Exascale Labs Holdings Inc 10-K for FY2026
Exascale Labs Holdings Inc. (XLAB)
About this 10-K
Exascale Labs Holdings Inc filed this 10-K on September 28, 2026, covering the fiscal year ended June 30, 2026 (FY2026).
Headline figures
Fiscal year ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $14.82M
- up 111.3% from $7.02M a year earlier
- Net loss
- $12.16M
- compared with a net loss of $7.66M a year earlier
- Diluted EPS
- -$8,108.26
- compared with -$5,106.44 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended
or
For the transition period from __________ to __________
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
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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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
Based on paragraph (3)(iv) of the definition of “smaller reporting company” under Rule 12b-2 under the Exchange Act, the aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates of the registrant as of September 2, 2026, was approximately $
On September 25, 2026, the registrant had shares of Class A common stock and shares of Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
EXASCALE LABS HOLDINGS INC.
FORM 10-K
FOR THE YEAR ENDED JUNE 30, 2026
i
EXPLANATORY NOTE
On August 27, 2026 (the “Closing Date”), D. Boral ARC Acquisition I Corp., a British Virgin Islands business company (“BCAR”) consummated a previously announced business combination pursuant to the terms of an Agreement and Plan of Merger (the “Business Combination Agreement”), by and among BCAR, D. Boral ARC Merger Corporation, a Delaware corporation and a then-wholly owned subsidiary of BCAR, D. Boral Arc Merger Sub Inc., a Delaware corporation and a then-wholly owned subsidiary of BCAR (“Merger Sub”), and Exascale Labs Inc., a Delaware corporation (“Legacy Exascale”).
As contemplated by the Business Combination Agreement, (i) prior to the effective time of the Acquisition Merger (as defined below), BCAR continued out of the British Virgin Islands and into the State of Delaware and redomiciled as, and became a, Delaware corporation by merging with and into Boral ARC Merger Corporation (the “Domestication Merger”), with Boral ARC Merger Corporation continuing as the surviving corporation and changing its name from “Boral ARC Merger Corporation” to “Exascale Labs Holdings Inc.” and (ii) following the Domestication Merger, Merger Sub merged with and into Legacy Exascale, with Legacy Exascale surviving as a wholly-owned subsidiary of Exascale Labs Holdings Inc. (the “Acquisition Merger”).
We refer to the Domestication Merger, the Acquisition Merger, and the other transactions contemplated under the Business Combination Agreement, collectively, as the “Business Combination.” Through the Business Combination, Exascale Labs Holdings Inc. succeeded to the business of Legacy Exascale.
Unless the context otherwise requires, all references in this Annual Report on Form 10-K (this “Annual Report”) to “we,” “us,”, “our” or the “Company” refer to the business and operations of Legacy Exascale and its subsidiaries prior to consummation of the Business Combination and to Exascale Labs Holdings Inc. (which is the registrant) and its subsidiaries following the consummation of the Business Combination.
Unless otherwise indicated, the historical financial information in this Annual Report, including the information in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data,” does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
ii
FORWARD LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements contained in this Annual Report that are not purely historical are forward-looking statements. It is important for an investor to understand that these statements involve risks and uncertainties, some of which are beyond our control. These statements relate to the discussion of our business strategies and our expectations concerning future operations, margins, profitability, liquidity, and capital resources and to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. We sometimes use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “think,” “will,” “would,” or the negative of these words or other similar or comparable terms and phrases, including references to assumptions, in this Annual Report to identify forward-looking statements, although not all forward-looking statements contain these words.
Forward-looking statements in Annual Report may include, for example, statements about:
| ● | our future financial performance; |
| ● | changes in the market for our products and services; |
| ● | our expected growth, scale, and market opportunity in artificial intelligence (“AI”) infrastructure, GPU as a Service (“GaaS”), and enterprise AI compute markets; |
| ● | the anticipated performance, capacity, utilization, availability, and economics of our graphics processing unit (“GPU”) compute platform; |
| ● | the expected demand for large language model (“LLM”) training, fine-tuning, and high-concurrency inference workloads and our ability to capture such demand; |
| ● | our ability to execute our business strategy, expand customer relationships, enter into strategic partnerships, and compete effectively in the AI infrastructure market; |
| ● | our ability to execute our growth strategy, manage growth and maintain our corporate culture as we grow; |
| ● | expectations regarding our existing contracts and agreements, including our memoranda of understanding; |
| ● | anticipated technology trends and developments and our ability to address those trends and developments with our products and offerings; |
| ● | our future regulatory, legal, and compliance environment, including matters related to data security, AI regulation, energy usage, and data center operations; and |
| ● | expansion plans and opportunities. |
These forward-looking statements are based on information available as of the date of this Annual Report and our managements’ current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside our control. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update, add or otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.
iii
Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:
| ● | the liquidity and trading of our Class A Common Stock (as defined herein); |
| ● | our ability to obtain sufficient additional financing, on acceptable terms or at all, and our ability to continue as a going concern; |
| ● | changes in the market in which we compete, including with respect to our competitive landscape, technology evolution or changes in applicable laws or regulations; |
| ● | demand uncertainty for AI compute services, including slower-than-anticipated adoption of LLMs, changes in customer workload requirements, budget constraints, or shifts toward alternative architectures or in-house compute solutions; |
| ● | fluctuations in utilization rates of our GPU capacity, which could negatively affect revenues, margins, and operating leverage; |
| ● | technological risks, including the performance, scalability, reliability, and security of our platform, as well as the pace of innovation in AI hardware and software that could render our offerings less competitive; |
| ● | competitive pressures from hyperscalers, cloud service providers, vertically integrated AI infrastructure companies, and other GaaS providers with greater scale, resources, or pricing flexibility; |
| ● | the impact of macroeconomic events; |
| ● | changes in the vertical markets that we target; |
| ● | the impact of current or future government regulation and oversight, including the U.S. federal, state and local authorities; |
| ● | our ability to launch new services and products or to profitably expand into new markets; |
| ● | our ability to execute our growth strategies; |
| ● | our ability to develop and maintain effective internal controls and procedures, correct or remediate the previously identified material weaknesses, or correct or remediate any future identified material weaknesses; |
| ● | our exposure to any liability, protracted and costly litigation or reputational damage relating to our data security; and |
| ● | other risks and uncertainties indicated in this Annual Report, including those set forth under “Risk Factors” in this Annual Report. |
iv
MARKET AND INDUSTRY DATA
Information contained in this Annual Report concerning the market and the industry in which we compete, including our market position, general expectations of market opportunity, size and growth rates, is based on information from various third-party sources, on assumptions we have made based on such sources and our knowledge of the markets for our services and solutions. This information and any estimates provided herein involve numerous assumptions and limitations, and third-party sources generally state that the information contained in such sources have been obtained from sources believed to be reliable. The industry in which we operate is subject to a high degree of uncertainty and risk. As a result, the estimates and market and industry information provided in this Annual Report are subject to change based on various factors, including those described in “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this Annual Report.
TRADEMARKS, TRADE NAMES AND SERVICE MARKS
This Annual Report contains references to trademarks, trade names and service marks. Solely for convenience, trademarks, trade names and service marks referred to in this Annual Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to such trademarks, trade names and service marks. We do not intend the use or display of other entities’ trade names, trademarks or service marks in this Annual Report to imply a relationship with, or endorsement or sponsorship of us by, any other entities.
v
PART I
ITEM 1. BUSINESS
Overview
Exascale Labs Holdings Inc. was incorporated under the name “D. Boral ARC Merger Corporation” as a Delaware corporation on December 19, 2025. Legacy Exascale was incorporated as a Delaware corporation on June 1, 2022. Through the Business Combination, Exascale Labs Holdings Inc. became the combined company of the Business Combination and succeeded to the business of Legacy Exascale.
The Business Combination
The Business Combination closed on August 27, 2026. As contemplated by the Business Combination Agreement, (i) prior to the effective time of the Acquisition Merger, BCAR continued out of the British Virgin Islands and into the State of Delaware and redomiciled as, and became a, Delaware corporation by merging with and into Boral ARC Merger Corporation (the forgoing transaction being referred to herein as the “Domestication Merger”), with Boral ARC Merger Corporation continuing as the surviving corporation and changing its name from “Boral ARC Merger Corporation” to “Exascale Labs Holdings Inc.” and (ii) following the Domestication Merger, Merger Sub merged with and into Legacy Exascale, with Legacy Exascale surviving as a wholly-owned subsidiary of Exascale Labs Holdings Inc. (the foregoing transaction being referred to herein as the “Acquisition Merger”).
The Domestication Merger
At the effective time of the Domestication Merger, (i) each outstanding BCAR Class A ordinary share, par value, $0.0001 per share (“BCAR Class A Ordinary Share”) and BCAR Class B ordinary share, par value, $0.0001 per share (“BCAR Class B Ordinary Share,” and together with the BCAR Class A Ordinary Share, the “BCAR Ordinary Shares”) (other than BCAR Ordinary Shares owned by BCAR as treasury shares or owned by a direct or indirect subsidiary of BCAR, BCAR Ordinary Shares held by BCAR shareholders who properly exercised their dissenter’s rights under applicable British Virgin Islands law, and BCAR Class A Ordinary Shares that were redeemed in connection with the BCAR shareholder vote to approve the Business Combination and related proposals at the extraordinary general meeting of BCAR’s shareholders (the “Extraordinary General Meeting”)) was cancelled and automatically converted into one share of our Class A common stock, par value $0.0001 (“Class A Common Stock”) and (ii) each outstanding warrant of BCAR (a “BCAR Warrant”) was assumed by us and became an outstanding warrant of the Company, exercisable for our Class A Common Stock on the same terms, with adjustments as provided in the Business Combination Agreement.
The Acquisition Merger
Following the Domestication Merger, the Acquisition Merger was effected. At the closing of the Acquisition Merger:
| ● | Each issued and outstanding Simple Agreement for Future Equity (each, a “SAFE”), by and between Legacy Exascale and the holder thereof (each, a “SAFEholder”), was canceled and converted into the right to receive a number of shares of our Class A Common Stock determined under the terms of the applicable SAFE; |
| ● | A base camp agreement between Legacy Exascale and an investor (the “Base Camp Investment Agreement”) was cancelled and converted into the right to receive a number of shares of our Class A Common Stock determined in accordance with the terms of the Base Camp Investment Agreement; |
| ● | Each outstanding Legacy Exascale equity incentive award was cancelled and converted into the right to receive a number of shares of our Class A Common Stock determined based on Legacy Exascale’s fully diluted capitalization at the time of the Business Combination; |
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| ● | Each issued and outstanding Legacy Exascale Class A common stock was cancelled and converted into the right to receive a number of shares of our Class A Common Stock determined based on Legacy Exascale’s fully diluted capitalization at the time of the Business Combination; |
| ● | Each issued and outstanding Legacy Exascale Class B common stock was cancelled and converted into the right to receive a number of shares of our Class B common stock, par value $0.0001 per share (“Class B Common Stock,” and together with the Class A Common Stock, the “Common Stock”) determined based on Legacy Exascale’s fully diluted capitalization at the time of the Business Combination; and |
| ● | Each share in Merger Sub issued and outstanding immediately prior to the effective time of the Acquisition Merger, automatically became an issued share of Legacy Exascale (with such shares becoming the only issued shares of Legacy Exascale immediately after the effective time of the Acquisition Merger). |
No fractional shares of our Common Stock were issued in connection with the Business Combination.
In connection with the Extraordinary General Meeting and the Business Combination, holders of 26,865,211 BCAR Class A Ordinary Shares exercised their right to redeem their shares for cash.
On the Closing Date, we issued, or reserved for issuance, a total aggregate of 33,689,050 shares of Class A Common Stock and 30,645,739 shares of Class B Common Stock, of which an aggregate of 19,354,261 shares of Class A Common Stock and 30,645,739 shares of Class B Common Stock were issued to the former Legacy Exascale securityholders in exchange for their equity interests in Legacy Exascale, representing an aggregate merger consideration of $500,000,000 based on a deemed value of $10.00 per share of our Common Stock. In addition, we assumed the BCAR Warrants, which became our warrants, with the result that, as of the Closing Date, we had 14,099,992 warrants issued and outstanding, each whole warrant entitling the holder thereof to purchase one share of our Class A Common Stock at an exercise price of $11.50 per share.
Listing
Prior to the Closing Date, BCAR’s units (the “BCAR Units”), the BCAR Class A Ordinary Shares and the BCAR Warrants were listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “BCARU,” “BCAR” and “BCARW,” respectively. In connection with the Business Combination, all of the BCAR Units separated into their component parts and ceased trading on Nasdaq.
On August 28, 2026, our Class A Common Stock and warrants began trading on Nasdaq under the symbols “XLAB” and XLABW,” respectively. Our Class B Common Stock are not listed on Nasdaq or any other securities exchange and are not publicly traded.
Our Business
We are a next-generation AI infrastructure provider operating an asset-light, software-defined GPU compute platform and related AI infrastructure solutions. Our core business includes GaaS, through which we provide reserved and on-demand access to high-performance GPU compute capacity sourced from third-party data centers globally, as well as GPU cluster management and optimization services for AI data center (“AIDC”) operators. In addition, we have developed certain modular data center, high-density liquid cooling, high-voltage direct current (“HVDC”) power, data center interconnectivity and energy storage solutions that are designed to address deployment bottlenecks in AI infrastructure and that we believe are ready for commercial engagement, although these capabilities have not yet generated revenue as of the date of this Annual Report. The platform is purpose-built for large-scale AI workloads, including LLM training, fine-tuning, and high-concurrency inference.
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Our business consists of two primary product and service categories. First, we provide GPU-based compute services through our GaaS offering, which delivers scalable access to high-performance GPU capacity via bare-metal and VM configurations. These services are offered through both on-demand and reserved usage models and are designed to support a range of AI workloads, including large-scale model training, fine-tuning, and high-concurrency inference. Second, we provide Infrastructure Solutions for AI deployments, which include (i) GPU cluster management and operational services provided to AIDC operators, including planning and configuration support, monitoring, performance tuning, and ongoing operational assistance for large-scale GPU deployments, which are revenue-generating and delivered pursuant to commercial service arrangements, and (ii) certain modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions that our management believes are ready to support customer deployments as of the date of this Annual Report, although such offerings have not generated revenue to date. We expect to pursue these offerings on an asset-light basis, primarily through partnerships, systems integration, contract manufacturing and other collaborative structures.
Industry and Market Background
The AI industry is undergoing a generational paradigm shift, driven by the rapid adoption of Generative AI and LLMs. This shift has created an unprecedented demand for specialized, high-performance accelerated computing infrastructure that far exceeds the capabilities of traditional general-purpose cloud architectures. We believe the market is currently in the early stages of a secular transition from legacy central processing unit (“CPU”)-centric data centers to accelerated computing environments purpose-built for AI.
The proliferation of foundational models and AI-native applications has triggered a massive capital investment cycle. According to a September 2025 report by Gartner, Inc., a business and technology insights company, global spending on AI infrastructure is projected to grow to exceed $2.0 trillion by 2026. This growth is driven not only by the training of increasingly larger models which now regularly exceed trillions of parameters, but also by the exponential rise in inference workloads as enterprises integrate AI into production environments. The demand for compute capacity is outstripping supply by a significant margin. As of early 2026, despite increases in manufacturing capacity, the demand for cutting-edge GPUs, such as NVIDIA’s Blackwell architecture and subsequent generations, remained robust. Market indicators suggest that supply constraints for high-end AI processors could extend through 2027 and into 2028.
Limitations of Legacy Cloud Infrastructure
Traditional hyperscale cloud providers have historically architected their infrastructure to primarily support general-purpose web applications, such as web-hosting, e-commerce, databases, and search, and have historically relied on CPU-based, web-scale computing architectures. While hyperscale cloud providers have added GPU offerings and continue to invest in AI-related infrastructure, the operational and architectural assumptions that underlie general-purpose cloud platforms, such as multi-tenant abstractions designed for a wide set of workloads, may not be optimized for certain AI workloads that require dense GPU clusters, high-performance interconnects, and operational practices focused on maximizing effective utilization and minimizing job disruption. Industry participants have stated that certain large, diversified cloud providers are not purpose-built for the AI and accelerated compute use cases served by specialized AI infrastructure providers.
As AI adoption accelerates, the market increasingly demands infrastructure that is purpose-built to address the unique characteristics of AI workloads. This shift is driving specific requirements for platforms and service providers that combine GPU capacity with specialized software, operational tooling, and infrastructure management practices intended to (i) optimize performance, (ii) maintain stability and uptime, and (iii) reduce the complexity of operating high-performance AI infrastructure.
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In particular, AI adoption has driven demand for infrastructure that can address several interrelated requirements, including the following:
| ● | Performance at scale through balanced system design. Large AI training workloads can require high-throughput data pipelines and coordinated operation across many GPUs. In these settings, performance is often influenced not only by the GPUs themselves but also by the design and operation of supporting infrastructure components (including networking, storage, and systems software). |
| ● | Maximizing effective utilization of expensive GPU resources. Because GPU compute capacity is a significant input cost for many AI workloads, effective utilization can meaningfully affect the economics and throughput of AI development and deployment. Industry users place strong emphasis on the degree to which real-world performance approaches hardware potential, and on how that performance can be affected by software stack efficiency, data movement and bottlenecks, as well as operational factors that interrupt or degrade workload execution. |
| ● | Reliability, stability, and operational consistency. Large-scale training runs and production inference environments can be sensitive to interruptions, failures, and performance variability. As clusters scale, operational stability and uptime become increasingly important for avoiding disruptions and managing overall compute costs and time-to-completion. We have observed an increasing demand for lifecycle management, monitoring, validation, and proactive health-checking capabilities intended to prevent failures and rapidly remediate issues in complex AI infrastructure environments. |
| ● | Reducing operational complexity for customers and improving usability. Deploying and operating GPU clusters at scale often involves significant complexity, including provisioning, configuration management, observability, incident response workflows, and ongoing tuning of infrastructure and software environments. The industry requires monitoring and observability solutions, as well as operational services designed to support the deployment, ongoing operation, and remediation of infrastructure components throughout their full lifecycle. These capabilities are needed to shift a meaningful portion of the infrastructure management burden from customers to the platform. |
| ● | Speed of deployment and access to current-generation GPU capability. AI demand has increased the importance of time-to-capacity, including the ability to deploy and operate GPU clusters in a timely manner and, in some cases, to adopt new GPU generations as they become commercially available. Industry participants have cited speed to market and the scale of GPU clusters as factors relevant to competitive positioning in accelerated computing markets. |
The Evolution of Purpose-built AI Clouds (NeoClouds)
In response to the demand for accelerated compute capacity and the constraints associated with obtaining and deploying advanced GPU resources, a category of purpose-built AI infrastructure providers, often referred to in industry discussions as “neoclouds,” has emerged.
Neocloud providers generally offer GPU-centric infrastructure and services designed specifically for AI workloads. By combining compute capacity with managed configuration, monitoring, incident response workflows, and workload tuning practices, these platforms are intended to improve effective utilization and deliver more predictable performance for model training and large-scale inference, while supporting service stability and uptime. Neocloud offerings are also commonly structured to reduce the operational complexity associated with deploying and operating high-performance GPU clusters and to provide customers with more rapid access to scalable GPU capacity as demand changes.
Business models among neocloud providers vary. Some specialized providers have adopted capital-intensive approaches that involve significant investments in GPU fleets and data center capacity, and certain market participants have described their operations as capital-intensive and related capital market risks.
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Capital Investment and Industry Trajectory
The AI infrastructure sector continues to attract unprecedented levels of capital investment, driven by what we believe is a secular transition in global computing architecture. However, this rapid expansion is inherently capital-intensive, often requiring substantial upfront expenditures that can translate into significant balance sheet leverage, while simultaneously exposing operators to risks associated with hardware obsolescence, accelerated depreciation, and rapid technology refresh cycles. A November 2025 report by CreditSights projects combined capital expenditures for the top five hyperscalers increasing from approximately $256.0 billion in 2024 to approximately $602.0 billion in 2026.
We believe that this investment cycle is in its early stages. According to an April 2025 article by McKinsey & Company, global data centers will require a cumulative investment of approximately $6.7 trillion by 2030, of which approximately $5.2 trillion is specifically attributed to AI-related infrastructure. This forecast implies a sustained, multi-year expansion in the addressable market for data center delivery, specialized compute services, and hardware optimization.
We believe these capital inflows underscore the strategic importance of computing power as a fundamental resource for future economic growth. At the same time, the scale and structure of these investments highlight the importance of capital-efficient models that can mitigate leverage, manage asset lifecycle risk, and optimize returns amid ongoing hardware evolution. The magnitude of the projected investment suggests durable market demand for infrastructure providers capable of delivering high-performance resources with speed and capital efficiency.
