tt) Other At The Market Sales Agreements. The Company is not a party to any agreement with an agent or underwriter for any other “at the market” offering.
Any certificate signed by an officer of the Company and delivered to the Agents or to counsel for the Agents pursuant to or in connection with this Agreement or any Terms Agreement shall be deemed to be a representation and warranty by the Company to the Agents as to the matters set forth therein.
The Company acknowledges that the Agents and, for purposes of the opinions to be delivered pursuant to Section 7, counsel to the Company and counsel to the Agents, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.
7. Covenants of the Company. The Company covenants and agrees with the Agents that:
(a) Registration Statement Amendments. After the date of this Agreement and during any period in which a Prospectus relating to any Shares is required to be delivered by the Agents under the Securities Act or the Rules and Regulations (including in circumstances where such requirement may be satisfied pursuant to Rule 172 of the Rules and Regulations) (a “Delivery Period”), (i) the Company will notify the Agents promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference, has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus has been filed, (ii) the Company will prepare and file with the Commission, promptly upon the Agents’ request, any amendments or supplements to the Registration Statement or Prospectus that, in the Agents’ reasonable opinion, may be necessary or advisable in connection with the distribution of the Shares by the Agents (provided, however, that the failure of the Agents to make such request shall not relieve the Company of any obligation or liability hereunder, or affect the Agents’ right to rely on the representations and warranties made by the Company in this Agreement or any Terms Agreement); (iii) the Company will not file any amendment or supplement to the Registration Statement or the Prospectus, other than documents incorporated by reference, relating to the Shares or a security convertible into the Shares unless a copy thereof has been submitted to the Agents within a reasonable period of time before the filing and the Agents have not reasonably objected thereto (provided, however, that (x) the failure of the Agents to make such objection shall not relieve the Company of any obligation or liability hereunder, or affect the Agents’ right to rely on the representations and warranties made by the Company in this Agreement or any Terms Agreement and (y) the only remedy that the Agents shall have with respect to the failure by the Company to submit such filing to the Agents for review (other than the Agents’ rights under Section 9 hereof), shall be to cease making sales under this Agreement until such amendment or supplement is filed); (iv) the Company will cause each amendment or supplement to the Prospectus, other than documents incorporated by reference, to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act, and (v) prior to the termination of this Agreement, the Company will notify the Agents if at any time the Registration Statement shall no longer be effective as a result of the passage of time pursuant to Rule 415 under the Securities Act or otherwise. Prior to the initial sale of any Shares, the Company shall file a final Prospectus Supplement pursuant to Rule 424(b) relating to the Shares.
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(b) Notice of Commission Stop Orders. The Company will advise the Agents, promptly after it receives notice or obtains knowledge thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of the Prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information. In the event of the issuance of any stop order or of any order preventing or suspending the use of the Prospectus or suspending any such qualification, the Company shall use its best efforts to obtain the withdrawal of such order.
(c) Delivery of Prospectus; Subsequent Changes. During any Delivery Period, the Company will comply with all requirements imposed upon it by the Securities Act and the Rules and Regulations, as from time to time in force, and to file on or before their respective due dates all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of the Exchange Act or the Exchange Act Rules and Regulations. If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or the Prospectus to comply with the Securities Act or the Rules and Regulations, the Company will promptly notify the designated Agent to suspend the offering of Shares during such period and the Company will promptly amend or supplement the Registration Statement or the Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance; provided however, that the Company may delay any such amendment or supplement if (i) there is no outstanding Placement Notice, (ii) such Agent is not otherwise required to deliver the Prospectus under the Securities Act and the Rules and Regulations, and (iii) the Company believes, in the reasonable judgment of the Company, it is in the best interests of the Company not to file such amendment or supplement or effect such compliance. Until such time as the Company shall have corrected such misstatement or omission or effected such compliance, the Company shall not issue a Placement Notice to an Agent.
(d) Blue Sky Compliance. The Company shall promptly, from time to time, take such actions as an Agent may reasonably request to qualify the Shares for offering and sale under the securities or Blue Sky laws of such jurisdictions (domestic or foreign) as such Agent may reasonably designate and to continue such qualifications in effect, and to comply with such laws, for so long as required to permit the offer and sale of Shares in such jurisdictions; provided, however, that the Company and its subsidiaries shall not be obligated to (i) qualify as foreign corporations in any jurisdiction in which they are not so qualified, (ii) file a general consent to service of process in any jurisdiction, or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject.
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(e) Earnings Statement. The Company will make generally available to its stockholders as soon as practicable, but in any event not later than 15 months after the end of the Company’s current fiscal quarter, an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158).
(f) Expenses. The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, in accordance with the provisions of Section 11, will pay the following expenses all incident to the performance of its obligations hereunder, including, but not limited to, expenses relating to (i) the preparation, printing and filing of the Registration Statement (and each amendment and supplement thereto) and the Prospectus (and each amendment and supplement thereto), (ii) the preparation, issuance and delivery of the Shares, (iii) the qualification of the Shares under securities laws in accordance with the provisions of Section 7(d), including filing fees and associated legal expenses of the Agents’ outside counsel, (iv) the printing and delivery to the Agents of copies of the Prospectus and any amendments or supplements thereto, (v) the fees and expenses incurred in connection with the listing or qualification of the Shares for trading on the Exchange, (vi) the filing fees and expenses, if any, of the Commission, (vii) the filing fees and associated legal expenses of the Agents’ outside counsel for filings with the FINRA Corporate Financing Department, such legal expense reimbursement not to exceed $10,000 and, (viii) the reasonable fees and disbursements of the Agents’ counsel (A) in an amount not to exceed $75,000 arising out of executing this Agreement or any Terms Agreement and the satisfaction of the Company’s covenants with respect to the First Delivery Date and (B) in an amount not to exceed $10,000 in connection with each Bring-Down Date (as defined below) on which the Company is required to provide a Bring-Down Certificate (as defined below).
(g) Use of Proceeds. To apply the Net Proceeds as set forth in the Prospectus under the heading “Use of Proceeds.”