Physical Constraints: Data Center, Power, and Deployment
The scaling of AI infrastructure is increasingly constrained by physical limitations related to power availability, thermal management, and data center construction timelines. As the thermal design power (“TDP”) of next-generation AI accelerators approaches and, in some cases, exceeds 1,000 watts per GPU, legacy data centers designed for lower-density workloads, typically supporting approximately 10 to 15 kilowatts per rack, are becoming insufficient for modern AI deployments. As a result, the industry is undergoing a structural transition toward high-density computing environments capable of supporting rack densities ranging from approximately 40 kilowatts to over 100 kilowatts per rack. We believe this transition requires the adoption of advanced infrastructure technologies, including next-generation liquid cooling solutions and modular data center (“MDC”) architectures, to overcome the thermal and power-efficiency limitations of traditional air-cooled facilities.
In addition to thermal constraints, limitations on utility power availability and transmission capacity are increasingly influencing the design and deployment of AI infrastructure. These constraints have driven growing interest in HVDC power architectures, which are designed to improve power transmission efficiency and reduce energy losses within high-density AI computing environments. Collectively, these physical constraints are becoming a critical factor in determining the pace at which AI infrastructure can be deployed and scaled and are increasingly viewed as a prerequisite to sustaining continued performance improvements in next-generation AI models.
As GPU TDP continues to rise, software optimization has emerged as a critical economic lever for AI infrastructure providers and their customers. Given the high capital cost and ongoing scarcity of advanced AI hardware, the ability to improve effective compute throughput and increase GPU utilization rates through software-defined efficiency is becoming increasingly important to the economic viability of AI workloads. At the same time, the industry is mandating a shift toward liquid cooling technologies to support next-generation rack densities that exceed 100 kilowatts, which we believe requires AI infrastructure to be architected from the ground up to operate reliably and efficiently in high-density environments.
We believe that the convergence of supply constraints, increasing technical complexity, and the need for rapid deployment has created a significant and durable market opportunity for asset-light, execution-focused AI infrastructure providers, like us, that can deliver high-performance compute capacity while addressing these evolving physical and operational challenges.
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Our Solution
We have developed an asset-light, software-defined AI infrastructure platform designed to provide customers with access to high-performance GPU compute and related infrastructure services for large-scale AI workloads. The platform supports reserved and on-demand compute services and is intended to enable customers and infrastructure operators to provision, manage, monitor, and optimize GPU environments used for large-scale model training, fine-tuning, and high-concurrency inference.
Our business is organized around two primary product and service categories:
| (i) | GaaS: We provide GPU-based compute services through our GaaS offering, which delivers scalable access to high-performance GPU capacity via bare-metal and VM configurations. These services are offered through both on-demand and reserved usage models and are designed to support a range of AI workloads, including large-scale model training, fine-tuning, and high-concurrency inference. |
| (ii) | Infrastructure Solutions. We provide Infrastructure Solutions for AI deployments, which include (a) GPU cluster management and operational services provided to AIDC operators, including planning and configuration support, monitoring, performance tuning, and ongoing operational assistance for large-scale GPU deployments, which are revenue-generating and delivered pursuant to commercial service arrangements, and (b) certain modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions that management believes are ready to support customer deployments as of the date of this Annual Report, although such offerings have not generated revenue to date. |
Supporting these offerings, we utilize infrastructure-level interfaces, APIs, and operational tooling to facilitate provisioning, resource management, monitoring, incident response, performance management, and service delivery across our compute and infrastructure services. We expect to pursue our broader infrastructure offerings on an asset-light basis, primarily through partnerships, systems integration, contract manufacturing, and other collaborative structures.
We believe that our combination of GPU compute services, operational capabilities, and infrastructure solutions is designed to address the performance, reliability, deployment, and operational requirements of modern AI infrastructure and to position us for long-term growth in the accelerated computing market.
Competitive Strengths
The following subsections describe certain competitive strengths that we believe differentiate us in the rapidly evolving AI infrastructure market and may may support our ability to compete as the market continues to evolve. The following competitive strengths should be balanced with, and considered in the context of, the risks we faces, as discussed in the “Risk Factors” section of this Annual Report.
Purpose-Built for Large-Scale AI Workloads
Our platform and service model are designed for large-scale AI workloads, including model training, fine-tuning and high-concurrency inference. We believe this focus allows us to align our compute services, tooling and operational processes with the performance, stability and usability requirements of GPU-intensive environments.
Proprietary Software-Defined Efficiency
In an industry constrained by the high cost and scarcity of compute resources, we view software optimization as our primary lever for value creation. We have developed a proprietary Intelligent Scheduling System designed to decouple workload performance from raw hardware availability.
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Key elements of this approach include:
| ● | Process-Level Orchestration. Unlike conventional schedulers that typically manage resources at the server level, our system is engineered to provide deep, process-level observability and control. It dynamically schedules computing tasks and optimizes memory allocation to address bottlenecks inherent in large-scale cluster training and parallel computing workloads. |
| ● | Focus on Cost-Performance Efficiency. By optimizing kernel execution and mitigating network latency, our platform is designed to achieve utilization rates that significantly exceed standard industry benchmarks for generalized clouds. This efficiency objective allows us to potentially lower the effective total cost of ownership for our customers while maximizing the revenue yield of our deployed capacity. |
Asset-Light and Scalable Delivery Model
We prioritize leveraging the underlying hardware resources and operational services of third-party data centers, and integrate those resources through our proprietary software systems and service capabilities to deliver GPU-as-a-Service and related software offerings to end customers, rather than incurring heavy capital expenditures on real estate and direct hardware ownership. This model is intended to provide several operational benefits, including:
| ● | Agility and Risk Mitigation: Our model enables us to scale capacity in response to customer demand without the long lead times and significant balance-sheet burdens associated with building greenfield data centers or owning depreciating hardware assets. It also provides the flexibility to adapt to new hardware generations, aiming to reduce the risk of technology obsolescence. |
| ● | Focus on Core Competencies: By partnering with top-tier data center operators for physical facilities, we focuses our resources on what we believe are our core differentiators, namely: software orchestration, supply chain integration, and customer service delivery. |
Rapid Deployment
Time-to-market is a critical differentiator for our customers in the AI sector. We leverage the extensive experience of our technical leadership team to navigate complex supply chains and accelerate infrastructure delivery across a truly global footprint. Drawing on our leadership’s prior experience deploying large-scale, high-performance computing clusters, we apply specialized execution methodologies to significantly compress deployment timelines compared to industry standards.
Diversified Customer Base
We have strategically cultivated a diversified customer base to enhance commercial resilience and revenue stability. As of June 30, 2026, we served close to 50 distinct customers, with our largest single customer contributing approximately 20.1% of our total revenue. We believe this level of diversification differentiates us in the specialized AI cloud market, where high revenue concentration from a small number of anchor tenants is often a prevalent structural characteristic. We believe our broad customer distribution reduces our dependency on any single entity and validates the widespread applicability of our service offerings. Our diversified portfolio helps us mitigate counterparty risks and maintain more predictable revenue streams amid fluctuating market cycles.
Accessible Service Model
We have architected our product and service framework to democratize access to high-performance AI infrastructure, addressing a significant gap in the market for underserved segments. While many specialized infrastructure providers prioritize massive-scale engagements with high minimum spend thresholds, effectively excluding a large portion of the market, we maintain a flexible engagement model. We offer product configurations, technical support structures, and commercial terms specifically designed to be accessible to small-and-medium-sized enterprises (SMEs) and emerging AI startups. Our service delivery model includes dedicated technical support suited for organizations that may lack the massive internal engineering resources of large technology giants. By providing this level of accessibility, we are able to capture high-growth opportunities within the broader AI ecosystem that are often overlooked by other providers.
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Infrastructure Expertise and Future-Readiness
In addition to our compute services and revenue-generating GPU cluster management offerings, we have developed certain modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions that we believe are ready to support customer deployments as of the date of this Annual, although such offerings have not generated revenue to date. We expect to pursue these offerings primarily through partnerships, systems integration, contract manufacturing and other collaborative structures. We believe this approach may allow us to participate in broader AI infrastructure deployments over time while maintaining an asset-light operating model.
Our Principal Products and Services
Our products and services are organized into two primary categories: (i) GPU-as-a-Service (“GaaS”), which includes software-defined AI compute services, infrastructure-level interfaces, and operational tools that enable customers and operators to provision and manage GPU resources at scale; and (ii) AI Infrastructure Solutions, which includes revenue-generating GPU cluster management and operational services for AI data center operators, as well as complementary infrastructure solution capabilities, including modular data center solutions, high-density liquid cooling systems, HVDC power architectures, data center interconnectivity and energy storage capabilities, that management believes are ready for commercial engagement but that have not yet generated revenue as of the date of this Annual Report.
AI Compute Services (GPU-as-a-Service)
Our flagship offering is GPU-as-a-Service (“GaaS”), which provides customers with reserved or on-demand, scalable access to high-performance computing resources. Delivered through our unified control plane, these services are designed to meet the performance requirements of modern AI workloads.
We offer GPU compute configurations through both bare metal instances and virtual machines (“VMs”). We provide single-tenant, bare-metal servers that offer customers direct access to hardware resources without virtualization overhead. This configuration is optimized for large-scale cluster training and performance-critical workloads that require maximum throughput and low latency. We also offer flexible, isolated VM instances suitable for development, testing, and scalable inference workloads. These instances allow for rapid provisioning and efficient resource scaling.
We offer our compute services through multiple commercial models, including on-demand offerings that allow customers to provision capacity on a pay-as-you-go basis for short-term or burst workloads, as well as reserved instance offerings that provide guaranteed capacity and pricing stability for customers with predictable, long-term production requirements. Reserved arrangements typically range from one to three years and are intended to provide customers with supply certainty while providing us with improved revenue visibility.
Our platform supports a range of AI workloads, including large-scale multi-node training, enterprise fine-tuning of pre-trained models and production inference workloads requiring optimized latency and throughput. In connection with these services, we may also provide ancillary services that support compute usage, including networking and storage configuration, operating environment setup, and support services, as required by the customer and within the scope of the service arrangement. The availability of specific configurations and services may depend on supplier arrangements, data center capacity, and operational considerations.
Infrastructure-Level Interfaces and APIs
We provide infrastructure-level interfaces designed for developers and enterprise customers that support automated creation, management, and monitoring of compute resources through APIs. These interfaces are intended to enable customers to programmatically provision and manage resources without accessing a separate management console, including within the customer’s own systems and workflows.
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Our API capabilities are intended to support, among other things, (i) programmatic provisioning and lifecycle management of compute resources, including GPU and CPU nodes, (ii) Command Line Interfaces (CLIs) that allow developers to provision, manage, and monitor compute resources via code, which enables direct integration with customers’ internal machine learning operations pipelines and CI/CD workflows, (iii) programmatic management and monitoring of customer environments, and (iv) integration of compute resources with networking and storage configurations as supported under the applicable service offering. The scope of API functionality available to any customer depends on the customer’s service configuration, access permissions, and the terms of the applicable arrangement.
Operational and Management Tools Supporting Service Delivery
We operate internal operational and management tools used by our personnel to manage the compute infrastructure and support service delivery. These tools are used to manage server resources and underlying services and to support ongoing operations. Core functions supported by these internal tools include (i) server management and operations, including onboarding, configuration, operational control, monitoring, and inspection workflows, (ii) environment management and operations, including monitoring and management of network conditions, thermal conditions, and power-related parameters, and (iii) supporting functions, including access management, logging, analytics and reporting, and integrations with third-party tools used to support operations. These internal tools are intended to support consistent operational procedures across infrastructure deployed in third-party facilities and to enable us to provision and manage customer compute environments through its platform.
AI Infrastructure Solutions
Our Infrastructure Solutions category includes GPU cluster management and operational services for AIDC operators, as well as certain infrastructure solutions designed to support large-scale AI deployments.
GPU Cluster Management and Operational Services
We provide GPU cluster management services to AIDC operators. These services are intended to assist AIDC operators in deploying, operating, and optimizing large-scale GPU clusters and may be delivered in connection with customer deployments or ongoing operations, depending on the terms of the engagement. These services have generated revenue for us. The scope of our GPU cluster management services may include, as applicable, (i) planning and configuration support for GPU cluster deployments, (ii) operational monitoring and incident response support, (iii) performance tuning and optimization activities, and (iv) operational process support and ongoing assistance. Engagement terms, service scope, and duration may vary depending on the customer’s requirements and the nature of the deployment or operating environment.
Complementary Infrastructure Solution Capabilities
In addition, we have developed complementary infrastructure solution capabilities intended to support large-scale AI deployments, including modular data center solutions, high-density liquid cooling systems, HVDC power architectures, data center interconnectivity and energy storage capabilities. We have made progress in the development and validation of these capabilities, and management believes that certain of these solutions are ready for commercial engagement with prospective customers. However, as of the date of this Annual Report, these capabilities have not been deployed at scale under binding commercial contracts and have not generated revenue. We expect to pursue these offerings primarily on an asset-light basis through partnerships, systems integration, contract manufacturing, and other collaborative structures.
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Sales and Marketing
Our go-to-market approach is designed to support the delivery of GPU-based compute services and related infrastructure management services to developers, enterprise customers, academic and research institutions, and certain AIDC operators. Our strategy includes a mix of direct sales to enterprise clients and collaborations with cloud service providers and value-added resellers to broaden market reach. We engage customers through a combination of (i) platform-led provisioning of compute services and (ii) direct, service-oriented engagements for certain infrastructure management services. Our go-to-market approach is implemented in conjunction with our sourcing and facility relationships, including third-party GPU capacity suppliers and data center partners.
Customer Acquisition Channels
Our customer acquisition and engagement channels generally include the following:
| ● | Platform-led onboarding and ordering. For compute services, customers can access our platform to provision and manage compute resources via self-service workflows and interfaces, including API-based provisioning and management. |
| ● | Direct sales and account-driven engagements. For certain enterprise customers and service engagements, we may pursue direct customer relationships that involve structured onboarding, customized configurations, support requirements, or other service terms. |
| ● | Service-driven engagements with AIDC operators. For GPU cluster management services, we typically engage customers through direct service arrangements, which may be structured as project-based engagements or ongoing support arrangements, depending on customer requirements. |
The mix of channels utilized for a given customer may depend on the customer segment, workload characteristics, service configuration requirements, and the scope of support requested.
Partnerships and Ecosystem Relationships
Our go-to-market activities are supported by relationships with third parties, which include (i) GPU capacity suppliers, from which we source GPU hardware resources and underlying hardware operations services and integrates them through its proprietary software systems and customer-facing service capabilities to provide GPU-as-a-Service, (ii) data center and facility partners, which provide physical infrastructure inputs such as space, power, cooling, and network connectivity, (iii) technology and service providers, including vendors and tools used to support monitoring, management, security, and operations within our infrastructure environment, and (iv) systems integration, engineering, manufacturing and component partners that may support our Infrastructure Solutions offerings, including modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions.
These relationships are intended to support our ability to deliver our GaaS and Infrastructure Solutions offerings at scale. Our ability to expand customer engagements may be affected by supplier availability, data center capacity constraints, component availability, partner execution, permitting requirements, and operational integration and deployment timelines.
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GPU Capacity Supplier Arrangements
Our GPU capacity supplier arrangements are primarily integrated GPU capacity and related infrastructure service arrangements. Under these arrangements, third-party suppliers provide us with access to specified GPU servers or GPU capacity, together with bundled hosting, power, rack space, data center resources, network connectivity and related infrastructure services necessary to operate and make such GPU capacity available. The primary commercial purpose of these arrangements is to obtain access to GPU compute capacity. The hosting, power, rack space, data center resources, network connectivity and similar services provided by these suppliers are bundled infrastructure components that support the operation and delivery of such GPU capacity.
We pay GPU capacity suppliers primarily through usage-based fee arrangements. Depending on the supplier and the applicable order or service arrangement, we may be required to pay deposits or prepayments, or may be invoiced periodically in arrears based on actual usage. Certain supplier arrangements involve rolling monthly usage-based payments, which may be structured as prepaid amounts or invoiced after usage. We do not enter into revenue-sharing arrangements with its GPU capacity suppliers.
We rely on multiple GPU capacity supplier relationships as part of our overall supply model. This multi-supplier approach is designed to support supply continuity, procurement flexibility and access to alternative sources of GPU capacity. We actively evaluate capacity availability across existing and prospective third-party GPU capacity suppliers and seek to diversify our sourcing relationships so that we are not operationally dependent on any single supplier arrangement. We believe that maintaining multiple supplier relationships provides flexibility to source additional or replacement GPU capacity from existing suppliers or alternative third-party providers, subject to market availability, pricing, technical configuration, location, deployment timing and other commercial and operational considerations.
Our GPU capacity supplier arrangements vary in duration. Certain arrangements have longer-term contract periods, while other arrangements may be shorter-term, order-based or subject to rolling monthly usage-based terms. Our GPU capacity supplier arrangements do not include take-or-pay obligations, minimum purchase commitments or exclusivity obligations. Certain suppliers provide non-exclusive priority allocation or preferred access to GPU capacity, which is intended to support supply availability for us. However, such arrangements do not require us to purchase a minimum amount of capacity and do not provide us with exclusive rights to a supplier’s GPU capacity.
Supplier costs under these arrangements are a principal component of our cost of revenue. Pricing under our GPU capacity supplier arrangements is generally subject to market conditions for GPU compute capacity, although pricing may be fixed for short periods or for specific usage periods, orders or capacity configurations. Under certain usage-based arrangements, our unit cost may decrease as usage volume increases. However, we may not be able to maintain or reduce unit costs if GPU supply becomes constrained, supplier pricing increases, utilization levels decline or we are unable to obtain favorable terms.
Our GPU capacity supplier arrangements do not involve revenue sharing, the purchase or lease of GPU equipment or data center equipment from such suppliers, or a long-term lease of data center facilities. Although we rely on multiple supplier relationships as part of our overall supply model, our purchases have been concentrated among a limited number of suppliers. We do not currently believe that any individual GPU capacity supplier arrangement or hosting arrangement described above represents the major part of our requirements for GPU capacity or related infrastructure services.
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Segment-Specific Engagement Considerations
Our engagement approach may vary by customer segment. Developers and AI-native companies may primarily engage through platform-led ordering and provisioning workflows and may provision compute capacity as needed based on project cycles and workload requirements. Enterprise customers may require structured onboarding, defined service parameters, access controls, and support arrangements consistent with internal operational requirements. Academic and research institutions may have procurement and budgeting processes that differ from commercial enterprises and may require scheduling, data handling, or operational considerations tailored to research workflows and institutional requirements. AIDC operators engaging us for GPU cluster management services typically require operational support for deployment, ongoing operations, and the optimization of large-scale GPU clusters. In addition, certain enterprise customers, infrastructure operators or AIDC operators may engage us in connection with Infrastructure Solutions offerings, including modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions, which may require coordination with facility infrastructure, third-party partners, and project-specific operational constraints.
Implementation, Onboarding, and Account Management
For compute services, customer onboarding generally includes account setup, access provisioning, configuration of compute environments within our managed platform, and operational coordination based on the customer’s selected service configuration. Customers may expand or modify service configurations over time, subject to our available capacity, operational constraints, and the terms of the applicable arrangement. For GPU cluster management services, implementation typically includes scoping of the engagement, aligning with deployment or operational objectives, and delivering services consistent with the agreed scope and duration. For Infrastructure Solutions offerings, implementation may include solution scoping, design and deployment planning, coordination with facility, engineering, manufacturing or other third-party partners, integration activities, and commissioning or operational support, depending on the scope of the customer arrangement. Our account management activities may include operational coordination, support, and escalation processes, as well as periodic service reviews depending on the engagement structure.
Competition
The industry and markets in which we operate are highly competitive, rapidly evolving and characterized by technological change, capacity constraints and significant capital requirements. We compete in the provision of GPU-based compute services and related Infrastructure Solutions for AI deployments. Our current revenue-generating offerings include GaaS and GPU cluster management and operational services for AIDC. In addition, as we commercialize our modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage offerings, we expect to compete more directly in additional segments of the AI infrastructure market. Competitive dynamics are influenced by, among other factors, the availability and configuration of GPU capacity, performance and reliability requirements, deployment constraints, including power availability and cooling capacity, service quality, customer support, pricing and commercial terms, security and compliance capabilities, systems integration and deployment capabilities, and the pace of innovation in AI hardware and software.
We face competition from a range of entities with differing business models, operating scales and strategic priorities, including the following categories:
General-Purpose Cloud Computing Providers
We compete with large, diversified cloud service providers that offer GPU-based compute as part of broader cloud platforms. These providers include Amazon Web Services (“AWS”), Microsoft Azure, Google Cloud Platform, Oracle Cloud Infrastructure and IBM Cloud. These platforms typically benefit from significant financial resources, global infrastructure footprints, established customer relationships and extensive product ecosystems. However, their platforms were generally developed to support a wide range of general-purpose workloads and may not be purpose-built for certain AI workloads that require specialized GPU-centric configurations, high-performance interconnects and optimized utilization of underlying infrastructure.
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Specialized AI Infrastructure and GPU Compute Providers (“NeoClouds”)
We also compete with specialized providers focused on delivering GPU compute and AI-optimized infrastructure services. These providers include CoreWeave, Nebius, Lambda, Crusoe, Voltage Park, WhiteFiber and Hyperstack, among others. Certain of these competitors operate capital-intensive business models that involve owning and operating substantial GPU fleets and, in some cases, developing or controlling data center facilities. These providers may offer deep specialization for AI workloads but may face higher capital requirements and balance-sheet exposure associated with hardware ownership and facility development.
GPU Aggregators and Compute Marketplaces
We also compete with GPU aggregators and marketplaces that aggregate third-party GPU capacity and provide access to compute resources through software platforms. Examples of such providers include Vast.ai, Aethir Cloud, Hyperbolic and similar marketplace-based offerings. These platforms may offer flexible access to distributed capacity but may have more limited involvement in underlying infrastructure deployment, operational management and deep performance optimization, and may have varying levels of control over service quality, reliability and customer experience.
Data Center Operators and AIDC Service Providers
Certain data center operators and AIDC participants offer AI infrastructure services directly or through affiliated service offerings. In addition, some AIDC operators may provide managed cluster services or otherwise compete for customer workloads requiring large-scale GPU deployments. To the extent such operators internalize capabilities that overlap with our services, including GPU cluster management and operational support, they may compete with us for certain customer engagements.
AI Data Center Infrastructure and Solutions Providers
To the extent we pursue commercial engagements for our infrastructure solution capabilities, including modular data center solutions, liquid cooling systems, HVDC power architectures and data center interconnectivity, we may also face competition from established infrastructure equipment manufacturers and solutions providers. These may include providers of data center power distribution, cooling, and modular infrastructure products. These companies generally have significantly greater manufacturing scale, established supply chains, broader product portfolios, and longer track records of commercial deployment than us. Our infrastructure solution capabilities have not yet generated revenue, and there can be no assurance that we will be able to compete effectively in such market segment.
Factors Affecting Competition
We believe that competition in the markets in which we operate is generally based on a combination of factors, including, without limitation:
| ● | availability of GPU capacity and configuration options, including access to relevant GPU types and deployment timelines; |
| ● | performance and efficiency, including the ability to optimize workload performance and utilization within given infrastructure constraints; |
| ● | reliability and stability, including uptime, operational consistency, and network interconnect performance for cluster-based workloads; |
| ● | operational capabilities and support, including deployment planning, monitoring, incident response, and customer support processes; |
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| ● | ease of use and integration, including tooling, automation features and API-based controls that reduce operational complexity for customers; |
| ● | infrastructure constraints and deployment considerations, including access to suitable facilities, power, cooling, component availability and partner execution; |
| ● | speed and efficiency of infrastructure deployment, including the ability to design, configure, and commission AI-ready compute environments within compressed timelines; |
| ● | pricing and commercial terms, including flexibility and alignment with customer needs and requirements; and |
| ● | security, data protection and regulatory compliance considerations. |
The industry and markets in which we operate are highly competitive, and we face competition from a number of companies and other entities with varying business models, operating scales and strategic priorities. Many of our current and potential competitors have substantially greater financial, technical, marketing and other resources, broader customer relationships, longer operating histories, greater brand recognition, and more established infrastructure than us. As a result, these competitors may be able to respond more quickly to new or emerging technologies, devote greater resources to the development, promotion and sale of their offerings, withstand pricing pressures more effectively, or offer more favorable commercial terms than us. Increased competition could result in pricing pressure, reduced margins, increased customer acquisition costs or loss of market share. For additional discussion of risks related to the competition we face or could potentially face, see the section of this Annual Report captioned “Risk Factors.” Notwithstanding the foregoing, we believe our business model differs from certain capital-intensive providers by sourcing GPU capacity through third-party arrangements and delivering GaaS and Infrastructure Solutions through our managed platform, technology systems and operational processes on an asset-light basis. We intend to compete by applying our technology and operations capabilities to support performance optimization, operational stability, and usability for customers operating GPU-based workloads, including through GPU cluster management services for AIDC operators and, over time, through its complementary infrastructure solution capabilities as those offerings are commercially deployed.
Seasonality
Our business is not inherently seasonal. Demand for GaaS (including its APIs and supporting tools) is driven by ongoing AI training, inference, and production workloads, which are generally non-seasonal in nature. At present, revenue within our Infrastructure Solutions category is derived from GPU cluster management and operational services. Revenues from these services, and from other Infrastructure Solutions offerings if and when they begin to generate revenue, may exhibit period-to-period variability due to the timing of customer capital expenditure decisions, project milestones, deployment schedules, facility readiness, partner execution and delivery timelines. Such fluctuations are primarily project-based rather than seasonal, and we do not believe seasonality has a material impact on our business.
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Patents
Information concerning our patents and copyright, as of the date of this Annual Report, is set forth below:
Patents
| Title | Number | Registration Date | Jurisdiction | Status |
| COMPUTING POWER NETWORK SYSTEM | 12,058,179 | August 6, 2024 | United States | Granted and in force |
| AIOPS SCHEDULING METHOD AND SYSTEM BASED ON MULTI-AGENT COLLABORATIVE AUTONOMY | 19/440,612 | January 5, 2026 | United States | Pending |
| AN ADAPTIVE EXTERNAL SUPPLY-AND-RETURN WATER TEMPERATURE REGULATION SYSTEM AND METHOD FOR A MODULAR DATA CENTER | 19/440,577 | January 5, 2026 | United States | Pending |
| A METHOD AND SYSTEM FOR MAXIMIZING THROUGHPUT OF A GPU CLUSTER | 19/444,167 | January 8, 2026 | United States | Pending |
Software Copyright
| Title | Case Number | Application Date | Jurisdiction | Status |
| EXASCALE ARTIFICIAL INTELLIGENCE COMPUTING POWER MANAGEMENT PLATFORM | 1-15021399291 | October 15, 2025 | United States | Pending |
Regulation
We are subject to the laws and regulations of various jurisdictions and governmental agencies affecting our operations, products and services including, but not limited, laws relating to AI, intellectual property, tax, import and export requirements, anti-corruption, economic and trade sanctions, national security and foreign investment, data privacy and security requirements, competition, advertising, employment, product regulations, environment, health and safety requirements, and consumer laws. A discussion of the risks related to such laws is set forth in the “Risk Factors” section of this Annual Report, as supplemented by the discussion below. To date, costs and accruals incurred to comply with regulations have not been material to our capital expenditures and results of operations. Although there is no assurance that existing or future governmental laws and regulations applicable to our operations, products and services will not have a material adverse effect on our capital expenditures, operating results, and competitive position, we do not currently anticipate material expenditures for compliance with regulations. Nonetheless, we believe that global trade regulations could potentially have a material impact on our business.
As a global company, the import and export of our products and services are subject to laws and regulations including international treaties, U.S. export controls and sanctions laws, customs regulations, and local trade rules around the world. The scope, nature, and severity of such controls varies widely across different countries and may change frequently over time. Such laws, rules, and regulations may delay the introduction of products and services or impact our competitiveness through restricting our ability to conduct business in certain jurisdictions or with certain entities and individuals. For example, the U.S. Department of Commerce continues to tighten export controls and add firms to the “Entity List.” These export restrictions, which would require that we obtain licenses from the U.S. Department of Commerce to allow us to export infrastructure services to such listed firms, could limit or prevent us from doing business with certain potential customers or potential suppliers. These restrictive governmental actions and any similar measures that may be imposed on U.S. companies by other governments could limit our ability to conduct business globally.
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Our operations, and the third-party data center and partner-operated facilities in which our GPU capacity is deployed, are subject to laws and regulations of various jurisdictions and governmental agencies, including local, state, and federal environment laws, health and safety requirements. These requirements may relate to, among other things, the siting, build-out and operation of data center facilities, power and cooling infrastructure, and the handling and disposal of certain equipment and materials. In addition, because a significant portion of our cost structure is driven by third-party facility inputs (including colocation, power, cooling and network connectivity), changes in environmental laws at the local, state, and federal level, regulations or permitting requirements applicable to such facilities or related utilities could increase our operating costs, delay deployments, or otherwise affect our ability to scale capacity on expected timelines.
To date, costs and accruals incurred to comply with governmental regulations (including the environment, health and safety requirements described above) have not been material to our capital expenditures and results of operations, and we do not currently anticipate material expenditures for compliance with regulations. However, there can be no assurance that existing or future governmental laws and regulations applicable to us or our products and services will not have a material adverse effect on our capital expenditures, operating results, and competitive position.
We have developed infrastructure solution capabilities, including high-density liquid cooling systems designed to lower power usage effectiveness and HVDC power architectures intended to improve overall energy efficiency and facilitate better integration with renewable energy sources and grid-scale storage. To the extent we commercially deploy these infrastructure solution capabilities, such deployments may be subject to additional regulatory, permitting and compliance requirements, including those related to electrical systems, building codes, environmental standards, and equipment safety certifications, which could vary by jurisdiction and may affect deployment timelines and costs. As of the date of this Annual Report, these capabilities have not been commercially deployed and we have not incurred material regulatory compliance costs in connection with these capabilities.
Corporate Information
We are a Delaware corporation. Exascale Labs Holdings Inc. was incorporated under the name “D. Boral ARC Merger Corporation” as a Delaware corporation on December 19, 2025, and Legacy Exascale was incorporated as a Delaware corporation on June 1, 2022. Through the Business Combination, Exascale Labs Holdings Inc. became the combined company of the Business Combination and succeeded to the business of Legacy Exascale. Our principal executive office is located at 820 Gessner Road, Suite 332, Houston, Texas 77024 and our telephone number is (650) 537-7553. Our corporate website address is www.exascalelabs.ai. Our website and the information contained on, or that can be accessed through, our website is not deemed to be incorporated by reference in, and is not considered part of, this Annual Report.
Employees
As of the date of this Annual Report, we had 12 full-time employees on a consolidated basis. Of these employees, five were directly employed by us in the United States, and seven were employed by our wholly owned Singapore subsidiary. The subsidiary employees work remotely in support of our business operations.
Our workforce currently consists of (i) one Chief Executive Officer, (ii) one Chief Financial Officer; (iii) one data center partnerships lead; (iii) one research and development lead; (iv) one marketing lead; (v) one business development lead; (vi) four senior research and development engineers; and (vii) two operations personnel.
Our core research and development activities are led and performed by internal personnel, including our research and development lead and senior research and development engineers. Customer service and support are also handled internally by our personnel.
We also utilize certain third-party service providers to support specific functions. For example, we engage project-based outsourced development teams to assist with specific development tasks, certain third-party personnel to provide on-site data center operations support, and third-party service providers to assist with certain finance-related execution functions. These arrangements supplement our internal workforce and do not replace internal responsibility for management, core research and development, customer support, or overall business oversight.
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ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this Annual Report, including our audited consolidated financial statements and related notes appearing elsewhere in this Annual Report, before making an investment decision. The occurrence of any of the risks we describe below or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially adversely affect our business, financial condition, and results of operations. In such case, the trading price of our securities could decline, and you may lose some or all of your investment. The risks discussed below are not the only ones we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, prospects, results of operations, or cash flows.
We have a limited operating history, have incurred net losses since inception, and may not achieve or sustain growth or profitability.
Legacy Exascale was formed in June 2022. As such, we have a limited operating history upon which investors can evaluate our business, operating performance and prospects. As a result, our historical financial information may not be indicative of our future performance, and investors have limited information on which to base an investment decision. We have incurred net losses since inception. For the fiscal years ended June 30, 2026 and 2025, we incurred net losses of $12.2 million and $7.7 million, respectively. As at June 30, 2026, we had an accumulated deficit of $25.4 million. We expect to continue to incur operating losses for the foreseeable future as we invest in product development, platform enhancements, sales and marketing activities, personnel and infrastructure to support growth. Our ability to achieve and sustain profitability will depend on numerous factors, many of which are beyond our control. Under our asset-light business model, we incur significant recurring operating expenses, including costs associated with sourcing GPU resources, developing and maintaining software and platform capabilities, data center hosting, power and network services. These costs may not increase proportionately with revenue, and our ability to improve operating margins depends on our ability to efficiently manage these expenses while increasing revenue and utilization of our infrastructure. We operate in rapidly evolving and highly competitive markets for AI compute infrastructure and GPU-based cloud services. Our future growth depends on a number of factors, including our ability to maintain access to sufficient GPU capacity and suitable data center facilities, deliver reliable services at scale, expand our customer base, compete effectively against significantly larger and better-capitalized competitors, and successfully execute our growth strategy. Increases in GPU procurement costs, power prices or hosting expenses, pricing pressure from customers or competitors, supply constraints, or unsuccessful efforts to optimize pricing or resource utilization could adversely affect gross margins, operating results and customer demand. In addition, we may encounter unforeseen operational, technical, regulatory or commercial challenges as we scale our business. There can be no assurance that we will achieve or sustain profitability in the future. If we fail to increase revenues sufficiently to offset our operating expenses, effectively manage our cost structure, execute our business strategy or successfully scale our operations, our business, financial condition and results of operations could be materially adversely affected.
We depend on a limited and constrained supply of advanced GPU chips, and any disruption or increase in cost could adversely affect our business and results of operations.
Our business depends on our ability to obtain a reliable and cost-competitive supply of advanced GPU chips, which are subject to global supply constraints, limited sources of manufacture, and significant demand volatility. The supply of advanced GPUs is concentrated among a small number of manufacturers and distributors, and disruptions caused by geopolitical events, trade restrictions, manufacturing delays, or changes in allocation policies could limit our access to required hardware or increase procurement costs.
If we are unable to secure sufficient GPU supply on acceptable terms, our ability to plan capacity, meet customer demand, and expand our services could be adversely affected. Prolonged or recurring supply limitations could reduce service availability, impair operating efficiency, delay customer deployments, or negatively impact customer satisfaction and retention, which could materially harm our business, financial condition, and results of operations.
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Demand for AI compute services and accelerated infrastructure may not grow as expected, and customer spending may be volatile.
Our business depends on customer demand for GPU-based compute capacity and related services. Demand may be affected by factors outside our control, including macroeconomic conditions, changes in corporate IT spending, customer budget constraints, the pace of AI adoption across industries, and shifts in the economics of AI model development and deployment. In addition, improvements in model efficiency, changes in customer architecture decisions (including increased in-house deployments), or changes in the availability or pricing of competing offerings could reduce demand for our products and services. If demand for AI compute services grows more slowly than anticipated or declines, or if customers reduce or delay spending on AI workloads, our revenues and growth prospects could be materially adversely affected.
We operate in a highly competitive market, and we may be unable to compete effectively against larger and better-capitalized competitors.
The market for GPU-based compute services and AI infrastructure is highly competitive, and we face competition from a number of companies and other entities with varying business models, operating scales and strategic priorities, including (i) large, diversified cloud service providers, (ii) specialized AI infrastructure providers, (iii) GPU aggregators and marketplaces, and (iv) data center operators and AIDC service providers. Many of our competitors have substantially greater financial, technical, operational, and marketing resources, broader customer relationships, longer operating histories, and greater brand recognition than we do. As a result, these competitors may be able to respond more quickly to new or emerging technologies, devote greater resources to the development, promotion and sale of their offerings, withstand pricing pressures more effectively, or offer more favorable commercial terms than us. Competitive pressures may require us to reduce prices, increase spending on technology and operations, expand support commitments, or accept less favorable commercial terms. If we are unable to compete effectively or maintain differentiation in performance, reliability, ease of use, and service quality, our business and results of operations could be materially adversely affected. See “Item 1. Business—Competition” for additional information.
We depend on third-party GPU capacity suppliers, and disruptions, non-renewals, pricing increases or capacity limitations could adversely affect our business, results of operations and margins.
Our asset-light business model depends on our ability to obtain access to GPU capacity from third-party suppliers. Our GPU capacity supplier arrangements generally provide access to specified GPU servers or GPU capacity, together with bundled hosting, power, rack space, data center resources, network connectivity and related infrastructure services. Supplier costs are a principal component of our cost of revenue, and pricing under these arrangements is generally subject to market conditions for GPU compute capacity, although pricing may be fixed for short periods or for specific usage periods, orders or capacity configurations.
We use a multi-supplier sourcing model designed to support supply continuity, procurement flexibility and access to alternative sources of GPU capacity. We have identified and continue to evaluate alternative sources of GPU capacity; however, alternative capacity may differ in pricing, GPU type, configuration, location, performance, network connectivity, deployment timing or bundled infrastructure services. Our supplier arrangements do not include take-or-pay obligations, minimum purchase commitments or exclusivity provisions. Certain suppliers may provide non-exclusive priority allocation or preferred access to GPU capacity, but there can be no assurance that such arrangements or alternative sources will be sufficient to meet our customer demand or growth plans.
If any significant supplier reduces available GPU capacity, fails to perform, increases pricing, declines to renew or terminates an arrangement, experiences power, facility, network or operational issues, or is unable to provide additional capacity when needed, we may not be able to obtain replacement capacity on a timely basis or on commercially acceptable terms. Any such event could reduce available GPU capacity, impair our ability to meet customer demand, increase cost of revenue, reduce gross margins, lower utilization, delay customer deployments or adversely affect customer relationships.
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GPU capacity used to deliver our services is deployed in third-party data centers and partner facilities, and constraints or disruptions in those facilities could materially adversely affect our business.
GPU deployments for our compute services depend on third-party data centers and partner facilities that provide space, power, cooling, and network connectivity. Our ability to deploy and operate GPU capacity is subject to facility availability, build-out timelines, grid interconnection constraints, power and cooling limitations, and other facility-related requirements. Third-party facilities may experience outages, service interruptions, cyber incidents, equipment failures, natural disasters, or other events that disrupt operations. If we are unable to secure sufficient facility capacity, if facility costs increase, or if our deployed capacity experiences material disruptions, our ability to deliver services and generate revenue could be materially adversely affected.
If we fail to deliver expected performance, efficiency, or reliability for customer workloads, our reputation, customer relationships, and results of operations could be harmed.
Customers running AI training and inference workloads may be sensitive to performance, stability, and predictability, particularly for large-scale or time-sensitive workloads. Our value proposition includes applying our technology and operational practices to optimize cluster performance and utilization, maintain stability and uptime, and reduce operational complexity for customers. Actual performance and reliability outcomes may vary based on workload characteristics, network and storage conditions, hardware configurations, and other factors. If our services experience performance degradation, instability, or downtime, or if customers perceive that our services do not meet their requirements, we may face customer dissatisfaction, reduced usage, non-renewals, contractual disputes, service credits, or reputational harm, any of which could materially adversely affect our business.
Our performance optimization and utilization practices may not achieve intended results, and our methods may not scale as customer requirements and infrastructure complexity increase.
We seek to maximize the compute potential of infrastructure components through configuration, tuning, orchestration, and operational practices across compute, networking, and related systems. Achieving and sustaining high effective utilization is technically and operationally complex, and outcomes can be affected by software stack efficiency, data movement bottlenecks, workload-specific behaviors, and operational factors that interrupt or degrade workload execution. As customer workloads and cluster sizes increase, optimization complexity may increase and may require additional engineering and operational resources. If our performance optimization methods are ineffective in certain environments, do not scale as expected, or require greater resources than anticipated, our service quality, margins, and competitiveness could be materially adversely affected.
We may experience service interruptions, security incidents, or other operational failures, which could expose us to liability and harm our business.
Operating GPU compute services and infrastructure management services involves risks of outages, system failures, human errors, misconfigurations, and cyber incidents. Service interruptions may result from failures of third-party facilities or suppliers, software defects, network disruptions, power events, or other causes, including causes beyond our control, such as natural disasters that are not in our control. Security incidents could result in unauthorized access, data exposure, malware, ransomware, or disruption of operations. Any such incident could lead to loss of customers, reputational harm, regulatory inquiries, litigation, remediation costs, and potential contractual liabilities. If we are unable to prevent or rapidly remediate operational failures or security incidents, our business and results of operations could be materially adversely affected.
Our AI-assisted operational tools and automation may not perform as intended and could introduce errors or risks.