(h) Clear Market. Without the prior written consent of the Agents, the Company will not, directly or indirectly, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Shares (other than the Shares offered pursuant to this Agreement or any Terms Agreement) or securities convertible into or exchangeable or exercisable for Common Shares, warrants or any rights to purchase or acquire Common Shares during the period beginning on the third Trading Day immediately prior to the date on which any Placement Notice is delivered to the Agents hereunder and ending on the second Trading Day immediately following the final Settlement Date with respect to Shares sold pursuant to such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of all Shares covered by a Placement Notice, the date of such suspension or termination); and will not directly or indirectly in any other “at the market offering” or continuous equity transaction offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of any Common Shares (other than the Shares offered pursuant to this Agreement or any Terms Agreement) or securities convertible into or exchangeable or exercisable for Common Shares, warrants or any rights to purchase or acquire, Common Shares prior to the later of the termination of this Agreement or any Terms Agreement and the 30th day immediately following the final Settlement Date with respect to Shares sold pursuant to such Placement Notice; provided, however, that such restrictions will not be required in connection with the Company’s issuance, grant or sale of (i) Common Shares, options to purchase Common Shares or other securities under an Exempt Plan, (ii) Common Shares issuable upon the exercise of options or vesting of other securities, pursuant to any Exempt Plan, (iii) Common Shares issuable upon conversion of securities or the exercise of warrants, options or other rights in effect or outstanding, and disclosed in the Prospectus, or (iv) Common Shares or securities convertible into or exchangeable for Common Shares as consideration for mergers, acquisitions, other business combinations or strategic alliances occurring after the date of this Agreement, which are not issued for capital raising purposes.
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(i) Change of Circumstances. The Company will, at any time during a fiscal quarter in which the Company intends to tender a Placement Notice or sell Shares hereunder or pursuant to a Terms Agreement, advise the Agents promptly after it shall have received notice or obtained knowledge thereof, of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document provided to the Agents pursuant to this Agreement or any Terms Agreement.
(j) Due Diligence Cooperation. During the term of this Agreement, the Company will cooperate with any reasonable due diligence review conducted by the Agents or their respective agents in connection with the transactions contemplated hereby or by any Terms Agreement, including, without limitation, providing information and making available documents and senior corporate officers, during regular business hours and at the Company’s principal offices, as the Agents may reasonably request.
(k) Required Filings Relating to Placement of Shares. The Company agrees that on such dates as the Securities Act or the Rules and Regulations shall require, the Company will (i) file a prospectus supplement with the Commission under the applicable paragraph of Rule 424(b) of the Rules and Regulation, and (ii) deliver such number of copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be required by the rules or regulations of such exchange or market. The Company shall disclose in its Quarterly Reports on Form 10-Q and in its Annual Report on Form 10-K, the number of Shares sold under this Agreement and any Terms Agreement, and the gross proceeds and Net Proceeds to the Company from the sale of the Shares and the compensation paid by the Company with respect to sales of the Shares pursuant to this Agreement and any Terms Agreement during the relevant quarter or, in the case of an Annual Report on Form 10-K, during the fiscal year covered by such Annual Report and the fourth quarter of such fiscal year.
(l) Bring-Down Dates; Bring-Down Certificate. On or prior to the First Delivery Date and each time (i) the Company files the Prospectus relating to the Shares or amends or supplements the Registration Statement or the Prospectus relating to the Shares (other than a prospectus supplement filed in accordance with Section 7(k)) by means of a post-effective amendment, sticker, or supplement but not by means of incorporation of document(s) by reference into the Registration Statement or the Prospectus relating to the Shares; (ii) the Company files an Annual Report on Form 10-K under the Exchange Act (including any Form 10-K/A containing amended financial information or a material amendment to the previously filed Annual Report on Form 10-K); (iii) the Company files its Quarterly Reports on Form 10-Q under the Exchange Act (including any Form 10-Q/A containing amended financial information or a material amendment to the previously filed Quarterly Report on Form 10-Q); or (iv) the Company files a current report on Form 8-K containing amended financial information (other than an earnings release) under the Exchange Act (each date of filing of one or more of the documents referred to in clauses (i) through (iv), a “Bring-Down Date”); the Company shall furnish the Agents with a certificate, in the form attached hereto as Exhibit 7(l) (a “Bring-Down Certificate”), within one Trading Day of any Bring-Down Date, if requested by the Agents. The requirement to provide a certificate under this Section 7(l) shall be waived for any Bring-Down Date occurring at a time at which no Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers a Placement Notice hereunder (which for such calendar quarter shall be considered a Bring-Down Date) and the next occurring Bring-Down Date; provided, however, that such waiver shall not apply for any Bring-Down Date on which the Company files its Annual Report on Form 10-K. Notwithstanding the foregoing, if the Company subsequently decides to sell Shares in an Agency Transaction following a Bring-Down Date when the Company relied on such waiver and did not provide the Agents with a certificate under this Section 7(l), then before the Company delivers the Placement Notice or the Agents sell any Shares pursuant to such Agency Transaction, the Company shall provide the Agents with a Bring-Down Certificate, dated the date of the Placement Notice. With respect to any Principal Transaction, a Bring-Down Certificate shall be delivered on the Principal Settlement Date.
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(m) Legal Opinion. On or prior to the First Delivery Date and within one Trading Day of each Bring-Down Date with respect to which the Company is obligated to deliver a Bring-Down Certificate for which no waiver is applicable, the Company shall cause to be furnished to the Agents written opinions of The Loev Law Firm, PC and/or Gunderson Dettmer Stough Villeneuve Frankling & Hachigian, LLP (“Company Counsels”) and negative assurance letter from The Loev Law Firm, PC, or other counsel satisfactory to the Agents, in form and substance satisfactory to the Agents and its counsel, dated the date that the opinion is required to be delivered; provided, however, that in lieu of such opinions for subsequent Bring-Down Dates, counsel may furnish the Agents with a letter to the effect that the Agents may rely on a prior opinion delivered under this Section 7(m) to the same extent as if it were dated the date of such letter (except that statements in such prior opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented at such Bring-Down Date). With respect to any Principal Transaction, the Company shall cause to be furnished to the Agents written opinions of Company Counsels, or other counsel satisfactory to the Agents, in form and substance satisfactory to the Agents and its counsel, dated the Principal Settlement Date.