We use AI-assisted tools to support certain operational workflows, such as issue detection, analysis, prioritization, and support processes. These tools may produce inaccurate outputs, fail to identify certain issues, or generate recommendations that are ineffective or inappropriate for particular operational circumstances. AI-assisted tools may require ongoing training, validation, monitoring, and human oversight, and their performance may degrade over time as infrastructure configurations, workloads, or external conditions change. If our AI-assisted tools do not perform as intended, or if reliance on such tools contributes to operational errors, service disruptions, or customer dissatisfaction, our business could be materially adversely affected.
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Our costs may increase, and we may be unable to pass increased costs through to customers, which could adversely affect our margins and results of operations.
A significant portion of our cost structure relates to fees paid under GPU capacity sourcing arrangements and costs associated with third-party facilities, including colocation, power, cooling, and network connectivity. Our costs may increase due to changes in supplier pricing, power price volatility, facility pricing, regulatory or tax changes, insurance costs, or other factors. Competitive pressures or contractual terms may limit our ability to increase prices or adjust commercial terms to offset cost increases. If our costs increase materially and we are unable to manage or pass through such increases, our margins and financial performance could be materially adversely affected.
Our revenues may be concentrated in a limited number of customers or engagements, and our results may be volatile due to usage variability and contract dynamics.
Customer demand for compute services can vary based on project cycles, workload characteristics, and budget constraints. In addition, certain customer arrangements may be of limited duration or may permit termination under specified conditions. Revenues from GPU cluster management services may be project-based or dependent on ongoing engagements that can fluctuate in timing and scope. If a significant customer reduces usage, terminates or does not renew an arrangement, delays implementation, or experiences financial difficulties, our revenues and cash flows could be materially adversely affected. We may also face increased credit risk, disputes, or collection delays depending on customer terms and payment practices.
We operate in a highly competitive market, and our failure to acquire, retain, or expand our customer base could adversely affect our revenue and growth.
Our results of operations depend on sustained customer demand and our ability to attract, retain, and expand relationships with AI developers and enterprise customers in a competitive market. Customers may evaluate our services against alternative providers based on performance, reliability, pricing, and available features, and may reduce or discontinue usage for a variety of reasons, including changes in budget priorities, internal capabilities, or technological preferences.
While we have experienced customer growth and high renewal rates in recent periods, there can be no assurance that these trends will continue. Increased competition, service performance issues, pricing pressure, or an inability to address evolving customer requirements could result in lower customer acquisition, reduced renewals, or decreased usage levels. Any decline in customer demand or retention could materially and adversely affect our revenue and operating results.
Our AIDC GPU cluster management services may expose us to additional operational, contractual, and liability risks.
We provide GPU cluster management services to certain AIDC operators, which may involve planning, deployment support, operational monitoring, performance tuning, and ongoing assistance. These engagements may require coordination with customer environments and third-party facilities, and may depend on customer-provided information, customer operational practices, and infrastructure conditions outside our control. If our services do not meet customer expectations, if clusters experience operational issues, or if customers allege that our actions contributed to performance degradation or outages, we could face contractual disputes, claims, reputational harm, and potential liabilities. In addition, scaling these services may require specialized personnel and operational capacity, and we may be unable to expand or deliver such services consistently as demand increases.
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Our infrastructure solution capabilities, including modular data centers, liquid cooling, HVDC power, data center interconnectivity and energy storage solutions have not yet generated revenue and may not achieve commercial success.
We have developed certain Infrastructure Solutions offerings intended to support large-scale AI deployments, including modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions. While we have made progress in the development and validation of these capabilities and our management believes these offerings are ready to support customer deployments as of the date of this Annual Report, these offering have not generated revenue to date. We expect to pursue these offerings on an asset-light basis, primarily through partnerships, systems integration, contract manufacturing and other collaborative structures. Because these offerings have limited commercial operating history, we may face challenges in customer adoption, partner execution, technical integration, supply chain availability, regulatory or permitting requirements, pricing, warranty or performance obligations, and the efficient scaling of deployment and support capabilities. These offerings may require significant investment to commercialize and scale and may not achieve market acceptance, revenue generation, margins or profitability on our expected timeline, or at all. If we are unable to successfully commercialize these offerings, secure customers or partners, or perform customer deployments as expected, our business, financial condition and results of operations could be materially adversely affected.
Rapid technological change in GPUs, networking, and AI software could require us to adapt quickly, and we may be unable to keep pace.
The AI infrastructure market is characterized by rapid changes in GPU architectures, interconnect technologies, software frameworks, and customer requirements. Our competitiveness may depend on our ability to integrate new GPU generations and adapt our software and operational systems to evolving infrastructure configurations. If we are unable to access current-generation GPUs on acceptable terms, if our platform is not compatible with emerging architectures, or if our operational tooling and methods do not evolve with technology changes, we may lose customers or face increased costs and operational complexity. In addition, customer preferences may shift toward alternative architectures or deployment models, which could reduce demand for our services.
Third parties may claim that our platform infringes, misappropriates, or otherwise violates their intellectual property rights, and such claims could be time-consuming or costly to defend or settle, result in the loss of significant rights, or harm our relationships with our customers or our reputation in the industry.
Third parties may claim that our current or future offerings infringe their intellectual property rights, and such claims may result in legal claims against us, our third-party partners, and our customers. These claims may be time consuming, costly to defend or settle, damage our brand and reputation, harm our customer relationships, and create liability for us. Contractually, we are expected to indemnify our partners and customers for these types of claims. We expect the number of such claims (whether warranted or not) to increase given our increased profile and visibility as a public company, as the level of competition in our market grows, as the functionality of our offerings overlap with that of other cloud infrastructure companies, and as the volume of issued hardware and software patents and patent applications continues to increase. We generally agree in our customer and partner contracts to indemnify customers for certain expenses or liabilities they incur as a result of third-party intellectual property infringement claims associated with our platform. To the extent that any claim arises as a result of third-party technology we have licensed for use in our platform, we may be unable to recover from the appropriate third party any expenses or other liabilities that we incur.
Companies in the cloud infrastructure and technology industries, including some of our current and potential competitors, may own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, patent holding companies, non-practicing entities, and other adverse patent owners that are not deterred by our existing intellectual property protections may seek to assert patent claims against us. From time to time, third parties, including certain of these leading companies, may invite us to license their patents and may assert patent, copyright, trademark, or other intellectual property rights against us, our third-party partners, or our customers. We may also receive notices that claim we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility, we will face a higher risk of being the subject of intellectual property infringement claims.
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There may be third-party intellectual property rights that cover significant aspects of our technologies or business methods and assets. In the event that we engage software engineers or other personnel who were previously engaged by competitors or other third parties, we may be subject to claims that those personnel inadvertently or deliberately incorporate proprietary technology of third parties into our platform or have improperly used or disclosed trade secrets or other proprietary information. We may also in the future be subject to claims by our third-party manufacturing partners, employees, or contractors asserting an ownership right in our intellectual property as a result of the work they performed on our behalf. In addition, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market, and support potential offerings and platform enhancements, which could severely harm our business.
Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights, and may require us to indemnify our customers for liabilities they incur as a result of such claims. These claims could also result in our having to stop using technology found to be in violation of a third party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non-infringing technology, which could require significant time, effort, and expense, and may affect the performance or features of our platform. If we cannot license or develop alternative non-infringing substitutes for any infringing technology used in any aspect of our business, we would be forced to limit or stop sales of our platform and may be unable to compete effectively. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our securities. Any of these results would adversely affect our business, operating results, financial condition, and future prospects.
Some of our technology incorporates “open-source” software, and failure to comply with the terms of the underlying open-source software licenses could adversely affect our business, results of operations, financial condition, and future prospects.
We use open-source software in our solutions and services and may continue to use open-source software in the future. Certain open-source licenses contain requirements that we make available source code for modifications or derivative works we create. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public on unfavorable terms or at no cost. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract may allow our competitors to create similar products with lower development effort and time and, ultimately, could result in a loss of sales for us.
The use and distribution of open-source software may entail greater risks than the use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code, which they are not typically required to maintain and update, and they can change the license terms on which they offer the open-source software. Although we believe that we have complied with our obligations under the applicable licenses for open-source software, it is possible that we may not be aware of all instances where open-source software has been incorporated into our proprietary software or used in connection with our solutions or our corresponding obligations under open-source. We take steps to monitor our use of open-source software in an effort both to comply with the terms of the applicable open-source licenses and to avoid subjecting our platform to conditions we do not intend, but there are risks associated with use of open-source software that cannot be eliminated and could negatively affect our business. We rely on multiple software programmers to design our proprietary software and, while we take steps to vet software before it is incorporated into our proprietary software and monitor the software incorporated into our proprietary software, we cannot be certain that our programmers have not incorporated open-source software into our proprietary software that we intend to maintain as confidential or that they will not do so in the future. In addition, the wide availability of source code used in our offerings could expose us to security vulnerabilities. Such use, under certain circumstances, could materially adversely affect our business, operating results, financial condition, and future prospects, as well as our reputation, including if we are required to take remedial action that may divert resources away from our development efforts.
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On occasion, companies that use open-source software have faced claims challenging their use of open-source software or compliance with open-source license terms. There is evolving legal precedent for interpreting the terms of certain open-source licenses, including the determination of which works are subject to the terms of such licenses. The terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on our ability to commercialize any offerings incorporating such software. Moreover, we cannot provide assurance that our processes for controlling our use of open-source software in our platform will be effective. From time to time, we may face claims from third parties asserting ownership of, or demanding release of, the open-source software or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open-source license. These claims, regardless of validity, could result in time consuming and costly litigation, divert management’s time and attention away from developing our business, expose us to customer indemnity claims, or force us to disclose source code. Litigation could be costly for us to defend, result in paying damages, entering into unfavorable licenses, have a negative effect on our business, operating results, financial condition, and future prospects, or cause delays by requiring us to devote additional research and development resources to change our solution.
We may be unable to protect our intellectual property, and third-party claims of infringement could be costly and disruptive.
We rely on proprietary software, operational methods, and know-how to differentiate our services. We may be unable to prevent unauthorized use or disclosure of our proprietary information, and trade secret protections may be difficult to enforce. In addition, third parties may claim that our technology infringes or misappropriates their intellectual property, whether or not such claims have merit. Any such claims could result in litigation, require us to obtain licenses, modify our systems, incur significant costs, or face injunctions, and could materially adversely affect our business.
We customarily enter into confidentiality or license agreements with our employees, consultants, vendors, and customers, and make significant efforts to limit access to and distribution of our proprietary information. However, such agreements may not be enforceable in whole or in part in all jurisdictions and any breach could negatively affect our business and our remedy for such breach may be limited. The contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Lastly, the measures we employ to limit the access and distribution of our proprietary information may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property. As such, we cannot guarantee that the steps taken by us will prevent infringement, violation, or misappropriation of our technology.
We pursue the registration of our trademarks, service marks, patents, and domain names in the United States and in certain foreign jurisdictions. These processes are expensive and may not be successful in all jurisdictions or for every such application, and we may not pursue such protections in all jurisdictions that may be relevant, for all our goods or services or in every class of goods and services in which we operate. As such, policing unauthorized use of our technology or platform is difficult. Additionally, we may not be able to obtain, maintain, protect, exploit, defend, or enforce our intellectual property rights in every foreign jurisdiction in which we operate. For example, effective trade secret protection may not be available in every country in which our platform is available or where we have employees or independent contractors. The loss of trade secret protection could make it easier for third parties to compete with our platform by copying functionality. Any changes in, or unexpected interpretations of, the trade secret and employment laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. In addition, we believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand and maintaining goodwill and if we do not adequately protect our rights in trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and business. The legal systems of certain countries do not favor the enforcement of trademarks, trade names, service marks, trade secrets, and other intellectual property and proprietary protection, which could make it difficult for us to stop the infringement, misappropriation, dilution, or other violation of our’ intellectual property or marketing of competing platforms, solutions, or services in violation of our intellectual property rights generally. Any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our intellectual property rights. If we fail to maintain, protect and enhance our intellectual property rights, our business, operating results, financial condition, and future prospects may be harmed.
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In addition, defending our intellectual property rights through litigation might entail significant expense. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, financial condition, and future prospects. If we are unable to protect our proprietary rights, we could find ourselves at a competitive disadvantage to others who need not incur the additional expense, time, and effort required to create our platform and our other offerings. Moreover, we may need to expend additional resources to defend our intellectual property rights in foreign countries, and our inability to do so could impair our business or adversely affect our international expansion.
We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws.
We are subject to laws and regulations, including governmental export and import controls, that could subject us to liability or impair our ability to compete in our markets. Our platform and related technology are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations (also known as “EAR”), and we and our employees, representatives, contractors, agents, intermediaries, and other third parties are also subject to various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control and other U.S. government agencies. Changes to sanctions and export or import restrictions in the jurisdictions in which we operate could further impact our ability to do business in certain parts of the world and to do business with certain persons and entities, which could adversely affect our business, operating results, financial condition, and future prospects. In particular, we are continuing to monitor recent and forthcoming developments in export controls with respect to the semiconductor industry and their impact on our sourcing of equipment for our computing infrastructure. In addition, we are also monitoring the January 29, 2024 proposed rule from the U.S. Department of Commerce, Bureau of Industry and Security (“BIS”), which if implemented as proposed, would impose requirements on Infrastructure-as-a-Service providers (“IaaS”) and their foreign resellers to verify the identity and beneficial ownership of foreign person customers and to perform related reporting to BIS, as well as provide BIS authority to restrict certain IaaS transactions with foreign persons. While we have implemented certain procedures to facilitate compliance with applicable laws and regulations, we cannot provide assurance that these procedures are fully effective or that we, or third parties who we do not control, have complied with all laws or regulations in this regard. Failure by our employees, representatives, contractors, partners, agents, intermediaries, or other third parties to comply with applicable laws and regulations also could have negative consequences to us, including reputational harm, government investigations, loss of export privileges and penalties. Changes in our platform, and changes in or promulgation of new export and import regulations, may create delays in the introduction of our platform into international markets, prevent our customers with international operations from deploying our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions, or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased sales of our platform, solutions, and services, or in our decreased ability to export or sell our platform, to existing or potential customers with international operations. Any decreased sales of our platform, solutions, and services or limitation on our ability to export or sell its platform would adversely affect our business, operating results, financial condition, and future prospects.
We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the United Kingdom Bribery Act 2010 (the “Bribery Act”), and other anti-corruption, sanctions, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities. Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees, agents, intermediaries, and other third parties from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public, and in certain cases, private sector. We leverage third parties, including intermediaries and agents, to conduct our business in the United States and abroad, to sell our platform. We and such third parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and we may be held liable for the corrupt or other illegal activities of these third-party
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business partners and intermediaries, our employees, representatives, contractors, partners, agents, intermediaries, and other third parties, even if we do not explicitly authorize such activities. We cannot provide assurance that our policies and procedures to address compliance with the FCPA, the Bribery Act, and other anti-corruption, sanctions, anti-bribery, anti-money laundering, and similar laws, will be effective, or that all of our employees, representatives, contractors, partners, agents, intermediaries, or other third parties have not taken, or will not take actions, in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international sales and business, our risks under these laws will increase. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements, prosecution, loss of export privileges, suspension or debarment from U.S. government contracts, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, whistleblower complaints, adverse media coverage, and other consequences. Any investigations, actions, or sanctions could harm our reputation, business, operating results, financial condition, and future prospects.
We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where we conduct our business and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business.
Various local, state, federal, and international laws, directives, and regulations apply to our collection, use, retention, protection, disclosure, transfer, and processing of personal information. These data protection and privacy laws and regulations are subject to uncertainty and continue to evolve in ways that could adversely impact our business. These laws have a substantial impact on our operations both in the United States and internationally and compliance with new and existing laws may result in significant costs due to implementation of new processes, which could ultimately hinder our ability to grow our business by extracting value from our data assets.
In the United States, state and federal lawmakers and regulatory authorities have increased their attention on the collection and use of user data. For example, in California, the California Consumer Privacy Act of 2018 (as amended, the “CCPA”) requires companies that hit certain broad revenue or data processing related thresholds to, among other things, provide new disclosures to California users, and affords such users new privacy rights such as the ability to opt-out of certain processing of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used, and shared. The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase security breach litigation. In addition, other states have enacted laws that contain obligations similar to the CCPA that have taken effect or will take effect in coming years and many others continue to propose similar laws, or are considering proposing similar laws. We cannot fully predict the impact of recently proposed or enacted laws or regulations on our business or operations, but compliance may require us to modify our data processing practices and policies incurring costs and expense. Further, to the extent multiple state-level laws are introduced with inconsistent or conflicting standards, it may require costly and difficult efforts to achieve compliance with such laws. Our failure or perceived failure to comply with state or federal privacy laws or regulations passed in the future could have a material adverse effect on our business, including how we use personal information, our business, operating results, financial condition, and future prospects and could expose us to regulatory investigations or possible fines.
Additionally, many foreign countries and governmental bodies, including the European Union, the United Kingdom, Canada, and other jurisdictions in which we operate or conduct business, have laws and regulations concerning the collection, use, processing, storage, and deletion of personal data obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Such laws and regulations may require companies to implement new privacy and security policies, permit individuals to access, correct, and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, require that certain types of data be retained on local servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to collect and use personal information for certain purposes. The increased focus on data sovereignty and data localization requirements around the world could also impact our business model with respect to the storage, management, and transfer of data.
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We are subject to the European Union’s General Data Protection Regulation and the United Kingdom’s General Data Protection Regulation (collectively, the “GDPR”), which comprehensively regulate our use of personal data, including cross-border transfers of personal data out of the European Economic Area (“EEA”) and the United Kingdom. The GDPR imposes stringent privacy and data protection requirements, and could increase the risk of non-compliance and the costs of providing our services in a compliant manner. A breach of the GDPR could result in regulatory investigations, reputational damage, fines and sanctions, orders to cease or change our processing of our data, enforcement notices, or assessment notices (for a compulsory audit). For example, if regulators assert that we have failed to comply with the GDPR, we may be subject to fines. Since we are subject to the supervision of relevant data protection authorities under multiple legal regimes (including separately in both the EU and the United Kingdom), we could be fined under those regimes independently in respect of the same breach. We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.
The GDPR prohibits transfers of personal data from the EEA or the United Kingdom to countries not formally deemed adequate by the European Commission or the U.K. Information Commission Office, respectively, including the United States, unless a particular compliance mechanism (and, if necessary, certain safeguards) is implemented. The mechanisms that we and many other companies, including our customers, rely upon for European and U.K. data transfers (for example, Standard Contractual Clauses or the EU-US Data Privacy Framework) are the subject of legal challenge, regulatory interpretation, and judicial decisions by the Court of Justice of the European Union. The suitability of Standard Contractual Clauses for data transfer in some scenarios has recently been the subject of legal challenge, and while the United States and the European Union reached an agreement on the EU-US Data Privacy Framework (and similar agreements were reached with respect to the United Kingdom), there are legal challenges to that data transfer mechanism as well. We expect the legal complexity and uncertainty regarding international personal data transfers to continue, and as the regulatory guidance and enforcement landscape in relation to data transfers continues to develop, we could suffer additional costs, complaints, and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make other operational changes; we may have to implement alternative data transfer mechanisms under the GDPR and/or take additional compliance and operational measures; and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operating results, financial condition, and future prospects.
We are also subject to evolving U.S., E.U., and U.K. privacy laws governing cookies, tracking technologies, and e-marketing. In the United States, plaintiffs are increasingly making use of existing laws such as the California Invasion of Privacy Act to litigate use of tracking technologies. In the European Union, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem. Also in the European Union, informed consent, including a prohibition on pre-checked consents and a requirement to ensure separate consents for each cookie, is required for the placement of a non-essential cookie or similar technologies on a user’s device and for direct electronic marketing. As regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, negatively impact our efforts to understand users, adversely affect our margins, increase costs, and subject us to additional liabilities.
There is also a risk that as we expand, we may assume liabilities for breaches experienced by the companies we acquire. Additionally, there are potentially inconsistent world-wide government regulations pertaining to data protection and privacy. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection, and information security, it is possible that our practices, offerings, or platform could fail, or be alleged to fail to meet applicable requirements. For instance, there are changes in the regulatory landscape relating to new and evolving technologies, such as generative AI. Changes to existing regulations, their interpretation or implementation, or new regulations could impede any potential use or development of AI technologies, which could impair our competitive position and result in an adverse effect on our business, operating results, financial condition, and future prospects. Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal information, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, severe criminal, or civil sanctions, damage our reputation, or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, financial condition, and future prospects.
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Export controls, trade restrictions, and sanctions could limit our ability to procure GPU hardware or serve certain customers and could increase compliance costs.
GPU hardware and related technologies may be subject to export controls and trade restrictions, including restrictions on the export, reexport, or transfer of certain advanced computing items to specific jurisdictions or end users. Compliance obligations may limit our procurement options, delay deployments, restrict customer eligibility, or require enhanced due diligence and monitoring. Changes in export control regimes or sanctions programs could increase compliance costs, limit access to critical hardware, or constrain our ability to conduct business in certain markets, any of which could materially adversely affect our operations, financial condition and future prospects.
Our business is subject to a wide range of laws and regulations, and failure to comply with those laws and regulations could harm our business.
Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety and environmental laws, including those related to energy usage and energy efficiency requirements, privacy and data protection laws, AI, financial services laws, anti-bribery laws, sanctions, national security, import and export controls, anti-boycott, federal securities laws, and tax laws and regulations.
For example, governmental authorities have in the past sought to restrict data center development based on environmental considerations and have imposed moratoria on data center development, citing concerns about energy usage, requiring new data centers to meet energy efficiency requirements. We may face higher costs from any laws requiring enhanced energy efficiency measures, changes to cooling systems, caps on energy usage, land use restrictions, limitations on back-up power sources, or other environmental requirements.
In certain foreign jurisdictions, these regulatory requirements may be more stringent than those in the United States. These laws and regulations are subject to change over time and thus we must continue to monitor and dedicate resources to ensure continued compliance. In particular, the global AI regulatory environment continues to evolve as regulators and lawmakers have started proposing and adopting, or are currently considering, regulations and guidance specifically on the use of AI. Non-compliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions and jail time for responsible employees and managers. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results, financial condition, and future prospects could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results, financial condition, and future prospects.
We have identified material weaknesses in our internal control over financial reporting, and following the completion of the Business Combination, we became subject to increased regulatory scrutiny and reporting obligations. If we are unable to remediate these material weaknesses or maintain effective internal controls, our ability to accurately report our financial results and the market price of our securities could be adversely affected.
We currently have limited accounting and financial reporting personnel and other resources dedicated to internal control over financial reporting. In connection with the preparation of our audited consolidated financial statements as of and for the years ended June 30, 2026 and 2025, we identified material weaknesses in our internal control over financial reporting. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
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The material weaknesses identified relate to (i) a lack of sufficient accounting personnel with appropriate knowledge and experience in generally accepted accounting principles in the United States of America (“U.S. GAAP”) and SEC financial reporting requirements to support financial information processing and reporting, and (ii) a lack of financial reporting policies and procedures that are commensurate with U.S. GAAP and SEC reporting requirements. Our management has concluded that these material weaknesses represent deficiencies in our overall internal control environment and could adversely affect our ability to accurately and timely report our financial condition and results of operations.
Following the Business Combination, we became subject to significantly greater reporting, compliance, and internal control requirements applicable to U.S. public companies, including expanded disclosure obligations, increased scrutiny by regulators and investors, and, following the applicable transition period, the requirement to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. These requirements will place substantial demands on our management, accounting, and finance personnel and systems.
We have implemented and plan to continue to implement measures designed to remediate the identified material weaknesses, including hiring additional qualified accounting and reporting personnel with appropriate U.S. GAAP and SEC reporting expertise, developing and formalizing accounting policies and procedures applicable to our business, and providing internal training programs for our accounting and finance personnel. We intend to complete the remediation plan by the end of calendar year 2027. The remediation process will require significant time, management attention, and financial resources, and the associated costs, including personnel-related expenses and potential consulting fees, are expected to increase our and our general and administrative expenses in future periods.
The process of designing, implementing, and maintaining an effective system of internal control over financial reporting for us is ongoing and inherently complex. We cannot assure you that the measures we have implemented or plan to implement will be sufficient to remediate the identified material weaknesses in a timely manner, or at all, or that additional material weaknesses will not be identified in the future. If we are unable to maintain effective internal control over financial reporting, we may be unable to accurately report our financial results, prevent or detect fraud, or comply with applicable reporting requirements, which could result in regulatory actions, restatements of our financial statements, loss of investor confidence, and a decline in the market price of our securities.
We may be unable to utilize our net operating loss carryforwards to offset future taxable income, which could increase our future tax liabilities.
As of June 30, 2026 and 2025, we had net operating loss carryforwards (“NOLs”) of $9.9 million and $5.6 million for U.S. federal income tax purposes and $6.1 million and $5.6 million for state income tax purposes. Our federal NOLs do not expire; however, their use is subject to an annual limitation. The utilization of state NOLs is also subject to certain limitations.
The realization of our deferred tax assets related to these NOLs depends on our ability to generate sufficient taxable income in future periods, the timing of such income, and the jurisdictions in which such income is earned, all of which are uncertain. If we do not generate sufficient taxable income, or if changes in tax laws or interpretations further limit the use of NOLs, we will be required to record or increase a valuation allowance against our deferred tax assets, which could negatively affect our results of operations.
In addition, future ownership changes, including in connection with the recently completed Business Combination or other future equity issuances, could further limit our ability to utilize our NOLs under applicable provisions of the Internal Revenue Code and comparable state tax laws. As a result, even if we become profitable, we may be unable to fully realize the expected benefits of our NOLs, which could result in higher cash tax liabilities than anticipated and adversely affect our financial condition and results of operations.
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If we are unable to attract or retain qualified personnel or key personnel, our ability to execute our strategy and maintain service quality could be adversely affected.
Our business depends on highly skilled personnel, including but not limited to engineers and operations professionals with experience in AI infrastructure, distributed systems, and data center operations. Competition for such talent is intense. If we are unable to hire, develop, and retain qualified personnel, or if we experience turnover among key employees, our ability to operate reliably, improve our platform, support customers, and expand our services could be materially adversely affected.
Our prior evaluation of blockchain or digital asset-related concepts could create reputational or regulatory scrutiny, and any future evaluation of such initiatives may be subject to heightened regulation.
We have, in the past, evaluated and explored certain blockchain- or digital-asset-related concepts. These activities were exploratory in nature, did not generate material revenue, and are not part of our current core business operations. As of the date of this Annual Report, we are not engaged in cryptocurrency-related activities, other than the receipt, holding and/or settlement of Tether USD (“USDT”) and U.S. Dollar Coins (“USDC”) as part of payment collection, settlement and repayment arrangements. Notwithstanding the foregoing, third-party perceptions or historical public statements could result in inquiries or reputational considerations. In addition, if we evaluate any infrastructure-linked financial structures in the future, such initiatives could be subject to evolving laws and regulatory requirements and could expose us to additional compliance obligations and risks.
We may become involved in litigation, from time to time, that may adversely affect us.
From time to time, we may be subject to claims, suits, and other proceedings. Regardless of the outcome, legal proceedings can have an adverse impact on us because of legal costs and diversion of management’s attention and resources, and could cause us to incur significant expenses or liability, adversely affect our brand recognition, or require us to change our business practices. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our business, operating results, financial condition, and future prospects. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines, and penalties that would adversely affect our business, consolidated financial condition, operating results, or cash flows in a particular period. These proceedings could also result in reputational harm, sanctions, consent decrees, or orders requiring a change in our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, operating results, financial condition, and prospects. Any of these consequences could adversely affect our business, operating results, financial condition, and future prospects.
Global events and other general economic factors may impact our results of operations.
Global events and other general economic factors that are beyond our control, including local, state, and international politics, may impact our results of operations. These factors can include interest rates; recession; inflation; unemployment trends; the threat or possibility of war, terrorism or other global or national unrest; political or financial instability; and other matters that influence our customers’ spending. Potential increasing volatility in financial markets and changes in the economic climate could adversely affect our results of operation. The impact these potential global events can have on general economic conditions is continuously evolving and the ultimate impact that they will have on our results of operations continues to remain uncertain. There are no assurances that we will be able to continue to experience the same growth or not be materially adversely affected should such scenarios occur.
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We have a dual-class share structure with different voting rights, which may adversely affect the value and liquidity of our securities.
We have a dual-class structure with different voting rights, and such dual-class share structure may result in a lower or more volatile market price of our securities. Each Class A Common Stock has one (1) vote on all matters submitted to a vote of our stockholders and each Class B Common Stock has twenty (20) votes on all matters submitted to a vote of our stockholders. Holders of Class A Common Stock and Class B Common Stock will vote together as a single class except where required otherwise by applicable law. The Class B Common Stock may be converted into Class A Common Stock on a one-for-one basis voluntarily at the option of the holder or automatically upon transfer to certain persons and entities. The Class A Common Stock is not convertible into Class B Common Stock under any circumstances. Certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indices. Because of our dual class structure, we will likely be excluded from these indices and other stock indices that take similar positions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our securities less attractive to investors. In addition, several shareholder advisory firms have announced their opposition to the use of a multiple class structure and our dual class structure may cause shareholder advisory firms to publish negative commentary about our corporate governance or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our securities. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our securities.
Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that our stockholders may view as beneficial.
As a result of our dual-class share structure and the concentration of ownership, Hoansoo Lee, who is our Chief Executive Officer and member of our board of directors, Wenying Jia, who is the Chairperson and a member of our board of directors, and entities affiliated with Hoansoo Lee and Wenying Jia, collectively own all of our Class B Common Stock, and thus, a significant amount of the total voting power of our outstanding Common Stock. As such, Hoansoo Lee and Wenying Jia, and their affiliates, have, and will continue to have, substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Hoansoo Lee and Wenying Jia, and their affiliates, may take actions that are not in the best interest of our other stockholders. Such dual-class arrangement may discourage, delay or prevent a change in our control, which could deprive our other stockholders of an opportunity to receive a premium for their Common Stock as part of our sale and may reduce the price of our securities. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that our other stockholders may view as beneficial. Further information is available in the “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” section of this Annual Report.
The holders of shares of our Class B Common Stock own a significant voting percentage of our Common Stock and will be able to exert significant control over matters subject to stockholder approval.
As of the date of this Annual Report, The entirety of our Class B Common Stock is held by five shareholders, namely, (i) Zerowave Ltd, (ii) Jisu Paul Lee Non-Grantor Directed Trust, (iii) Sophia Jisun Lee Non-Grantor Directed Trust, (iv) Gabriel Jihwan Lee Non-Grantor Directed Trust and (v) HSL Capital Management LLC.
Zerowave Ltd is affiliated with Wenying Jia, and the Jisu Paul Lee Non-Grantor Directed Trust, the Sophia Jisun Lee Non-Grantor Directed Trust, the Gabriel Jihwan Lee Non-Grantor Directed Trust and HSL Capital Management LLC are each affiliated with Hoansoo Lee, as more particularly explained below.
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Wenying Jia, who is the Chairperson and a member of our board of directors, is the sole member and manager of Zerowave Ltd and has sole voting and dispositive power with respect to the Class B Common Stock directly held by Zerowave Ltd.
Hoansoo Lee, who is our Chief Executive Officer and a member of our board of directors, is the sole member and manager of HSL Capital Management LLC and has sole voting and dispositive power with respect to the Class B Common Stock directly held by HSL Capital Management LLC.
Hoansoo Lee is also the settlor of, and serves as investment advisor to, each of the Jisu Paul Lee Non-Grantor Directed Trust, the Sophia Jisun Lee Non-Grantor Directed Trust, and the Gabriel Jihwan Lee Non-Grantor Directed Trust, and the beneficiaries of each of those trusts are the children of Hoansoo Lee.
Each share of Class B Common Stock has twenty (20) votes on any matter brought before our stockholders for a vote, which means that the five stockholders who currently own all of our Class B Common Stock will have, collectively, 680,880,000 votes on any matter subject to stockholder approval. In contrast, each share of Class A Common Stock has one (1) vote on any matter brought before our stockholders for a vote. Thus, the five holders of shares of Class B Common Stock can together be able to determine or significantly influence all matters requiring stockholder approval. For example, these five stockholders can control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our stock that you may feel are in your best interest as one of our stockholders. Our certificate of incorporation currently only authorizes 260,000,000 shares of Class A Common Stock, which means that even if every authorized share of Class A Common Stock was issued and outstanding, the five holders of shares of Class B Common Stock would have more votes than all of the holders of Class A Common Stock together. Further information is available in the section of this Annual Report titled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
We are a “controlled company” within the meaning of Nasdaq listing rules, and as a result, we are entitled to rely on exemptions from certain corporate governance requirements that could adversely affect the rights of holders of our Class A Common Stock.
The holders of our Class B Common Stock own a significant voting percentage of the outstanding voting power of our Company. Each share of Class B Common Stock is entitled to twenty (20) votes per share, while each share of Class A Common Stock is entitled to one (1) vote per share. As a result, the five stockholders who currently collectively own all of the outstanding shares of Class B Common Stock, four of whom are affiliated with Hoansoo Lee, our Chief Executive Officer and a member of our board of directors, and one of whom is affiliated with Wenying Jia, our Chairperson and a member of our board of directors, are able to exercise voting control over matters submitted to our stockholders for approval.
Because more than 50% of the voting power of our outstanding capital stock are held by these stockholders, we qualify as a “controlled company” under the Nasdaq rules. As a controlled company, we may elect to rely on exemptions from certain corporate governance requirements, including requirements that a majority of our board of directors be independent and that our compensation and nominating and corporate governance committees be composed entirely of independent directors. Although we do not currently rely on any of the exemptions afforded to a “controlled company” under Nasdaq rules, we may do so in the future.
If we rely on one or more of these exemptions, holders of our Class A Common Stock may not have the same protections afforded to stockholders of companies that are subject to all Nasdaq corporate governance requirements. In addition, the voting control exercised by the holders of our Class B Common Stock will enable them to determine the outcome of matters requiring stockholder approval, including the election of directors, certain amendments to our organizational documents, and approval of mergers, asset sales, or other significant corporate transactions. This concentration of control could discourage or prevent transactions that other stockholders may consider favorable and could limit the ability of holders of our Class A Common Stock to influence corporate matters, which could adversely affect the market price of our securities.
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The price of our securities may be volatile, and you could lose all or part of your investment.
The prices of our securities may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report, these factors include:
| ● | introduction of new products or services offered by us or our competitors; |
| ● | announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; |
| ● | our ability to effectively manage our growth; |
| ● | actual or anticipated variations in quarterly operating results; |
| ● | our cash position; |
| ● | additions or departures of key personnel; |
| ● | loss of a strategic relationship; |
| ● | our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; |
| ● | publication of research reports about us or our industry; |
| ● | changes in the market valuations of similar companies; |
| ● | overall performance of the equity markets; |
| ● | sales of our securities by us or our stockholders in the future; |
| ● | trading volume of our securities; |
| ● | investor perception of our industry or prospects; |
| ● | insider selling or buying; |
| ● | ineffectiveness of our internal controls; and |
| ● | general political and economic conditions and other events or factors. |
Many of these factors are beyond our control and may decrease the market price of our securities, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our securities will be at any time, including as to whether our securities will sustain current market prices, or as to what effect that the sale of shares or the availability of our securities for sale at any time will have on the prevailing market price.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our securities.
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A liquid trading market for our securities may not be sustained.
An active and liquid public trading market for our Class A Common Stock and our other securities may not be sustained. Our securities may experience limited trading volume, and the market price may be subject to significant volatility due to a number of factors, including limited analyst coverage, the concentration of share ownership among a small number of stockholders, the resale of shares by certain of our stockholders following the expiration of applicable lock-up periods, general market conditions affecting companies operating in the AI and technology sectors, and other factors discussed elsewhere in this “Risk Factors” section.
There can be no assurance that an active trading market will be maintained on a consistent or liquid basis. Low trading volume or volatility could make it difficult for investors to sell their our securities at or above the price they paid, or at all. In addition, if we fail to meet the continued listing standards of Nasdaq, its securities could be delisted, which would further reduce liquidity and market visibility.
As a result, investors may experience difficulty in buying or selling our securities, may be unable to sell their securities at a favorable time or price, and may be required to hold their investment for an extended period of time.
We may be unable to maintain the listing of our securities on Nasdaq in the future.
If we fail to meet Nasdaq’s continued listing requirements and Nasdaq removes our securities from Nasdaq, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | a limited amount of news and analyst coverage for us; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The requirements of being a public company may strain our resources and distract management and we will continue to incur substantial costs as a result of being a public company.
Following the Business Combination, we became subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Securities Act. These rules, regulations and requirements are extensive. We have incurred, and will continue to incur, significant costs associated with our public company corporate governance and reporting requirements. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, our management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more corporate employees to comply with these requirements or engage outside consultants, which would increase our costs and expenses. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. These applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.
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In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
As a result of disclosure of information in the filings that we are required to make as a public company, our business, operating results and financial condition have become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If any such claims are successful, our business, operating results and financial condition could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, operating results and financial condition.
A decline in the price of our Class A Common Stock could affect our ability to raise working capital and adversely impact our ability to continue operations.
A prolonged decline in the price of our Class A Common Stock could result in a reduction in the liquidity of our Class A Common Stock and a reduction in our ability to raise capital. A decline in the price of our Class A Common Stock could be especially detrimental to our liquidity, operations and strategic plans. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new products and services and continue current operations. If the price of our Class A Common Stock declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations or raise capital that is on favorable terms to us. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
Changes in international trade policies, tariffs and treaties affecting imports and exports may have a material adverse effect on our business.
There have recently been significant changes to international trade policies and tariffs affecting imports and exports. Any significant increases in tariffs on goods or materials or other changes in trade policy could negatively affect our business operations. Recently, the U.S. has implemented a range of new tariffs and increases to existing tariffs. In response to the tariffs announced by the United States, other countries have imposed, are considering imposing, and may in the future impose new or increased tariffs on certain exports from the United States. There is currently significant uncertainty about the future relationship between the United States and other countries with respect to trade policies, taxes, government regulations and tariffs, and we cannot predict whether, and to what extent, current tariffs will continue or trade policies will change in the future. Tariffs, or the threat of tariffs or increased tariffs, could have a significant negative impact on our businesses (either due to our reliance on imported goods or dependence on access to foreign markets).
Among other things, historical financial performance of companies affected by trade policies and/or tariffs may not provide useful guidance as to the future performance of such companies, because future financial performance of those companies may be materially affected by new U.S. tariffs or foreign retaliatory tariffs, or other changes to trade policies. We may not be able to adequately address the risks presented by these tariffs or other potential trade policy changes. As a result, our business may be negatively impacted.
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Inflationary pressures and persistently high prices and uncertain availability of inputs used by us and our suppliers, or instability in logistics and related costs, could negatively impact our profitability. Pending tariffs proposed by the Trump Administration, may also negatively impact the cost structure of our supply chain, and we may not be able to pass these price increases on to our customers.
Increases in prices, including because of inflation and rising interest rates, for inputs that we and our suppliers use in manufacturing products, systems, components and parts, or increases in logistics and related costs, have led in the past and may lead in the future to higher production costs for products, systems, parts and components. Geopolitical risks, fluctuations in supply and demand, fluctuations in interest rates, any weakening of the U.S. dollar in comparison with other currencies, and other economic and political factors have created and may continue to create pricing pressure for our inputs. These inflationary pressures could, in turn, negatively impact our profitability because we may not be able to pass all of those costs on to our customers or require our suppliers to absorb such costs.
Changes to United States tariff and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.
The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations.
The resale by certain holders of our Class A Common Stock, or the perception that such sales may occur, could cause the market price of the Class A Common Stock to decline.
We are obligated to register for resale a substantial number of shares of our Class A Common Stock held by, or issuable to, certain former shareholders of BCAR, including the sponsor of BCAR and certain of its affiliates and transferees. Upon the effectiveness of the registration statement covering such shares, such shares will generally be freely tradable without restriction under the Securities Act.
The market price of our Class A Common Stock could decline as a result of actual sales of a substantial number of shares by such selling securityholders, or the perception that such sales may occur. Because the shares to be registered for resale were acquired by the selling securityholders at prices substantially below the price at which public investors acquired their shares, the selling securityholders may have an incentive to sell their shares at prices that are below the market price or at prices that would still result in significant profits to them. Sales of substantial amounts of the Class A Common Stock we will register, or the availability of such shares for sale, could increase the supply of shares in the public market, adversely affect prevailing market prices and impair our ability to raise additional capital through future equity financings.
In addition, the resale of our Class A Common Stock by the selling securityholders could make it more difficult for us to maintain the trading price of our Class A Common Stock at levels that public investors deem attractive. Any decline in the market price of our Class A Common Stock resulting from the resale, or the potential resale, of the shares to be registered could adversely affect the value of your investment.
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Future sales and issuances of our securities could result in additional dilution of the percentage ownership of existing stockholders and could cause our stock price to fall.
We expect that significant additional capital may be needed in the future to continue our planned operations. To raise capital, we may sell Class A Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell Class A Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our Class A Common Stock.