(n) Comfort Letter. On or prior to the First Delivery Date and within one Trading Day of each Bring-Down Date with respect to which the Company is obligated to deliver a Bring-Down Certificate for which no waiver is applicable, the Company shall cause its independent accountants to furnish the Agents a letter (a “Comfort Letter” and the first such letter, the “Initial Comfort Letter”), dated the date the Comfort Letter is delivered, in form and substance satisfactory to the Agents, (i) confirming that they are an independent registered public accounting firm within the meaning of the Securities Act and the PCAOB, (ii) stating, as of such date, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to the Agents in connection with registered public offerings, and (iii) updating the Initial Comfort Letter with any information that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter. With respect to any Principal Transaction, the Company shall cause its independent accountants to furnish the Agents Comfort Letters, dated the date of the Terms Agreement and the Principal Settlement Date, in form and substance satisfactory to the Agents.
(o) Chief Accounting Officer’s Certificate. On or prior to the First Delivery Date and within one Trading Day of each Bring-Down Date with respect to which the Company is obligated to deliver a Bring-Down Certificate for which no waiver is applicable, if requested by the Agents, the Company shall have delivered to the Agents a certificate executed by the Chief Accounting Officer of the Company, providing “management comfort” with respect to certain financial data included or incorporated by reference in the Prospectus, dated as of such date, in form and substance satisfactory to the Agents (a “CAO Certificate”). With respect to any Principal Transaction, if requested by the Agents, the Company shall have delivered to the Agents a CAO Certificate, dated the date of the Terms Agreement and the Principal Settlement Date, in form and substance satisfactory to the Agents.
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(p) Secretary’s Certificate. On or prior to the First Delivery Date and within one Trading Day of each Bring-Down Date with respect to which the Company is obligated to deliver a Bring-Down Certificate for which no waiver is applicable, the Company shall have delivered to the Agents a certificate executed by the Secretary of the Company, dated as of such date, in form and substance satisfactory to the Agents. With respect to any Principal Transaction, the Company shall have delivered to the Agents a certificate executed by the Secretary of the Company, dated the date of the Principal Settlement Date, in form and substance satisfactory to the Agents.
(q) Market Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or would reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares or (ii) sell, bid for, or purchase the Common Shares to be issued and sold pursuant to this Agreement or any Terms Agreement, or pay anyone any compensation for soliciting purchases of the Shares other than the Agents; provided, however, that the Company may bid for and purchase Common Shares in accordance with Rule 10b-18 of the Exchange Act Rules and Regulations.
(r) Insurance. The Company and its subsidiaries shall maintain, or cause to be maintained, insurance in such amounts and covering such risks as is reasonable and customary for the business for which they are engaged.
(s) Compliance with Laws. The Company and each of its subsidiaries shall use commercially reasonable efforts to maintain, or cause to be maintained, all material Governmental Permits in order to conduct their businesses as described in the Prospectus, and the Company and each of its subsidiaries shall conduct their businesses, or cause their businesses to be conducted, in substantial compliance with such Governmental Permits and with applicable environmental laws, except where the failure to maintain or be in compliance with such Governmental Permits and laws could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(t) Investment Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor its subsidiaries will be or become, at any time prior to the termination of this Agreement, an “investment company,” as such term is defined in the Investment Company Act, assuming no change in the Commission’s current interpretation as to entities that are not considered an investment company.
(u) Securities Act and Exchange Act. The Company will use its best efforts to comply with all requirements imposed upon it by the Securities Act, the Rules and Regulations, the Exchange Act, and the Exchange Act Rules and Regulations as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings in, the Shares as contemplated by the provisions hereof and the Prospectus.
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(v) No Offer to Sell. Other than a Permitted Free Writing Prospectus, neither the Agents nor the Company (including its agents and representatives, other than the Agents in their capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined in Rule 405 of the Rules and Regulations), required to be filed with the Commission, that constitutes an offer to sell or solicitation of an offer to buy Shares hereunder.
(w) Sarbanes-Oxley. The Company and its subsidiaries will use their best efforts to comply with all effective applicable provisions of Sarbanes-Oxley.
(x) Affirmation. Each Placement Notice delivered by the Company to the Agents and each execution and delivery by the Company of a Terms Agreement shall be deemed to be (i) an affirmation that the representations, warranties and agreements of the Company herein contained and contained in any certificate delivered to the Agents pursuant hereto are true and correct at the time of delivery of such Placement Notice or the date of such Terms Agreement, as the case may be, and (ii) an undertaking that such representations, warranties and agreements will be true and correct on any applicable Time of Sale and Settlement Date, as though made at and as of each such time (it being understood that such representations, warranties and agreements shall relate to the Registration Statement and the Prospectus as amended and supplemented to the time of such Placement Notice acceptance or Terms Agreement execution, as the case may be).
(y) Renewal. If immediately prior to the third anniversary (the “Renewal Deadline”) of the initial effective date of the Registration Statement, the aggregate gross sales price of Shares sold by the Company is less than the Maximum Amount and this Agreement has not expired or been terminated, the Company will, prior to the Renewal Deadline, file, if it has not already done so and is eligible to do so, a new automatic shelf registration statement relating to the Shares, in form and substance satisfactory to the Agents. If the Company is not eligible to file an automatic shelf registration statement, the Company will, prior to the Renewal Deadline, if it has not already done so, file a new shelf registration statement relating to the Shares, in a form and substance satisfactory to the Agents, and will use its best efforts to cause such registration statement to be declared effective within 180 days after the Renewal Deadline. The Company will take all other reasonable actions necessary or appropriate to permit the issuance and sale of the Shares to continue as contemplated in the expired registration statement relating to the Shares. References herein to the Registration Statement shall include such new automatic shelf registration statement or new shelf registration statement, as the case may be, from the date of effectiveness thereof.