In addition, our employees are expected to be granted equity awards under equity incentive plans in the future. You will experience additional dilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of our Class A Common Stock.
Our existing warrants may have an adverse effect on the market price of our Class A Common Stock.
We have outstanding warrants we assumed in the Business Combination that entitle the holders thereof to purchase shares of our Class A Common Stock. Such warrants, when exercised, will increase the number of issued and outstanding shares of our Class A Common Stock and reduce the value of our Class A Common Stock.
We do not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in our securities must come from increases in the fair market value and trading price of such securities.
We currently anticipate retaining future earnings, if any, for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends on our Common Stock for the foreseeable future. In addition, debt agreements, which we may enter into, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that our board of directors decides is relevant. Any return to stockholders will therefore be limited to the appreciation of their Common Stock.
We are a “smaller reporting company” and an “emerging growth company” under the U.S. federal securities laws, and the reduced reporting requirements applicable to smaller reporting companies and emerging growth companies could make our securities less attractive to investors.
We are a “smaller reporting company” and an “emerging growth company” under U.S. federal securities laws. For as long as we continue to be a smaller reporting company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Furthermore, as an emerging growth company, we have taken, and intend to continue to take, advantage of exemptions from certain reporting requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and exemptions from the requirements of holding a non-binding advisory vote on executive compensation. Investors may not find our securities attractive because we may rely on these exemptions and reduced disclosures. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and our stock price may be more volatile.
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We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common equity held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common equity held by non-affiliates exceeds $700 million as of the last business day of the most recently completed second fiscal quarter.
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (ii) the date on which have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Our management team has limited experience managing a U.S. public company, and the additional demands associated with operating as a public company may adversely affect our business, financial condition and results of operations.
Following the Business Combination, we became a publicly traded company subject to the reporting, corporate governance, internal control, investor relations and other requirements applicable to companies whose securities are listed on a national securities exchange. Other than our Chief Financial Officer, whose public company experience consists of serving as the chief financial officer of a Nasdaq-listed special purpose acquisition company, the members of our executive management team have not previously served as executive officers of a U.S. public company, and our management team as a whole has limited experience complying with the legal, accounting, regulatory and governance requirements applicable to operating public companies.
As a public company, we are required to devote significant management attention and financial resources to complying with the reporting requirements of the Exchange Act, the rules and regulations of the SEC, applicable Nasdaq listing standards and the requirements of the Sarbanes-Oxley Act. These obligations include, among other things, preparing and filing periodic reports with the SEC, establishing and maintaining effective disclosure controls and procedures and internal control over financial reporting, complying with corporate governance requirements, implementing appropriate public company policies and procedures and responding to increased scrutiny from stockholders, securities analysts and regulators. Our management may not successfully or timely implement the processes, systems and controls necessary to satisfy these requirements. In addition, the time and attention required to address public company obligations may divert management’s focus from the operation and growth of our business. Failure to comply with applicable securities laws, SEC reporting requirements or Nasdaq listing standards could result in regulatory investigations or enforcement actions, litigation, reputational harm, the loss of investor confidence or the delisting of our securities from Nasdaq, any of which could materially and adversely affect our business, financial condition, results of operations and the market price of its securities.
Although we expect to engage experienced outside legal counsel, independent auditors and other professional advisers to assist us in complying with our public company obligations, there can be no assurance that these efforts will be sufficient to ensure timely compliance with all applicable requirements or to prevent deficiencies in our disclosure controls, internal controls or corporate governance practices.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 1C. CYBERSECURITY
Risk Management
As a newly public company, we have not yet formally adopted a cybersecurity policy, although we have processes for assessing, identifying and managing material cybersecurity threats. We routinely assess material risks from cybersecurity threats that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
Following these risk assessments, we re-design, implement, and maintain reasonable safeguards to minimize identified risks, reasonably address any identified gaps in existing safeguards, and regularly monitor the effectiveness of our safeguards. We devote significant resources and designate high-level personnel, including our Chief Executive Officer, to manage the risk assessment and mitigation process.
Governance
Our research and development lead oversees our cybersecurity processes, including those described in “—Risk Management” above.
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ITEM 2. PROPERTIES
We do not have any principal physical properties.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A Common Stock and warrants are traded on Nasdaq under the symbols “XLAB” and “XLABW,” respectively. Our Class B Common Stock are not listed on Nasdaq or any other securities exchange and are not publicly traded.
Stockholders
As of September 25, 2026, we had 33,689,050 shares of Class A Common Stock outstanding held of record by approximately 38 holders and 30,645,739 shares of Class B Common Stock outstanding held of record by five holders.
The number of holders of record of our Class A Common Stock does not include a substantially greater number of “street name” holders or beneficial holders whose Class A Common Stock are held of record by banks, brokers and other financial institutions.
Dividends
We have not paid any cash dividends on our Common Stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board may deem relevant. In addition, our ability to pay dividends may be limited by any outstanding preferred stock and covenants of any existing and future outstanding indebtedness. We do not anticipate declaring any cash dividends to holders of our Common Stock in the foreseeable future. As a result, you may not receive any return on an investment in our Common Stock unless you sell your Common Stock for a price greater than that which you paid for it.
Securities Authorized for Issuance under Equity Compensation Plans
In connection with the Business Combination, the board of directors and the shareholders of BCAR approved our 2026 Omnibus Equity Incentive Plan (the “Equity Incentive Plan”), which became effective upon the closing of the Business Combination (the “Closing”).
The Equity Incentive Plan is administered by the plan administrator, which is the compensation committee of our Board. The plan administrator has the power to, among other things, determine the individuals among eligible individuals to whom awards will be granted, make any combination of awards to participants, and determine the specific terms and conditions of each award, subject to the provisions of the Equity Incentive Plan. The plan administrator may delegate to a committee consisting of one or more officers the authority to grant stock options and other awards to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act and not members of the delegated committee, to the maximum extent permitted by applicable law, subject to certain limitations and guidelines. Persons eligible to participate in the Equity Incentive Plan are those full or part-time officers, employees, non-employee directors and consultants as selected from time to time by the plan administrator in its discretion.
A total of 10,000,000 shares of our Class A Common Stock (the “Initial Limit”) are reserved for issuance under the Equity Incentive Plan, subject to annual increases as described below.
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The Equity Incentive Plan provides that the number of shares reserved and available for issuance under the Equity Incentive Plan will automatically increase each January 1, beginning on January 1, 2027, by five percent (5.0%) of the outstanding number of shares of our Class A Common Stock on the immediately preceding December 31, or such lesser amount as determined by our Board in its discretion (the “Annual Increase”). This limit is subject to adjustment in the event of a reorganization, recapitalization, reclassification, stock split, stock dividend, reverse stock split or other similar change in our capitalization. The maximum aggregate number of shares of Class A Common Stock that may be issued upon exercise of incentive stock options under the Equity Incentive Plan shall not exceed the Initial Limit cumulatively increased on January 1, 2027 and on each January 1 thereafter by the lesser of the Annual Increase or 3,200,000 shares of our Class A Common Stock.
The Equity Incentive Plan contains a limitation whereby the value of all awards under the Equity Incentive Plan and all other cash compensation paid by us to any non-employee director may not exceed $750,000 in any calendar year; provided, however, that such amount will be $1,000,000 for the first calendar year a non-employee director is initially appointed to our Board.
Recent Sales of Unregistered Securities
During the fiscal year ended June 30, 2026, Legacy Exascale sold and issued an aggregate of two SAFEs for an aggregate amount of $3.5 million. Subsequent to period end, on July 2, 2026, Legacy Exascale sold and issued one SAFE for $1.0 million to one investor. The foregoing transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof, as transactions by an issuer not involving a public offering.
The SAFEs were governed by substantially similar forms of SAFE agreements. In general, each SAFE provided that, upon the occurrence of a liquidity event, the SAFE holder would become entitled to the consideration specified in the SAFE based on the form and amount of proceeds payable in such liquidity event, including, where applicable, shares determined by reference to the applicable liquidity price. The Business Combination constituted a liquidity event pursuant to the terms of the SAFEs and the aforementioned SAFEs were settled in connection with the consummation of the Business Combination.
Use of Proceeds from Registered Offerings
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. [Reserved]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and notes thereto included elsewhere in this Annual Report. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Forward-Looking Statements.”
OVERVIEW
Legacy Exascale was incorporated in the State of Delaware in June 2022. Exascale Labs Holdings Inc. was incorporated in the State of Delaware in December 2025 in connection with the Business Combination. Through the Business Combination, Exascale Labs Holdings Inc. succeeded to the business of Legacy Exascale. We are a next-generation AI infrastructure provider operating an asset-light, software-defined GPU compute platform and related AI infrastructure solutions. Our core business includes GaaS, through which we provide reserved and on-demand access to high-performance GPU compute capacity sourced from third-party data centers globally, as well as GPU cluster management and optimization services for AIDC operators. In addition, we have developed certain modular data center, high-density liquid cooling, HVDC power, data center interconnectivity and energy storage solutions that are designed to address deployment bottlenecks in AI infrastructure and that we believe are ready for commercial engagement, although these capabilities have not yet generated revenue as of the date of this Annual Report. The platform is purpose-built for large-scale AI workloads, including LLM training, fine-tuning, and high-concurrency inference.
Our business consists of two primary product and service categories. First, we provide GPU-based compute services through our GaaS offering, which delivers scalable access to high-performance GPU capacity via bare-metal and VM configurations. These services are offered through both on-demand and reserved usage models and are designed to support a range of AI workloads, including large-scale model training, fine-tuning, and high-concurrency inference. Second, we provide Infrastructure Solutions for AI deployments, which include (i) GPU cluster management and operational services provided to AIDC operators, including planning and configuration support, monitoring, performance tuning, and ongoing operational assistance for large-scale GPU deployments, which are revenue-generating and delivered pursuant to commercial service arrangements, and (ii) certain modular data center, advanced liquid cooling, HVDC power, data center interconnectivity and energy storage solutions that management believes are ready to support customer deployments as of the date of this Annual Report, although such offerings have not generated revenue to date. We expect to pursue these offerings on an asset-light basis, primarily through partnerships, systems integration, contract manufacturing and other collaborative structures.
Key Financial Metrics
|
For the Years Ended |
||||||||
| 2025 | 2026 | |||||||
| $ | $ | |||||||
| Total revenues | 7,015,512 | 14,822,799 | ||||||
| Loss from operations | (3,044,846 | ) | (4,800,840 | ) | ||||
| Net loss | (7,659,667 | ) | (12,162,391 | ) | ||||
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Key Performance and Operating Metrics
We use certain key performance and operating metrics to evaluate the performance of our business, monitor customer demand and utilization, assess capacity sourcing and deployment, evaluate supplier procurement and pricing, and support resource allocation decisions. Management reviews these metrics together with our financial results, including revenue, cost of revenue, gross margin, operating expenses and cash flows.
The following table presents our key performance and operating metrics for the fiscal years ended June 30, 2025 and 2026. We calculate GPU-hours using a standard 730-hour month for each month presented, rather than the actual number of calendar days in each month. We use 730 hours because it approximates the average number of hours in a month and is applied consistently across all periods presented to enhance period-to-period comparability and avoid fluctuations caused solely by differences in the number of calendar days in individual months. Accordingly, available GPU-hours are calculated as deployed GPU capacity multiplied by 730 hours for each month, and billable GPU-hours are calculated as customer-contracted GPU capacity multiplied by 730 hours for each month. Our current KPI framework does not separately track or present on-demand GPU-hours as a key operating metric. On-demand usage, to the extent generated during the periods presented, is discussed through revenue and MD&A rather than through this KPI.
For capacity-based metrics, we present monthly average amounts for the applicable period because management believes period-average capacity metrics are more directly comparable to period revenue, cost of revenue, available GPU-hours, billable GPU-hours and utilization. Monthly average amounts are calculated as the simple average of the monthly capacity amounts compiled by management for each month in the applicable period.
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Average contracted GPU supply | 935.3 GPUs | 1,294.7 GPUs | ||||||
| Average theoretical GPU compute power related to contracted GPU supply | 733,231 Tflops | 2,194,087 Tflops | ||||||
| Average deployed GPU capacity | 816.7 GPUs | 1,154.7 GPUs | ||||||
| Average theoretical GPU compute power related to deployed GPU capacity | 595,289 Tflops | 1,816,187 Tflops | ||||||
| Average customer-contracted GPU capacity | 754.7 GPUs | 1,050.8 GPUs | ||||||
| Average theoretical GPU compute power related to customer-contracted GPU capacity | 532,238 Tflops | 1,580,057 Tflops | ||||||
| Available GPU-hours | 7,154,000 | 10,114,880 | ||||||
| Billable GPU-hours | 6,610,880 | 9,205,008 | ||||||
| Utilization of deployed GPU capacity | 92.4 | % | 91.0 | % | ||||
| Weighted-average remaining customer contract term, as of period end | 4.2 months | 8.2 months | ||||||
Average contracted GPU supply.
The monthly average GPU capacity secured under binding supplier arrangements during the applicable period. This metric includes GPU capacity available to us under binding supplier arrangements during the period and excludes non-binding forecasts, options, allocation indications, memorandums of understanding (“MOUs”) and similar non-binding arrangements. Monthly average amounts are calculated as the simple average of the monthly capacity amounts compiled by management for each month in the applicable period. This metric provides visibility into our access to GPU supply and capacity sourcing over the applicable period. Management uses this metric for supplier procurement planning, deployment planning, capacity expansion decisions and alignment of supplier capacity with expected customer demand.
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Average theoretical GPU compute power related to contracted GPU supply.
The monthly average theoretical compute power associated with average contracted GPU supply during the applicable period, calculated based on the GPU types and theoretical performance characteristics used by management. Theoretical GPU compute power does not represent actual realized throughput, which may vary based on workload type, configuration, utilization, software optimization, networking, memory, customer usage patterns and other factors. This metric helps investors understand the compute capacity associated with our contracted GPU supply. Management uses this metric to assess the scale and performance profile of contracted GPU resources.
Average deployed GPU capacity.
The monthly average GPU capacity that was installed, configured and made available for customer workloads on our platform during the applicable period. Monthly average amounts are calculated as the simple average of the monthly capacity amounts compiled by management for each month in the applicable period. This metric helps investors understand the average amount of capacity available for revenue-generating customer workloads during the period. Management uses this metric to assess deployment progress, available service capacity and operational readiness.
Average theoretical GPU compute power related to deployed GPU capacity.
The monthly average theoretical compute power associated with average deployed GPU capacity during the applicable period, calculated based on the GPU types and theoretical performance characteristics used by management. Theoretical GPU compute power does not represent actual realized throughput, which may vary based on workload type, configuration, utilization, software optimization, networking, memory, customer usage patterns and other factors. This metric helps investors understand the compute capacity associated with our deployed GPU capacity. Management uses this metric to assess deployed platform scale and capacity available to support customer workloads.
Average customer-contracted GPU capacity.
The monthly average customer demand committed under binding customer arrangements during the applicable period, measured by reference to GPUs committed to customers or equivalent committed GPU-hours, as applicable, and excluding non-binding MOUs, letters of intent, cancellable trial arrangements, pipeline opportunities and similar non-binding discussions. Monthly average amounts are calculated as the simple average of the monthly capacity amounts compiled by management for each month in the applicable period. This metric provides visibility into committed demand and forward utilization. Management uses this metric to assess demand visibility, customer commitments, capacity allocation and alignment between supplier capacity and customer demand.
Average theoretical GPU compute power related to customer-contracted GPU capacity.
The monthly average theoretical compute power associated with average customer-contracted GPU capacity during the applicable period, calculated based on the GPU types and theoretical performance characteristics used by management. Theoretical GPU compute power does not represent actual realized throughput, which may vary based on workload type, configuration, utilization, software optimization, networking, memory, customer usage patterns and other factors. This metric helps investors understand the compute power associated with customer-contracted demand. Management uses this metric to assess customer demand, capacity allocation and utilization planning.
Available GPU-hours.
The aggregate standardized GPU-hours during the applicable period attributable to deployed GPU capacity available to support customer workloads, calculated as the sum, for each month in the applicable period, of deployed GPU capacity multiplied by 730 hours. We use a standard 730-hour month for this calculation and does not adjust the calculation based on differences in the actual number of calendar days in each month. Available GPU-hours is a standardized capacity metric based on deployed GPU capacity made available for customer workloads and does not reflect actual customer usage. This metric serves as the denominator for utilization and helps investors understand the amount of deployed capacity available to generate revenue. Management uses this metric to monitor platform availability, operating capacity and potential idle capacity.
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Billable GPU-hours.
The aggregate standardized GPU-hours during the applicable period attributable to customer-contracted GPU capacity under reserved or other binding customer arrangements, calculated as the sum, for each month in the applicable period, of customer-contracted GPU capacity multiplied by 730 hours. We use a standard 730-hour month for this calculation and do not adjust the calculation based on differences in the actual number of calendar days in each month. Our current KPI framework does not separately track or present on-demand GPU-hours as a key operating metric. On-demand usage, to the extent generated during the periods presented, is discussed through revenue and MD&A rather than through this KPI. This metric serves as the numerator for utilization and helps investors understand the portion of available deployed capacity covered by customer-contracted arrangements. Management uses this metric to evaluate customer commitments, revenue generation and capacity monetization.
Utilization of deployed GPU capacity.
Billable GPU-hours divided by available GPU-hours for the applicable period. This metric helps investors evaluate the efficiency with which we monetize deployed capacity. Management uses this metric to identify idle capacity, evaluate demand, plan procurement, assess pricing and support expansion decisions.
Weighted-average remaining customer contract term.
Weighted-average remaining term of binding fixed-term customer contracts as of the end of the applicable period, weighted by monthly committed revenue. This metric helps investors assess revenue visibility, renewal timing and customer contract duration. Management uses this metric to manage renewals, assess revenue visibility and align customer commitments with supplier arrangements.
We review supplier pricing and procurement cost information in connection with procurement planning, customer pricing, margin management and supplier negotiations. However, we do not use a single standardized average procurement cost per GPU-hour or per billable GPU-hour as a key operating metric. Our supplier arrangements are primarily usage-based and bundled with related infrastructure services, and pricing may vary based on GPU type, capacity configuration, usage volume, supplier terms, deposits, prepayments, service period, hosting, power, network connectivity and prevailing market conditions. We therefore discuss supplier cost trends through cost of revenue, gross margin and qualitative period-over-period MD&A discussion, rather than presenting a separate unit-cost KPI.
SPECIFIC FACTORS AFFECTING OUR RESULTS OF OPERATIONS
As an AI infrastructure provider, our operational performance is shaped by key factors tied to the rapid evolution of the AI industry. While influenced by these broader industry trends, we believe our results of operations are more directly affected by company-specific factors, including the following major factors:
Our ability to secure a stable and competitive supply of advanced GPU chips
Our business depends on our ability to obtain a reliable and cost-competitive supply of advanced GPU chips. Given the current global environment, in which supply chains are concentrated and subject to periodic constraints, access to GPUs is an important input to our capacity planning, ability to meet customer requirements, and anticipated growth. GPUs represent a foundational component of our technology platform, and limitations in supply could adversely affect operating efficiency and service delivery. We believe that our current chip technology compares favorably with available alternatives and supports customer acquisition and retention.
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Our ability to manage computing power supply under an asset-light model
We operate under an asset-light model and do not own core hardware. As a result, our service offerings depend on the availability of GPU servers and related computing capacity sourced and integrated from third-party providers. Supplier concentration, access to advanced GPU hardware, procurement terms, and delivery timelines may affect our available capacity, cost structure, and deployment flexibility. Disruptions in the supply chain, changes in technology, or modifications to relationships with key suppliers could adversely impact our business.
We seek to mitigate these risks through supplier relationship management, capacity planning, and the use of contractual arrangements designed to provide flexibility where feasible. We have expanded our available computing capacity over time, which supports anticipated business growth and may contribute to improved procurement efficiency.
Our ability to develop and scale our technical and operational platform
Our service offerings depend on the performance and reliability of our software platform and operational systems, which enable the delivery and management of computing services. While GPU hardware is sourced from third parties, our software and operational capabilities are required to allocate resources, manage performance, support automation, and provide customer support at scale. The effectiveness of this technical and operational layer influences service reliability, operating costs, and the customer experience.
We continue to develop and enhance our internal software platform and operational processes, including the addition of new functionality intended to address evolving customer requirements and support the scaling of our services.
Our ability to manage third-party data center dependencies
We rely on third-party providers for data center facilities, including space, power, cooling, and network connectivity. These infrastructure components are not directly controlled by us, and their availability, cost and performance may affect service delivery. Under our asset-light model, we seek to manage these dependencies through capacity planning, system architecture design, service-level management, and the use of multiple facilities where feasible.
Our approach is intended to support operational continuity and provide flexibility as service demand evolves; however, disruptions or changes in third-party data center relationships could adversely impact operations.
Our ability to acquire, retain, and expand our customer base
Our results depend on continued customer demand for our services and our ability to attract and retain customers in a competitive market. Serving both AI developers and enterprise customers requires offerings that meet customer performance, reliability, and cost expectations, as well as the ability to respond to evolving use cases and requirements. Competition, changes in customer preferences, or the availability of alternative solutions could affect customer acquisition and retention.
We seek to support customer retention by maintaining service quality and reliability and by demonstrating the value of our services over time. For the fiscal year ended June 30, 2025 and 2026, our customer renewal rate was approximately 90% and 68%, respectively.
Our ability to achieve profitability through cost management
Under our asset-light model, we incur operating expenses in place of significant capital expenditures. Our primary cost components include GPU hardware resources, data center hosting, power, and network services. As a result, operating results are influenced by our ability to manage these ongoing costs in relation to revenue.
We seek to improve financial performance by managing resource utilization, negotiating procurement arrangements, and applying pricing practices intended to reflect cost structures and market conditions, while maintaining service quality. There can be no assurance that these efforts will result in sustained profitability.
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KEY COMPONENTS OF RESULTS OF OPERATIONS
Revenues
Our business is primarily comprised of the following two revenue streams: (i) providing intelligent computing power service to commercial enterprise clients with substantial GPU computing requirements, and (ii) providing comprehensive data center service to data center asset owners.
(i) Revenue from intelligent computing power service
We leverage our expertise in high-performance computing and cloud-native architectures to build and operate stable, efficient, and scalable GPU computing platforms through modular data center design and liquid cooling technology. We use these platforms to provide computing resources for large-scale AI training, model inference, and high-performance scientific computing to commercial enterprise clients with substantial GPU computing requirements. Supporting services include GPU server environment deployment, cluster scheduling and performance optimization, high-speed network interconnection, real-time monitoring and intelligent alerting systems, as well as industry-compliant security and regulatory assurance. Under ASC 606, all related services are accounted for as a single performance obligation, and revenue is recognized on a straight-line basis over the contractual service period.
(ii) Revenue from comprehensive data center service
We leverage our project experience in infrastructure management, cluster optimization, and system monitoring to provide full-cycle operational support to data center asset owners. Services encompass facility environment deployment, network architecture implementation, security and compliance system development, daily operational monitoring, and emergency fault response. Under ASC 606, revenue from each distinct service, which constitutes a separate performance obligation, is recognized on a straight-line basis over the contractual service period.
Cost of Revenues
Our cost of revenues primarily include computing power service, professional service fees and staff costs and employee benefits. All the cost of revenues are recognized in the period in which the related services occur or the benefits are received.
Operating expenses
Our selling and marketing expenses primarily include: (i) advertising and promotion expenses, (ii) staff costs, employee benefits and share-based compensation, and (iii) travel and other routine office expenses. All expenses are recognized in the period in which the related services occur or the benefits are received.
Our general and administrative expenses mainly consist of staff costs and employee benefits, professional service fees, depreciation expenses and other operating expenses.
Our research and development expenses mainly consist of software development outsourcing service fees, server costs, staff costs and employee benefits, and testing expenses.
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RESULTS OF OPERATIONS
Fiscal year ended June 30, 2025 compared to fiscal year ended June 30, 2026
The following table summarizes the results of our operations for the years ended June 30, 2025 and 2026 and provides information regarding the dollar and percentage increase (or decrease) during such periods.
| For the Years Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2026 | Fluctuation | ||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Revenue from intelligent computing power service | 6,546,249 | 93.3 | % | 14,664,937 | 98.9 | % | 8,118,688 | 124.0 | % | |||||||||||||||
| Revenue from comprehensive data center service | 469,263 | 6.7 | % | 157,862 | 1.1 | % | (311,401 | ) | -66.4 | % | ||||||||||||||
| Total revenues | 7,015,512 | 100.0 | % | 14,822,799 | 100.0 | % | 7,807,287 | 111.3 | % | |||||||||||||||
| Cost of revenues | (5,910,315 | ) | -84.2 | % | (12,404,546 | ) | -83.7 | % | (6,494,231 | ) | 109.9 | % | ||||||||||||
| Gross profit | 1,105,197 | 15.8 | % | 2,418,253 | 16.3 | % | 1,313,056 | 118.8 | % | |||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Selling and marketing expenses | (989,155 | ) | -14.1 | % | (499,392 | ) | -3.4 | % | 489,763 | -49.5 | % | |||||||||||||
| General and administrative expenses | (362,982 | ) | -5.2 | % | (1,229,516 | ) | -8.3 | % | (866,534 | ) | 238.7 | % | ||||||||||||
| Research and development expenses | (2,797,906 | ) | -39.9 | % | (5,490,185 | ) | -37.0 | % | (2,692,279 | ) | 96.2 | % | ||||||||||||
| Total operating expenses | (4,150,043 | ) | -59.2 | % | (7,219,093 | ) | -48.7 | % | (3,069,050 | ) | 74.0 | % | ||||||||||||
| Loss from operations | (3,044,846 | ) | -43.4 | % | (4,800,840 | ) | -32.4 | % | (1,755,994 | ) | 57.7 | % | ||||||||||||
| Change in fair value of simple agreements for future equity | (4,614,821 | ) | -65.8 | % | (7,377,383 | ) | -49.8 | % | (2,762,562 | ) | 59.9 | % | ||||||||||||
| Other income | - | - | % | 15,832 | 0.1 | % | 15,832 | NA | ||||||||||||||||
| Loss before income tax expenses | (7,659,667 | ) | -109.2 | % | (12,162,391 | ) | -82.1 | % | (4,502,724 | ) | 58.8 | % | ||||||||||||
| Income tax expenses | - | - | - | - | - | - | ||||||||||||||||||
| Net loss | (7,659,667 | ) | -109.2 | % | (12,162,391 | ) | -82.1 | % | (4,502,724 | ) | 58.8 | % | ||||||||||||
| Loss per share(1) | ||||||||||||||||||||||||
| Basic and diluted | $ | (5,106.44 | ) | $ | (8,108.26 | ) | ||||||||||||||||||
| Weighted average number of shares | ||||||||||||||||||||||||
| Basic and diluted | 1,500 | 1,500 | ||||||||||||||||||||||
| (1) | On January 8, 2026, we re-designated our authorized share capital of 1,500 common stock to 303 shares of Class A common stock and 1,197 shares of Class B common stock. |
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Revenues
Our revenues consist of the following:
| For the Years Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2026 | Fluctuation | ||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||
| Revenues | ||||||||||||||||||||||||
| Revenue from intelligent computing power service | 6,546,249 | 93.3 | % | 14,664,937 | 98.9 | % | 8,118,688 | 124.0 | % | |||||||||||||||
| Revenue from comprehensive data center service | 469,263 | 6.7 | % | 157,862 | 1.1 | % | (311,401 | ) | -66.4 | % | ||||||||||||||
| Total revenues | 7,015,512 | 100.0 | % | 14,822,799 | 100.0 | % | 7,807,287 | 111.3 | % | |||||||||||||||
Our total revenue increased by $7.8 million, or 111.3%, from $7.0 million for the year ended June 30, 2025 to $14.8 million for the year ended June 30, 2026. This growth was primarily driven by revenue from our intelligent computing power service, which increased by approximately $8.1 million, or 124.0%, from $6.5 million for the year ended June 30, 2025 to $14.7 million for the year ended June 30, 2026. This segment constituted 98.9% of our total revenue for fiscal year 2026, up from 93.3% in the prior fiscal year, solidifying its position as the core driver of our expansion. This increase was partially offset by a decrease of $0.3 million, or 66.4%, from comprehensive data center service.
We quantified the increase in revenue attributable to expansion within our existing customer base and new customer additions as follows:
| (i) | Expansion within existing customer base: $4.8 million (approximately 61.5% of total revenue growth), representing increased spending by customers that generated revenue for the year ended June 30, 2025. The increase in average revenue per existing customer was primarily associated with higher service utilization, as average service usage increased from 8.2 months for the year ended June 30, 2025 to 11.8 months for the year ended June 30, 2026, with a 17 % increase in average monthly service fees, which we believe reflects increased customer demand for compute services and higher workload and performance requirements. |
| (ii) | New customers: $3.0 million (approximately 38.5% of total revenue growth), representing revenue from customers that first generated revenue for the year ended June 30, 2026. |
The revenue growth analysis for our two revenue streams is presented below:
| (1) | Revenue from intelligent computing power service |
Our revenue from intelligent computing power service increased by approximately $8.1 million, or 124.0%, from $6.5 million for the year ended June 30, 2025 to $14.7 million for the year ended June 30, 2026. The increase was mainly due to:
Expansion and Efficiency Enhancement of Our Core Resource Pool
Our intelligent computing power resource pool has seen significant improvements in both scale and performance. Through strategic investments, we have not only expanded our total computing power supply but also optimized our resource scheduling efficiency and stability, particularly with the latest GPU computing cards. This enables us to meet the stringent demands of high-end customers for low-latency, highly reliable computing power while supporting more high-load clients, laying a solid physical foundation for revenue scaling.
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Deepening Product Value and Enhancing Solution Added Value
We continuously enhance the value delivered to customers through rapid iteration of product features and strengthening of our technical service systems. Specific manifestations include:
| (i) | Rapid evolution of product functionality: Keeping pace with cutting-edge demands, we have consistently enhanced core features such as model training optimization, inference acceleration, and dedicated resource scheduling, enabling customers to utilize computing power more efficiently. |
| (ii) | Professionalization of technical services: We provide in-depth support for technology-driven clients, including architecture consulting, performance tuning, and rapid troubleshooting, transforming from a “resource provider” to a “technology partner.” |
| (iii) | Enhancement of solution added value: By offering integrated solutions that include software tool chains, industry optimization practices, and ongoing technical support, we help customers reduce total cost of ownership and accelerate innovation, thereby achieving higher average revenue per customer and deeper customer engagement. |
High Customer Renewal Rate and Strengthening of Long-Term Partnerships
Our customer agreements generally fall into two categories, namely, (i) agreements for compute services and (ii) agreements for GPU cluster management services and related infrastructure support services. With respect to compute services, we offer both reserved arrangements and on-demand arrangements. Reserved arrangements generally provide committed intelligent computing power services for a defined service term. Historically, most reserved arrangements have had initial terms of approximately one year, although actual contract durations have generally ranged from approximately three months to three years. On-demand arrangements are generally provided under our platform terms and conditions and allow customers to obtain services on a pay-as-you-go basis without a fixed committed service term. With respect to GPU cluster management services and related infrastructure support services, we generally enter into customer agreements that provide for services to be delivered either over a defined service period on a fixed-term basis or on a project basis to complete specified scope, deliverables, or implementation work within an agreed timeframe.
During the fiscal year ended June 30, 2025, we had 28 customers across our current revenue-generating offerings, of which 19 continued to generate revenue during the fiscal year ended June 30, 2026. Accordingly, for the year ended June 30, 2026, our customer renewal rate was approximately 68% (19 out of 28). The average revenue per enterprise customer increased from $250,000 to $570,000, directly contributing to stable revenue growth. The high renewal rate stems from:
| (i) | Industry-leading hardware and software in our computing services: The reliability and performance of our products consistently meet standards. |
| (ii) | Establishment of long-term partnerships: Transitioning from transactional relationships to strategic collaborations, we have signed long-term framework agreements with several leading customers, ensuring sustainable and predictable revenue. |
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Expanded our market presence.
During the initial operational phase of year ended June 30, 2024, our revenue primarily originated from early-established regional markets, such as Canada and Hong Kong. Entering year ended June 30, 2025, we successfully extended our reach to strategic markets including Singapore and the United States, resulting in a more balanced and diversified revenue structure. Specifically, the combined contribution from the Singapore and U.S. markets amounted to $4.6 million, accounting for 65.1% of total revenue for the year ended June 30, 2025. During the year ended June 30, 2026, the revenue from Hong Kong and U.S. markets was $8.5 million, accounting for 57.0% of total revenue for the period.
Overall, our growth model has established a virtuous cycle encompassing “supply capacity, product value, customer relationships, and market presence”: resource expansion supports scale growth, product evolution enhances monetization capabilities, customer relationships provide a stable foundation, and market optimization strengthens development resilience. This growth system has laid a solid groundwork for our future sustainable development, while also validating the effectiveness of our strategic execution and the sustainability of our business model.
| (2) | Revenue from comprehensive data center service |
Our revenue from our comprehensive data center service decreased by $0.3 million, or 66.4%, from $0.5 million for the year ended June 30, 2025 to $0.2 million for the year ended June 30, 2026. The decrease was mainly due to a decline in the average service volume per customer, while the number of customers remained unchanged at two for both fiscal years.
Cost of revenues
Our cost of revenues increased by $6.5 million, from $5.9 million for the year ended June 30, 2025 to $12.4 million for the year ended June 30, 2026, representing a growth rate of 109.9%. This increase primarily reflects the scaling of our business operations in line with revenue expansion, while demonstrating improved cost efficiency as evidenced by the reduction in the cost-to-revenue ratio from 84.2% to 83.7%.
Gross profit and gross margin
The following table sets forth our gross profit and gross margin by revenue types for the years indicated:
| For the Years Ended June 30, |
||||||||||||||||
| 2025 | 2026 | Fluctuation | ||||||||||||||
| $ | $ | $ | % | |||||||||||||
| Revenues | 7,015,512 | 14,822,799 | 7,807,287 | 111.3 | % | |||||||||||
| Cost of revenues | (5,910,315 | ) | (12,404,546 | ) | (6,494,231 | ) | 109.9 | % | ||||||||
| Gross profit | 1,105,197 | 2,418,253 | 1,313,056 | 118.8 | % | |||||||||||
| Gross margin | 15.8 | % | 16.3 | % | ||||||||||||
Our gross profit increased by $1.3 million, from $1.1 million for the year ended June 30, 2025 to $2.4 million for the year ended June 30, 2026, representing a growth rate of 118.8%. This increase was driven by higher revenue and an expansion in gross margin, which improved from 15.8% to 16.3%.
The concurrent improvement in gross profit and gross margin reflects scalable operational efficiency amid rapid revenue growth. Margin expansion was achieved through ongoing optimization of technology infrastructure, energy efficiency initiatives, and dynamic resource scheduling, which helped contain the growth of cost of revenues to 109.9%, below the revenue growth of 111.3%.
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Operating expenses
The following table sets forth our operating expenses, both in absolute amount and as a percentage of the total revenues, for the years indicated:
| For the Years Ended June 30, | ||||||||||||||||||||||||
| 2025 | 2026 | Fluctuation | ||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||
| Selling and marketing expenses | (989,155 | ) | -14.1 | % | (499,392 | ) | -3.4 | % | 489,763 | -49.5 | % | |||||||||||||
| General and administrative expenses | (362,982 | ) | -5.2 | % | (1,229,516 | ) | -8.3 | % | (866,534 | ) | 238.7 | % | ||||||||||||
| Research and development expenses | (2,797,906 | ) | -39.9 | % | (5,490,185 | ) | -37.0 | % | (2,692,279 | ) | 96.2 | % | ||||||||||||
| Total operating expenses | (4,150,043 | ) | -59.2 | % | (7,219,093 | ) | -48.7 | % | (3,069,050 | ) | 74.0 | % | ||||||||||||
Our operating expenses consist of selling and marketing expenses, general and administrative expenses, and research and development expenses. Operating expenses increased by $3.1 million, or 74.0%, from $4.2 million for the year ended June 30, 2025 to $7.2 million for the year ended June 30, 2026. The increase was primarily due to research and development expenses increasing by $2.7 million and general and administrative expenses increasing by $0.9 million, partially offset by a decrease in selling and marketing expenses of $0.5 million.
Our selling and marketing expenses decreased by $0.5 million, or 49.5%, to $0.5 million for the year ended June 30, 2026 from $1.0 million for the year ended June 30, 2025. The decrease was primarily driven by lower share-based compensation expense and reduced marketing and promotional spending. Revenue growth for the year ended June 30, 2026 came mainly from upsells to existing customers and new customer acquisitions, without a corresponding increase in selling and marketing expenses. We expect selling and marketing expenses to remain relatively stable as a percentage of total revenue in the foreseeable future.
General and administrative expenses increased by $0.9 million, or 238.7%, from $0.4 million for the year ended June 30, 2025 to $1.2 million for the year ended June 30, 2026. The increase was primarily attributable to salaries and compensations paid to operational support staff and professional fees related to consulting and audit. Despite the increase, we believe our general and administrative spending remained disciplined and aligned with our ongoing focus on administrative cost control and operating efficiency.
Research and development expenses increased by $2.7 million, or 96.2%, from $2.8 million for the year ended June 30, 2025 to $5.5 million for the year ended June 30, 2026. This increase reflects our continued commitment to technological innovation and product development to strengthen the core competitiveness of our intelligent computing power services and comprehensive for data center.
Loss from operations
Our loss from operations amounted to $4.8 million for the year ended June 30, 2026, compared to $3.0 million for the year ended June 30, 2025, representing an increase in operating loss of $1.8 million. This change was primarily attributable to the growth in operating expenses as we invested in research and development activities and higher professional service fees, which was partially offset by the revenue growth we achieved during the period.
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Change in fair value of simple agreements for future equity
The change in fair value of simple agreements for future equity resulted in a loss of $7.4 million for the year ended June 30, 2026, compared to a loss of $4.6 million for the year ended June 30, 2025. The increase in loss of $2.8 million reflects the relative stabilization in the valuation of these instruments during the period.
Net loss
Our net loss increased by $4.5 million, from $7.7 million for the year ended June 30, 2025 to $12.2 million for the year ended June 30, 2026. The increase in net loss was primarily driven by the growth in operating loss and the fair value adjustment on simple agreements for future equity, as we continued to invest in scaling our infrastructure, expanding our market presence, and advancing our technology platform.
LIQUIDITY AND CAPITAL RESOURCES
Going Concern Considerations
As of June 30, 2026, we had cash and USDC of $4.9 million and current liabilities of $31.9 million. For the years ended June 30, 2025 and 2026, we used $1.0 million and $2.8 million in operating activities. We incurred net losses of $7.7 million and $12.2 million for these respective periods. Since inception, we have incurred recurring net losses from operations and negative cash flows from operating activities. As of June 30, 2026, we had an accumulated deficit of $25.4 million. These factors raised substantial doubt regarding our ability to continue as a going concern within one year of the date our audited consolidated financial statements included elsewhere in this Annual Report were issued.
On August 27, 2026, we consummated the Business Combination. Upon the closing of the Business Combination, all outstanding SAFEs of Legacy Exascale were converted into our Class A Common Stock in accordance with their terms, eliminating SAFE liabilities that totaled approximately $29.1 million as of June 30, 2026. In connection with the closing of the Business Combination, we obtained access to cash proceeds of approximately $11.8 million retained from the Business Combination. In addition, between July 1, 2026 and August 27, 2026, an investor provided us with $1.0 million in the form of a SAFE, which was also converted into our Class A Common Stock upon the closing of the Business Combination.
Management has prepared a cash flow forecast covering the twelve-month period following the date our audited consolidated financial statements are issued. The forecast considers the liquidity provided by the Business Combination, conversion of SAFE instruments on the closing of the Business Combination, as well as our operating plans and expectations, including our continued focus on expanding our market presence and developing client relationships to drive revenue growth and managing operating expenses, with the objective of improving cash flows from operations over time.
Based on this forecast, we believe that we will have sufficient liquidity to fund our ongoing operations and anticipated working capital requirements for a period of at least twelve months after the date our audited consolidated financial statements are issued. Accordingly, we have concluded that the substantial doubt about our ability to continue as a going concern has been alleviated.
Our audited consolidated financial statements included elsewhere in this Annual Report have been prepared on a going concern basis, and no adjustments are required to the carrying amounts or classification of assets and liabilities in the financial statements.