8. Conditions to Each Agent’s Obligations. The obligations of each Agent hereunder with respect to a Placement Notice or any Terms Agreement will be subject to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance by the Company of its obligations hereunder and thereunder, to the completion by such Agent of a due diligence review satisfactory to such Agent in its reasonable judgment, and to the continuing satisfaction (or waiver by such Agent in its sole discretion) of the following additional conditions:
(a) Registration Statement Effective. The Registration Statement shall be effective and shall be available for (i) all sales of Shares issued pursuant to all prior Placement Notices or any Terms Agreement and (ii) the sale of all Shares contemplated to be issued pursuant to any Placement Notice or Terms Agreement.
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(b) No Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company or any of its subsidiaries of any request for additional information from the Commission or any other federal or state governmental authority during the period of effectiveness of the Registration Statement, the response to which would require any post-effective amendments or supplements to the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) the occurrence of any event that makes any material statement made in the Registration Statement or the Prospectus or any material document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related Prospectus or such documents so that, in the case of the Registration Statement, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and, that in the case of the Prospectus, it will not contain any materially untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(c) No Misstatement or Material Omission. Such Agent shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact that in such Agent’s reasonable opinion is material, or omits to state a fact that in such Agent’s opinion is material and is required to be stated therein or is necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances then existing) not misleading.
(d) No Material Adverse Effect. Except as disclosed in the Prospectus, there shall not have been any material adverse change, on a consolidated basis, in the authorized capital stock of the Company or any Material Adverse Effect or any development that would reasonably be expected to result in a Material Adverse Effect, or any downgrading in or withdrawal of the rating assigned to any of the Company’s securities (other than asset backed securities) by any rating organization or a public announcement by any rating organization that it has under surveillance or review its rating of any of the Company’s securities (other than asset backed securities), the effect of which, in the case of any such action by a rating organization described above, in the reasonable judgment of the Agents (without relieving the Company of any obligation or liability it may otherwise have), is so material as to make it impracticable or inadvisable to proceed with the offering of the Shares on the terms and in the manner contemplated in the Prospectus.
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(e) Company Counsels Legal Opinions. The Agents shall have received the opinions of Company Counsels and negative assurance letter required to be delivered pursuant to Section 7(m) on or before the date on which such delivery of such opinion is required pursuant to Section 7(m).
(f) the Agents Counsel Legal Opinion. The Agents shall have received from Paul Hastings LLP, counsel for the Agents, such opinion or opinions and negative assurance letter, on or before the date on which the delivery of the Company Counsels legal opinions is required pursuant to Section 7(m), with respect to such matters as the Agents may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters.
(g) Comfort Letters. The Agents shall have received the Comfort Letters required to be delivered pursuant to Section 7(o) on or before the date on which such delivery of such Comfort Letters are required pursuant to Section 7(n).
(h) CAO Certificate. The Agents shall have received the CAO Certificate required to be delivered pursuant to Section 7(o) on or before the date on which delivery of such certificate is required pursuant to Section 7(o).
(i) Bring-Down Certificate. The Agents shall have received the Bring-Down Certificate required to be delivered pursuant to Section 7(l) on or before the date on which delivery of such certificate is required pursuant to Section 7(l).
(j) Secretary’s Certificate. On or prior to the First Delivery Date and at each Principal Settlement Date, the Agents shall have received a certificate, executed by the Secretary of the Company, in form and substance satisfactory to the Agents and its counsel.
(k) No Suspension. Trading in the Common Shares shall not have been suspended on the Exchange.
(l) Other Materials. On each date on which the Company is required to deliver a Bring-Down Certificate pursuant to Section 7(l), in addition to each of the deliverables otherwise required by Section 7, the Company shall have furnished to the Agents such appropriate further information, certificates and documents as the Agents may have reasonably requested. All deliverables shall have been in compliance, and delivered when required by, the provisions of this Agreement.
(m) Securities Act Filings Made. All filings with the Commission required by Rule 424 of the Rules and Regulations to have been filed prior to the issuance of any Shares hereunder or under any Terms Agreement shall have been made within the applicable time period prescribed for such filing by Rule 424. The Company shall file a prospectus supplement in connection with any Principal Transaction within the applicable time period prescribed for such filing by Rule 424.
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(n) Listing on the Exchange. Either (i) the Shares shall have been approved for listing on the Exchange, subject only to notice of issuance, or (ii) the Company shall have filed an application for listing of the Shares on the Exchange, at, or prior to, the First Placement Notice Date and the Exchange shall have reviewed such application and not provided any objections thereto.
(o) No Termination Event. There shall not have occurred any event that would permit the Agents to terminate this Agreement pursuant to Section 11(a).
9. Indemnification and Contribution.
(a) Indemnification of the Agents by the Company. The Company shall indemnify and hold harmless each Agent, its affiliates, directors, officers, managers, members, employees, representatives and agents and each person, if any, who controls such Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Agent Indemnified Parties” and each, an “Agent Indemnified Party”) against any loss, claim, damage, expense or liability whatsoever (or any action, investigation or proceeding in respect thereof), joint or several, to which such Agent Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, expense, liability, action, investigation or proceeding arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus (including any free writing prospectus), or in any amendment or supplement thereto or (ii) the omission or alleged omission to state in any such document a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Agent Indemnified Party promptly upon demand for any legal fees or other expenses reasonably incurred by that Agent Indemnified Party in connection with investigating, or preparing to defend, or defending against, or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding, as such fees and expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense or liability arises out of or is based upon an untrue statement or alleged untrue statement in, or omission or alleged omission from any such document made in reliance upon and in conformity with written information furnished to the Company by or on behalf of an Agent specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of such Agent is its name (in the case of such Agent, the “Agent Information”).
The indemnity agreement in this Section 9(a) is not exclusive and is in addition to each other liability which the Company might have, and shall not limit any rights or remedies which may otherwise be available under this Agreement, at law or in equity to any Agent Indemnified Party.
(b) Indemnification of the Company by the Agents. The Agents shall, severally and not jointly, indemnify and hold harmless the Company and its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Company Indemnified Parties” and each, a “Company Indemnified Party”) against any loss, claim, damage, expense or liability whatsoever (or any action, investigation or proceeding in respect thereof), joint or several, to which such Company Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, expense, liability, action, investigation or proceeding arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (including any issuer free writing prospectus), or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state in any such document, a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Agents specifically for use therein, which information the parties hereto agree is limited to the Agent Information, and shall reimburse the Company Indemnified Parties for any legal or other expenses reasonably incurred by such party in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability, action, investigation or proceeding, as such fees and expenses are incurred.
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The indemnity agreement in this Section 9(b) is not exclusive and is in addition to each other liability which the Agents might have, and shall not limit any rights or remedies which may otherwise be available under this Agreement, at law or in equity to any Company Indemnified Party.
(c) Indemnification Procedure. Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section 9, notify such indemnifying party in writing of the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent it has been materially prejudiced by such failure (through the forfeiture of substantive rights or defenses); and, provided, further, that the failure to notify an indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action with counsel satisfactory to the indemnified party (which counsel shall not, except with the written consent of the indemnified party, be counsel to the indemnifying party). After notice from the indemnifying party to the indemnified party of its election to assume the defense of such action, except as provided herein, the indemnifying party shall not be liable to the indemnified party under Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of such action other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense of such action but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized in writing by the Company in the case of a claim for indemnification under Section 9(a) or the Agents in the case of a claim for indemnification under Section 9(b), (ii) such indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notice of the commencement of the action or the indemnifying party does not diligently defend the action after assumption of the defense, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of (or, in the case of a failure to diligently defend the action after assumption of the defense, to continue to defend) such action on behalf of such indemnified party and the indemnifying party shall be responsible for legal or other expenses subsequently incurred by such indemnified party in connection with the defense of such action; provided, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such indemnified parties (in addition to any local counsel), which firm shall be designated in writing by such Agent if the indemnified parties under this Section 9 consist of any Agent Indemnified Party or by the Company if the indemnified parties under this Section 9 consist of any Company Indemnified Parties. Subject to this Section 9(c), the amount payable by an indemnifying party under Section 9 shall include, but not be limited to, (i) reasonable legal fees and expenses of counsel to the indemnified party and any other expenses in investigating, or preparing to defend or defending against, or appearing as a third party witness in respect of, or otherwise incurred in connection with, any action, investigation, proceeding or claim, and (ii) all amounts paid in settlement of any of the foregoing. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of judgment with respect to any pending or threatened action or any claim whatsoever, in respect of which indemnification or contribution could be sought under this Section 9 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party in form and substance reasonably satisfactory to such indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Subject to the provisions of the following sentence, no indemnifying party shall be liable for settlement of any pending or threatened action or any claim whatsoever that is effected without its written consent (which consent shall not be unreasonably withheld or delayed), but if settled with its written consent, if its consent has been unreasonably withheld or delayed or if there be a judgment for the plaintiff in any such matter, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, if at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for reasonable fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated herein effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into, and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
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(d) Contribution. If the indemnification provided for in this Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid, payable or otherwise incurred by such indemnified party as a result of such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof), as incurred, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Agents on the other from the offering of the Shares, or (ii) if the allocation provided by clause (i) of this Section 9(d) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) of this Section 9(d) but also the relative fault of the Company, on the one hand, and the Agents, on the other, with respect to the statements, omissions, acts or failures to act which resulted in such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof) as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Agents, on the other, with respect to such offering shall be deemed to be in the same proportion as the total Net Proceeds from the sale of the Shares received by the Company bear to the total compensation received by the Agents from the sale of the Shares on behalf of the Company. The relative fault of the Company, on the one hand, and the Agents, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or the Agents, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company by or on behalf of the Agents for use in the Registration Statement, the Prospectus (including any free writing prospectus), or in any amendment or supplement thereto, consists solely of the Agent Information.
(e) Contribution Procedure. The Company and the Agents agree that it would not be just and equitable if contributions pursuant to Section 9(d) above were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to Section 9(d) above. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to in Section 9(d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 9, no Agent shall be required to contribute any amount in excess of the amount by which total compensation received by such Agent from the sale of Shares on behalf of the Company exceeds the amount of any damages which such Agent has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
10. Representations and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section 9 of this Agreement and all representations and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of their respective dates, regardless of (i) any investigation made by or on behalf of the Agents, any controlling persons, or the Company (or any of their respective officers, directors or controlling persons), (ii) delivery and acceptance of the Shares and payment therefor, or (iii) any termination of this Agreement.
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11. Termination.
(a) Each Agent shall have the right by giving notice as hereinafter specified at any time to terminate this Agreement with respect to such Agent if (i) the Company shall have suffered any Material Adverse Effect, or any development that could reasonably be expected to result in a Material Adverse Effect, that, in the judgment of such Agent, may materially impair the ability of such Agent to sell the Shares hereunder, (ii) the Company shall have failed, refused or been unable to perform any agreement on its part to be performed hereunder, (iii) any other condition of such Agent’s obligations hereunder is not fulfilled as and when required, or (iv) any suspension or limitation of trading in the Shares or in securities generally on the Exchange shall have occurred. Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(f) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery) and Section 17 (Governing Law, Jurisdiction, Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination. If an Agent elects to terminate this Agreement as provided in this Section 11(a), such Agent shall provide the required notice as specified in Section 12 (Notices).
(b) In the case of any purchase by an Agent pursuant to a Terms Agreement, the obligations of such Agent pursuant to such Terms Agreement shall be subject to termination by such Agent at any time prior to or on the Principal Settlement Date if since the time of execution of the Terms Agreement or the respective dates as of which information is given in the Registration Statement or the Prospectus, (A) there has been any Material Adverse Effect or material change in the senior management of the Company, whether or not arising in the ordinary course of business; (B) there has occurred any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic, political or other conditions, the effect of which on the United States or international financial markets is such as to make it, in such Agent’s judgment, impracticable to market the Shares or enforce contracts for the sale of the Shares; (C) trading in any securities of the Company has been suspended by the Commission or by the Exchange, or if trading generally on the Nasdaq has been suspended (including an automatic halt in trading pursuant to market-decline triggers, other than those in which solely program trading is temporarily halted), or limitations on prices for trading (other than limitations on hours or numbers of days of trading) have been fixed, or maximum ranges for prices for securities have been required, by such exchange or FINRA or by order of the Commission or any other governmental authority; (D) any federal, state, local or foreign statute, regulation, rule or order of any court or other governmental authority has been enacted, published, decreed or otherwise promulgated which, in the opinion of such Agent, would reasonably be expected to result in a Material Adverse Effect; or (E) any action has been taken by any federal, state, local or foreign government or agency in respect of its monetary or fiscal affairs which, in the opinion of such Agent, would reasonably be expected to have a material adverse effect on the securities markets in the United States. If such Agent elects to terminate its obligations pursuant to this Section 11(b), the Company shall be notified promptly in writing.
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(c) The Company shall have the right, by giving 10 days’ notice as hereinafter specified to terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(f) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery) and Section 17 (Governing Law, Jurisdiction, Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination.
(d) Each Agents shall have the right, in its sole discretion, by giving 10 days’ notice as hereinafter specified to terminate this Agreement with respect to such Agent at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party except that the provisions of Section 7(f) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery) and Section 17 (Governing Law, Jurisdiction, Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination.
(e) Unless earlier terminated pursuant to this Section 11, this Agreement shall automatically terminate upon the issuance and sale of all of the Shares through the Agents on the terms and subject to the conditions set forth herein; provided that the provisions of Section 7(f) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery) and Section 17 (Governing Law, Jurisdiction, Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination.
(f) This Agreement shall remain in full force and effect unless terminated pursuant to Sections 11(a), (c), or (d) above or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall in all cases be deemed to provide that Section 7(f) (Expenses), Section 9 (Indemnification and Contribution), Section 10 (Representations and Agreements to Survive Delivery) and Section 17 (Governing Law, Jurisdiction, Waiver of Jury Trial) shall remain in full force and effect.
(g) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such termination shall not be effective until the close of business on the date of receipt of such notice by the Agents or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Shares, such Shares shall settle in accordance with the provisions of this Agreement. Upon termination of this Agreement, the Company shall not be required to pay to the Agents any discount or commission with respect to any Shares not otherwise sold by the Agents under this Agreement; provided, however, that the Company shall remain obligated to reimburse the Agents’ expenses pursuant to Section 7(f) (Expenses).
(h) To the extent this Agreement is terminated by one Agent or by the Company with respect to some but not all Agents pursuant to Sections 11(a), (c) or (d) above, (i) this Agreement shall terminate only with respect to such Agent, as the case may be, and shall remain in full force and effect with respect to the Company and the other Agent, unless and until terminated pursuant to Sections 11(a), (c) or (d) above, and (ii) the term “Agents” as used herein shall, with effect from the date of such termination, be deemed to refer only to such other Agent in respect of which this Agreement has not been so terminated.
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12. Notices. All statements, requests, notices and agreements hereunder shall be in writing, and:
(a) if to Clear Street, shall be delivered or sent by mail or email to Clear Street LLC, Attention: General Counsel, 4 World Trade Center, New York, New York 10006, email: bfriedman@clearstreet.io, and if to TCS, shall be delivered or sent by mail or email to TCBI Securities, Inc., d/b/a Texas Capital Securities, Attention: Head of Equity Capital Markets, 2000 McKinney Avenue, Suite 700, Dallas, TX 75201, E-mails: ecm@texascapital.com and equitytrading@texascapital.com, with a copy of to: Texas Capital Legal Department, Attention: Chief Legal Officer, 2000 McKinney Avenue, Suite 700, Dallas, TX 75201, E-mail: legal@texascapital.com; and
(b) if to the Company shall be delivered or sent by mail or email to McAndrew Rudisill and John Saunders, emails: mcandrew@ethzilla.com, and john@ethzilla.com, with copies to (which shall not constitute notice to): David M. Loev and Keith J. Scherer, emails: dloev@loevlaw.com and kscherer@gunder.com.
Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof.
13. Successors and Assigns. This Agreement and any Terms Agreement shall inure to the benefit of and be binding upon the Agents, the Company and their respective successors and assigns and the persons referred to in Section 9 hereof. Nothing expressed or mentioned in this Agreement or any Terms Agreement is intended or shall be construed to give any person, other than the persons mentioned in the preceding sentence, any legal or equitable right, remedy or claim under or in respect of this Agreement or any such Terms Agreement, or any provisions herein or therein contained, this Agreement or any such Terms Agreement and all conditions and provisions hereof or thereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person; except that the representations, warranties, covenants, agreements and indemnities of the Company contained in this Agreement or such Terms Agreement shall also be for the benefit of the Agent Indemnified Parties, and the indemnities of the Agents shall be for the benefit of the Company Indemnified Parties. Neither party may assign its rights or obligations under this Agreement or any Terms Agreement without the prior written consent of the other party; provided, however, that an Agents may assign its rights and obligations hereunder to an affiliate of such Agent without obtaining the Company’s consent.
14. Adjustments for Share Splits. The parties acknowledge and agree that all share-related numbers contained in this Agreement or any Terms Agreement shall be adjusted to take into account any share split, share dividend or similar event effected with respect to the Common Shares.
15. Entire Agreement; Construction; Amendment. This Agreement (including any Placement Notices issued pursuant hereto), together with any Terms Agreements, constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. In this Agreement or any Terms Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement and any Terms Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement or any such Terms Agreement. This Agreement and any Terms Agreement may be amended or modified, and the observance of any term of this Agreement and any Terms Agreement may be waived, only by a writing signed by the Company and the Agents.
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16. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph, clause or provision of this Agreement or any Terms Agreement shall not affect the validity or enforceability of any other section, paragraph, clause or provision hereof. If any section, paragraph, clause or provision of this Agreement or any Terms Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
17. Governing Law, Jurisdiction, Waiver of Jury Trial. This Agreement and any Terms Agreement shall be governed by and construed in accordance with the laws of the State of New York, including without limitation Section 5-1401 of the New York General Obligations. The Company irrevocably (a) submits to the exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York for the purpose of any suit, action or other proceeding arising out of this Agreement or the transactions contemplated by this Agreement or by any Terms Agreement, the Registration Statement, or the Prospectus, (b) agrees that all claims in respect of any such suit, action or proceeding may be heard and determined by any such court, (c) waives to the fullest extent permitted by applicable law, any immunity from the jurisdiction of any such court or from any legal process, (d) agrees not to commence any such suit, action or proceeding other than in such courts, and (e) waives, to the fullest extent permitted by applicable law, any claim that any such suit, action or proceeding is brought in an inconvenient forum. Each of the parties to this Agreement hereby waives any right to trial by jury in any suit or proceeding arising out of or relating to this Agreement or any Terms Agreement.
18. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) each Agent has been retained solely to act as an arm’s length contractual counterparty to the Company in connection with the sale of the Shares contemplated hereby and by any Terms Agreement and that no fiduciary, advisory or agency relationship between the Company and such Agent has been created in respect of any of the transactions contemplated by this Agreement or any Terms Agreement, irrespective of whether such Agent has advised or is advising the Company on other matters;
(b) the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement or any Terms Agreement;
(c) the Company has been advised that such Agent and its affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that such Agent has no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and
(d) the Company waives, to the fullest extent permitted by law, any claims it may have against such Agent, for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that such Agent shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including stockholders, partners, employees or creditors of the Company.
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19. Research Analyst Independence. The Company acknowledges that each Agent’s research analysts and research department are required to be independent from its investment banking division and are subject to certain regulations and internal policies, and that such Agent’s research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company and/or its securities that differ from the views of its investment banking division. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against such Agent with respect to any conflict of interest that may arise from the fact that the views expressed by its independent research analysts and research department may be different from or inconsistent with the views or advice communicated to the Company by such Agent’s investment banking division. The Company acknowledges that each Agent is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the Company.
20. Counterparts. This Agreement and any Terms Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement or any Terms Agreement by one party to the other may be made by facsimile or other electronic transmission (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
21. Definition of Certain Terms. For purposes of this Agreement, (a) “affiliate” has the meaning set forth in Rule 405 of the Rules and Regulations, (b) “subsidiary” has the meaning set forth in Rule 405 of the Rules and Regulations; (c) “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k), (d) “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b), (e) “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable, and (f) “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
22. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Agent is a Covered Entity and becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Agent of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Agent is a Covered Entity and the Agents or a BHC Act Affiliate of such Agent becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Agent are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
[Remainder of Page Intentionally Blank]
-35-
If the foregoing correctly sets forth the understanding between the Company and the Agents, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the Agents.
| Very truly yours, | ||
| CLEAR STREET LLC | ||
| By: | /s/ Ryan Gerety | |
| Name: | Ryan Gerety | |
| Title: | Managing Director | |
| TCBI SECURITIES, INC. | ||
| By: | /s/ Jason Demark | |
| Name: | Jason Demark | |
| Title: | Managing Director | |
| ACCEPTED as of the date | ||
| first-above written: | ||
| ETHZILLA CORPORATION | ||
| By: | /s/ McAndrew Rudisill | |
| Name: | McAndrew Rudisill | |
| Title: | Chief Executive Officer | |
SCHEDULE 1
form of PLACEMENT NOTICE
| From: | [ ] |
| Cc: | [ ] |
| To: | [ ] |
| Subject: | the Agents At the Market Offering—Placement Notice |
Gentlemen:
Pursuant to the terms and subject to the conditions contained in the Amended and Restated Sales Agreement among ETHZilla Corporation (the “Company”) and Clear Street LLC (“Clear Street”) and TCBI Securities, Inc., doing business as Texas Capital Securities (“TCS”), dated November 14, 2025 (the “Agreement”), I hereby request on behalf of the Company that [Clear Steet] [TCS] sell up to [ ] shares of the Company’s Common Shares (as defined in the Agreement) at a minimum market price of $[ ] per share. Sales should begin on the date of this Notice and shall continue until [DATE] [all shares are sold].
SCHEDULE 2
Notice Parties
Company
| McAndrew Rudisill | Chief Executive Officer |
| John Saunders | Chief Financial Officer |
Clear Street
| Ryan Gerety | Managing Director – Chief Operating Officer |
[●]
TCS
[●]
[●]
SCHEDULE 2(b)
ETHZILLA CORPORATION
[_________________] SHARES
terms AGREEMENT
____, 20__
Clear Street LLC
TCBI Securities, Inc., d/b/a Texas Capital Securities
As Agents
c/o Clear Street LLC
4 World Trade Center
New York, New York 10006
c/o TCBI Securities, Inc.,
d/b/a Texas Capital Securities
2000 McKinney Avenue, Suite 700
Dallas, TX 75201
Ladies & Gentlemen:
ETHZilla Corporation, a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein and in the Amended and Restated Sales Agreement, dated November 14, 2025 (the “Sales Agreement”), among the Company, Clear Street LLC (“Clear Street”) and TCBI Securities, Inc., doing business as Texas Capital Securities (“TCS”), to issue and sell to [Clear Street] [TCS] the securities specified in the Schedule hereto (the “Purchased Securities”). Unless otherwise defined below, terms defined in the Sales Agreement shall have the same meanings when used herein.
Each of the provisions of the Sales Agreement not specifically related to the solicitation by an Agent, as an agent of the Company, of offers to purchase securities is incorporated herein by reference in its entirety, and shall be deemed to be part of this Terms Agreement to the same extent as if such provisions had been set forth in full herein. Each of the representations, warranties and agreements set forth therein shall be deemed to have been made as of the date of this Terms Agreement and the Settlement Date set forth in the Schedule hereto.
An amendment to the Registration Statement or a supplement to the Prospectus, as the case may be, relating to the Purchased Securities, in the form heretofore delivered to [Clear Street] [TCS], is now proposed to be filed with the Commission.
Subject to the terms and conditions set forth herein and in the Sales Agreement which are incorporated herein by reference, the Company agrees to issue and sell to [Clear Street] [TCS], and [Clear Street] [TCS] agrees to purchase from the Company, the Purchased Securities at the time and place and at the purchase price set forth in the Schedule hereto.
Notwithstanding any provision of the Sales Agreement or this Terms Agreement to the contrary, the Company consents to [Clear Street] [TCS] trading in the Common Shares for its own account and for the account of its clients at the same time as sales of the Purchased Securities occur pursuant to this Terms Agreement.
If the foregoing is in accordance with your understanding, please sign and return to us a counterpart hereof, whereupon this Terms Agreement, including those provisions of the Sales Agreement incorporated herein by reference, shall constitute a binding agreement between [Clear Street] [TCS] and the Company.
| ETHZILLA CORPORATION | ||
| By: | ||
| Name: | ||
| Title: | ||
| Accepted and agreed as of | ||
| the date first above written: | ||
| [CLEAR STREET LLC] | ||
| [TCBI SECURITIES, INC.] | ||
| By: | ||
| Name: | ||
| Title: | ||
Schedule to Terms Agreement
Title of Purchased Securities:
Common Stock, par value $0.0001 per share
Number of Shares of Purchased Securities:
[●] Shares
Purchase Price Payable by the Agents:
$[●] per Share
Method of and Specified Funds for Payment of Purchase Price:
[By wire transfer to a bank account specified by the Company in same day funds.]
Method of Delivery:
[To the Agents’ account, or the account of the Agents’ designee, at The Depository Trust Company via DWAC in return for payment of the purchase price.]
Settlement Date:
[●], 20[●]
Closing Location:
[●]
Documents to be Delivered:
The following documents referred to in the Amended and Restated Sales Agreement shall be delivered on the Settlement Date as a condition to the closing for the Purchased Securities (which documents shall be dated on or as of the Settlement Date and shall be appropriately updated to cover any Permitted Free Writing Prospectuses and any amendments or supplements to the Registration Statement, the Prospectus, any Permitted Free Writing Prospectuses and any documents incorporated by reference therein):
(1) the opinions of Company Counsels and negative assurance letter of The Loev Law Firm, PC, referred to in Section 8(e);
(2) the opinion and negative assurance letter of counsel to the Agents referred to in Section 8(f);
(3) the Comfort Letters referred to in Section 8(g);
(4) the CAO Certificate referred to in Section 8(h);
(5) the Bring-Down Certificate referred to in Section 8(i);
(6) the Secretary’s Certificate referred to in Section 8(j); and
(7) such other documents as the Agents shall reasonably request.
SCHEDULE 3
Compensation
In the case of an Agency Transaction, an Agent shall be paid compensation up to 3% of the gross proceeds from the sales of Shares by such Agent pursuant to the terms of this Agreement.
Exhibit 7(l)
OFFICER’S CERTIFICATE
[DATE]
The undersigned, the duly qualified and elected Chief Executive Officer, of ETHZilla Corporation (“Company”), a Delaware corporation, does hereby certify in such capacity and on behalf of the Company, pursuant to Section 7(l) of the Amended and Restated Sales Agreement dated November 14, 2025 (the “Sales Agreement”), among the Company, Clear Street LLC and TCBI Securities, Inc., doing business as Texas Capital Securities, that, to the best of the knowledge of the undersigned:
(a) The representations and warranties of the Company in Section 6 of the Sales Agreement (i) to the extent such representations and warranties are subject to qualifications and exceptions contained therein relating to materiality or Material Adverse Effect, are true and correct on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof, except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date, and (ii) to the extent such representations and warranties are not subject to any qualifications or exceptions, are true and correct in all material respects as of the date hereof as if made on and as of the date hereof with the same force and effect as if expressly made on and as of the date hereof except for those representations and warranties that speak solely as of a specific date and which were true and correct as of such date;
(b) The Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied pursuant to the Sales Agreement at or prior to the date hereof; and
(c) The Company does not possess any material non-public information.
| By: | ||
| Name: | ||
| Title: |
Exhibit 31.1
Certification of Chief Executive Officer
I, McAndrew Rudisill, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of ETHZilla Corporation (the “registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2025 | |
| /s/ McAndrew Rudisill | |
| McAndrew Rudisill | |
| Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer
I, Eric R. Van Lent, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of ETHZilla Corporation (the “registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 14, 2025 | |
| /s/ Eric R. Van Lent | |
| Eric R. Van Lent | |
Chief Accounting Officer (Principal Financial/Accounting Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002
I, McAndrew Rudisill, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ETHZilla Corporation on Form 10-Q for the quarter ended September 30, 2025, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of ETHZilla Corporation at the dates and for the periods indicated.
| Dated: November 14, 2025 | |
| /s/ McAndrew Rudisill | |
| McAndrew Rudisill | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
A signed original of this written statement required by Section 906 has been provided to ETHZilla Corporation and will be retained by ETHZilla Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002
I, Eric R. Van Lent, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ETHZilla Corporation on Form 10-Q for the quarter ended June 30, 2025, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of ETHZilla Corporation at the dates and for the periods indicated.
| Dated: November 14, 2025 | |
| /s/ Eric R. Van Lent | |
| Eric R. Van Lent | |
| Chief Accounting Officer | |
| (Principal Financial/Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to ETHZilla Corporation and will be retained by ETHZilla Corporation and furnished to the Securities and Exchange Commission or its staff upon request.