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Cash Flows
Fiscal year ended June 30, 2025 compared to fiscal year ended June 30, 2026
The following table sets forth a summary of our cash flows for the years ended June 30, 2025 and 2026.
| For the Years Ended |
||||||||
| June 30, | ||||||||
| 2025 | 2026 | |||||||
| $ | $ | |||||||
| Net cash used in operating activities | (1,010,799 | ) | (2,754,624 | ) | ||||
| Net cash (used in) provided by investing activities | (2,138 | ) | 1,406,521 | |||||
| Net cash provided by (used in) financing activities | 4,275,000 | (190,000 | ) | |||||
| Net change in cash and cash equivalents | 3,262,063 | (1,538,103 | ) | |||||
| Cash and cash equivalents at the beginning of year | 969,626 | 4,231,689 | ||||||
| Cash and cash equivalents at the end of year | 4,231,689 | 2,693,586 | ||||||
Operating Activities
For the year ended June 30, 2025, net cash used in operating activities was $1.0 million. This outflow was primarily attributable to: (i) a net loss of $7.7 million; (ii) an increase in advance to suppliers of $0.8 million, mainly due to strategic advances to secure priority access to key resources; and (iii) an increase in refundable deposits receivable, mainly due to business expansion. This outflow was significantly offset by non-cash adjustments and favorable changes in working capital, including: (i) a change in the fair value of the simple agreements for future equity of $4.6 million; (ii) a decrease in other receivables of $1.7 million due to the offset of investment funds held by an employee against supplier payments made on our behalf; (iii) an increase in refundable deposits payable of $1.2 million, primarily due to higher customer deposits resulting from business expansion; and (iv) an increase in contract liabilities of $0.3 million, mainly driven by an increase in both the customer base and the average revenue per customer resulting from business expansion.
For the year ended June 30, 2026, net cash used in operating activities was $2.8 million. This outflow was primarily attributable to: (i) a net loss of $12.2 million; (ii) an increase in account receivable of $1.0 million, mainly due to the growth in revenue; and (iii) a decrease in refundable deposits payable of $1.1 million. This outflow was significantly offset by non-cash adjustments and favorable changes in working capital, including: (i) a change in the fair value of the simple agreements for future equity of $7.4 million; (ii) a decrease in other receivables of $1.7 million due to the offset of investment funds held by an employee against supplier payments made on our behalf; (iii) an decrease in advance to suppliers of $0.9 million and an increase in account payable of 0.8 million, primarily due to our having secured more favorable credit terms from our suppliers.
Investing Activities
Net cash used in investing activities for the fiscal year ended June 30, 2025 was $2.1 thousand, which was attributable to the purchases of equipment of $2.1 thousand.
Net cash provided by investing activities for the fiscal year ended June 30, 2026 was $1.4 million, which was proceeds from the sale of USDT and USDC.
Financing Activities
Net cash provided by financing activities was $4.3 million for the fiscal year ended June 30, 2025, solely attributable to proceeds from the SAFEs. Net cash used in financing activities was $0.2 million for the fiscal year ended June 30, 2026, solely attributable to payment for deferred offering costs.
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During the fiscal year ended June 30, 2026, we received $3.5 million of SAFEs proceeds through non-cash channels, consisting of $3.0 million received in USDC and $0.5 million received by an employee on our behalf. These amounts were disclosed as supplemental non-cash financing information and therefore were not included in net cash provided by financing activities.
CAPITAL EXPENDITURES
Our capital expenditures were minimal for the periods presented. We spent $2.1 thousand and nil on equipment purchases for the years ended June 30, 2025 and 2026. Going forward, we expect to make necessary capital expenditures to meet the expected growth of our business.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS
We had no commitments and contractual obligations during any of the periods presented other than those disclosed in Note “COMMITMENTS and CONTINGENCIES” of our financial statements.
OFF BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements during any of the periods presented.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make estimates that affect the reported amounts of assets and liabilities at the dates of the balance sheets, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Revenue Recognition
We applied ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) for all periods presented.
The five-step model defined by ASC606 requires us to (i) identify our contracts with clients, (ii) identify our performance obligations under those contracts, (iii) determine the transaction prices of those contracts, (iv) allocate the transaction prices to our performance obligations in those contracts, and (v) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the client in an amount that reflects the consideration expected in exchange for those goods or services.
We report all of our revenues on a gross basis. This determination is based on our assessment that we are the principal in our revenue arrangements. We control the service delivery platform and infrastructure before the service is provided to the customer. We are primarily responsible for fulfilling the service promise, has discretion in setting prices, and assumes the credit risk associated with the customer receivable.
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As a practical expedient, we elected to expense the incremental costs of obtaining a contract when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less.
Pursuant to ASC 606, we recognize revenue based on the transaction price, which is the amount of consideration we expect to be entitled to in exchange for transferring services to customers. For intelligent computing power services, contract consideration is generally fixed and is typically stated as a fixed monthly fee determined by (i) the contractually specified number of GPUs (capacity) and (ii) the service period. Accordingly, the transaction price is generally the fixed contractual amount. We recognize revenue over time as the services are provided throughout the contract term. We offer payment terms ranging from 0 to 6 months, depending on customers’ credit profiles and service requirements.
We do not provide warranties for our services or offer service-type warranty arrangements.
The following is a description of our principal activities from which we generate our revenue under ASC 606.
(i) Revenue for intelligent computing power service
We leverage our expertise in high-performance computing and cloud-native architectures to build and operate stable, efficient, and scalable GPU computing platforms through modular data center design and liquid cooling technology. We use these platforms to provide computing resources for large-scale AI training, model inference, and high-performance scientific computing to commercial enterprise clients with substantial GPU computing requirements. Supporting services include GPU server environment deployment, cluster scheduling and performance optimization, high-speed network interconnection, real-time monitoring and intelligent alerting systems, as well as industry-compliant security and regulatory assurance.
We account for the above promises as a single performance obligation because they are highly integrated and not separately identifiable in the context of the contract. We provide an integrated, managed GPU computing platform in which computing capacity, deployment/configuration, scheduling, networking, monitoring, and security/compliance are interdependent and together deliver a single combined service—continuous access to a functioning and secured platform over the contractual term.
We provide intelligent computing power services under two pricing models: (i) reserved capacity arrangements and (ii) on-demand (pay-as-you-go) arrangements. The following table presents revenue recognized during the period by arrangement type:
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| $ | $ | |||||||
| Reserved capacity arrangements | 6,501,569 | 14,652,429 | ||||||
| On-demand arrangements | 44,680 | 12,508 | ||||||
| Total | 6,546,249 | 14,664,937 | ||||||
Reserved capacity arrangements
We enter into reserved capacity arrangements, which generally provide committed intelligent computing power services for a defined service term ranging from 3 months to 3 years, with the majority of such arrangements having a one-year term. These contracts typically are non-cancelable, or may be canceled only under limited conditions with early notifications required. Payment terms generally range from 0-6 months upon the completion of services, and certain arrangements require prepayments. Any prepayments are recorded as contract liabilities and recognized over the service term.
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The performance obligation is satisfied over time because the customer simultaneously receives and consumes the benefits. Revenue is recognized using a time-elapsed output method over the contractual service period.
On-demand (pay-as-you-go) arrangements
We provide customers with on-demand access to intelligent computing power and GPU resources under a pay-as-you-go model, which requires advance payment. Customer advances are recorded as contract liabilities and recognized as revenue over time during the provision of the related services underlying the contract term. We recognize revenue over time because the customer simultaneously receives and consumes the benefits during the service period. These arrangements generally do not include a fixed contractual term or minimum usage commitments.
(ii) Revenue from comprehensive data center service
We leverage our project experience in infrastructure management, cluster optimization, and system monitoring to provide full-cycle operational support to data center asset owners. Services encompass facility environment deployment, network architecture implementation, security and compliance system development, daily operational monitoring, and emergency fault response. Under ASC 606, revenue from each distinct service, which constitutes a separate performance obligation, is recognized on a straight-line basis over the contractual service period.
For the years ended June 30, 2025 and 2026, $7.0 million and $14.8 million of our revenue was recognized over time, respectively. Revenue is recognized over time because our services are performed throughout the contract term and the customer benefits as the services are provided.
Revenue disaggregated by service lines for the years ended June 30, 2025 and 2026 is disclosed in the table below:
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| $ | $ | |||||||
| Revenue from intelligent computing power service | 6,546,249 | 14,664,937 | ||||||
| Revenue from comprehensive data center service | 469,263 | 157,862 | ||||||
| Total | 7,015,512 | 14,822,799 | ||||||
Contract Liabilities
We receive advance payments from our customers for services to be provided in the future. These payments are recorded as contract liabilities on the balance sheet within “Contract liabilities”.
Contract liabilities are recognized when consideration is received from a customer prior to us satisfying our related performance obligations. For these service contracts, we recognize revenue, and reduce the contract liabilities over time as the services are rendered and the performance obligations are satisfied. Revenue recognized during the years ended June 30, 2025 and 2026 that was included in the contract liability balance at the beginning of the period was $95,326 and $392,152, respectively.
Crypto assets
Our crypto assets classified in current assets are held primarily for use in the ordinary course of business, which is expected to be actively utilized or converted within the normal operating cycle, and such crypto assets can be sold in a highly liquid marketplace. During the year ended June 30, 2026, we only held crypto assets of USDT and USDC, which were principally funded by SAFE investors and as a form of collection from revenue transactions. Our crypto assets are held with a qualified third-party custodian that provides secure storage and safeguarding of our crypto assets.
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USDC
USDC is a stablecoin redeemable on a one-to-one basis for U.S. dollars and is accounted for as a financial instrument in the consolidated balance sheets.
Crypto assets other than USDC
On December 13, 2023, the FASB issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain cryptocurrencies. The new guidance requires entities to subsequently measure certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period. We applied the ASU since our holding of crypto assets in December 2025.
Digital assets that are received as noncash consideration in our revenue arrangements and paid in purchases of professional services and others are presented as cash flows from operating activities in other operating activities settled in digital assets and USDC. Digital assets that are received in our revenue arrangements and sold for cash within seven days are presented as cash flows from operating activities, while other digital asset activity held longer than seven days is reflected as cash flows from investing activities under disposal of digital assets and USDC held in the consolidated statements of cash flows. We present crypto assets other than USDC separately from other intangible assets and USDC, recorded as digital assets on the consolidated balance sheets.
For the year ended June 30, 2026, we recorded receipt and disbursement of digital assets amounting to $991,601 and $991,601, respectively, which resulted in an ending balance of nil. Our balances related to digital assets and stablecoins during the period included USDT and USDC, both of which are USD-pegged stablecoins. No fair value gain or loss on digital assets was recognized for the year ended June 30, 2026, considering the low volatility in the fair value of digital assets during the year ended June 30, 2026.
Simple agreements for future equity
SAFEs issued by us are freestanding financial instruments. As they contain certain redemption or liquidation features that may require us to settle the obligation in cash upon the occurrence of defined events (e.g., a change of control or dissolution), the instruments create an obligation that meets the definition of a liability. Accordingly, the SAFEs are classified in their entirety as liabilities on the consolidated balance sheets.
These liabilities are measured at fair value upon initial recognition and are subsequently remeasured at fair value at each reporting date. All changes in their fair value are recognized in the consolidated statement of operations and comprehensive loss in the period in which they occur.
Income taxes
Current income taxes are provided on the basis of income before income taxes for financial reporting purposes, and adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are provided using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and are determined by applying enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or tax laws is recognized in the statements of comprehensive income in the period the change in tax rates or tax laws is enacted. A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred income tax assets will not be realized.
We apply a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. We recognize the benefit of a tax position in the financial statements if the tax position is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits may be affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition, changes in facts, circumstances and new information may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if required, are recorded in our financial statements in the period in which the change that necessities the adjustments occur. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in certain circumstances, a tax appeal or litigation process. We record interest and penalties related to unrecognized tax benefits (if any) in interest expenses and general and administrative expenses, respectively.
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RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report. We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on our financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to make disclosures under this Item.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information included in this Item 8. is that of Exascale Labs Inc.. prior to the Business Combination, as the Business Combination was consummated subsequent to the period covered by these audited consolidated financial statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and
Stockholders of Exascale Labs Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Exascale Labs Inc. (the “Company”) and its subsidiary as of June 30, 2025 and 2026, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit, and cash flows for each of the years in the two-year period ended June 30, 2026, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2026, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2026, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ |
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| We have served as the Company’s auditor since 2025. | |
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| September 28, 2026 |
F-2
EXASCALE LABS INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2025 AND 2026
(All amounts in US$, except for number of shares)
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| U.S. Dollar Coin | ||||||||
| Accounts receivable, net | ||||||||
| Advance to suppliers | ||||||||
| Refundable deposits receivable | ||||||||
| Other receivables | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Deferred offering costs | ||||||||
| Equipment, net | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Simple agreements for future equity | ||||||||
| Contract liabilities | ||||||||
| Refundable deposits payable | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 14) | ||||||||
| Shareholders’ Deficit | ||||||||
| Common stock (US$ par value per share; shares authorized; shares issued and outstanding as of June 30, 2025) | $ | $ | ||||||
| Class A common stock (US$ par value per share; shares authorized; shares issued and outstanding as of June 30, 2026) | ||||||||
| Class B common stock (US$ par value per share; shares authorized; shares issued and outstanding as of June 30, 2026) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Shareholders’ Deficit | $ | ( |
) | $ | ( |
) | ||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
EXASCALE LABS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS FOR THE YEARS ENDED JUNE 30, 2025 AND 2026
(All amounts in US$, except for number of shares, and per share data)
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( |
) | ( |
) | ||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling and marketing expenses | ( |
) | ( |
) | ||||
| General and administrative expenses | ( |
) | ( |
) | ||||
| Research and development expenses | ( |
) | ( |
) | ||||
| Total operating expenses | ( |
) | ( |
) | ||||
| Loss from operations | ( |
) | ( |
) | ||||
| Change in fair value of simple agreements for future equity | ( |
) | ( |
) | ||||
| Other income | ||||||||
| Loss before income tax expenses | ( |
) | ( |
) | ||||
| Income tax expenses | ||||||||
| Net loss and total comprehensive loss | $ | ( |
) | $ | ( |
) | ||
| Loss per share | ||||||||
| Basic and diluted | $ | ) | $ | ) | ||||
| Weighted average number of shares used to compute loss per share | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
EXASCALE LABS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ DEFICIT FOR THE YEARS ENDED JUNE 30, 2025 AND 2026
(All amounts in US$, except for number of shares)
| Common stock | Class A common stock |
Class B common stock |
Additional paid-in |
Accumulated |
Total shareholders’ |
|||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | capital | deficit | deficit | ||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
| Re-designation of authorized common stock | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
EXASCALE LABS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2025 AND 2026
(All amounts in US$)
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of equipment | ||||||||
| Share-based compensation | ||||||||
| Change in fair value of simple agreements for future equity | ||||||||
| Allowance for credit losses | ||||||||
| Other operating activities settled in digital assets and U.S. Dollar Coin | ( |
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ( |
) | ||||
| Advance to suppliers and prepaid expense | ( |
) | ||||||
| Refundable deposits receivable | ( |
) | ||||||
| Other receivables | ||||||||
| Accounts payable | ( |
) | ||||||
| Contract liabilities | ||||||||
| Refundable deposits payable | ( |
) | ||||||
| Other current liabilities | ( |
) | ||||||
| Net cash used in operating activities | $ | ( |
) | $ | ( |
) | ||
| Cash flows from investing activities: | ||||||||
| Purchase of equipment | ( |
) | ||||||
| Proceeds from sale of digital assets and U.S. Dollar Coin | ||||||||
| Net cash (used in) provided by investing activities | $ | ( |
) | $ | ||||
| Cash flows from financing activities: | ||||||||
| Payment for deferred offering costs | ( |
) | ||||||
| Proceeds from simple agreements for future equity | ||||||||
| Net cash provided by (used in) financing activities | $ | $ | ( |
) | ||||
| Net change in cash and cash equivalents | ( |
) | ||||||
| Cash and cash equivalents at the beginning of year | ||||||||
| Cash and cash equivalents at the end of year | $ | $ | ||||||
| Supplementary Information: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest expense paid | $ | $ | ||||||
| Supplemental schedule of non-cash financing activities: | ||||||||
| Investment proceeds received by an employee on behalf of the Company from SAFEs investors | $ | $ | ||||||
| Investment proceeds received through U.S. Dollar Coin from SAFEs investors | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
EXASCALE LABS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in US$, except for number of shares and per share data)
1. Organization and principal activities
On June 1, 2022, Exascale Labs Inc. (the “Company”) was formally incorporated in the State of Delaware. In accordance with the Company’s Certificate of Incorporation, the total authorized share capital of the Company consists of shares of common stock, with a par value of $ per share, all of which are of one class. The governance structure of the Company stipulates that the business and affairs of the Company shall be managed by or under the direction of its board of directors.
On December 16, 2025, the Company incorporated its wholly-owned subsidiary, Evana Alpha Pte. Ltd., in Singapore. The Company subscribed for all ordinary shares of the subsidiary, with a total issued share capital of Singapore Dollars . The subsidiary’s principal business activity is information technology consultancy (excluding cybersecurity).
The Company is a next-generation artificial intelligence (“AI”) infrastructure provider operating an asset-light, software-defined graphics processing unit (“GPU”) compute platform and related AI infrastructure solutions. The Company’s core business includes GPU as a Service (“GaaS”), through which it provides reserved and on-demand access to high-performance GPU compute capacity sourced from third-party data centers globally, as well as GPU cluster management and optimization services for artificial intelligence data center (“AIDC”) operators. In addition, the Company has developed certain modular data center, high-density liquid cooling, high-voltage direct current (“HVDC”) power, data center interconnectivity and energy storage solutions that are designed to address deployment bottlenecks in AI infrastructure and that the Company believes are ready for commercial engagement in future. The platform is purpose-built for large-scale AI workloads, including large language model (“LLM”) training, fine-tuning, and high-concurrency inference.
In January 2026, the Company adopted an Amended and Restated Certificate of Incorporation, which established a dual-class common stock structure. Under this new structure, the Company’s equity is divided into 303 shares of Class A common stock and 1,197 shares of Class B common stock, which are entitled to one (1) vote and twenty (20) votes per share, respectively. Despite the differential in voting power, Class A common stock and Class B common stock rank pari passu in all other respects, sharing ratably in dividends and any distributions upon liquidation. Furthermore, all outstanding Simple Agreements for Future Equity (“SAFEs”) are designated to convert or settle exclusively into Class A common stock.
On January 11, 2026, D. Boral ARC Acquisition I Corp., a British Virgin Islands business company (“BCAR”) entered into an Agreement and Plan of Merger (the “Business Combination Agreement”), with D. Boral ARC Merger Corporation, a Delaware corporation and a wholly owned subsidiary of BCAR (“PubCo”), D. Boral Arc Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of BCAR (“Merger Sub”), and the Company.
On August 27, 2026 (the “Closing Date”), PubCo consummated the transactions contemplated by the Business Combination Agreement
(the “Business Combination”). PubCo changed its name from “D. Boral ARC Merger Corporation” to “Exascale
Labs Holdings Inc”. Upon the closing of the Business Combination, Merger Sub merged with and into the Company, with the Company
surviving as a wholly owned subsidiary of PubCo.
The Business Combination was accounted for as a reverse recapitalization, with the Company identified as the accounting acquirer and BCAR identified as the accounting acquiree for financial reporting purposes (De-SPAC transaction).
As of the
F-7
2. Summary of significant accounting policies
a. Going concern
As of June 30, 2026, the Company had cash and U.S. Dollar Coin (“USDC”) of $4.9
On August 27, 2026, the Company consummated the Business Combination. Upon the closing of the Business Combination, all outstanding SAFEs of the Company were converted into PubCo Class A common stock in accordance with their terms, eliminating SAFE liabilities that totaled approximately $
Management has prepared a cash flow forecast covering the twelve-month period following the date that these consolidated financial statements are issued. The forecast considers the liquidity provided by the De-SPAC transaction, conversion of SAFE instruments on the closing of the Business Combination, as well as management’s operating plans and expectations, including the Company’s continued focus on expanding its market presence and developing client relationships to drive revenue growth and managing operating expenses, with the objective of improving cash flows from operations over time.
Based on this forecast, management believes that the Company will have sufficient liquidity to fund its ongoing operations and anticipated working capital requirements for a period of at least twelve months after the date that these consolidated financial statements are issued. Accordingly, management has concluded that the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.
These consolidated financial statements have been prepared on a going concern basis, and no adjustments are required to the carrying amounts or classification of assets and liabilities in the financial statements.
b. Basis of presentation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
F-8
2. Summary of significant accounting policies (Continued)
c. Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates used in preparing the consolidated financial statements are reasonable and prudent; however, actual results could differ from these estimates under different assumptions or conditions. Significant accounting estimates include recognition and measurement of SAFEs notes, recognition and measurement of the allowance for expected credit losses, deferred tax assets and valuation allowance.
d. Fair value measurements
In accordance with FASB ASC 820 Fair Value Measurements and Disclosures, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses a three-level hierarchy for fair value measurements of certain assets and liabilities for financial reporting purposes that distinguishes between market participant assumptions developed from market data obtained from outside sources (observable inputs) and the Company’s own assumptions about market participant assumptions developed from the best information available to us in the circumstances (unobservable inputs).
The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
The fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management during the years ended June 30, 2025 and 2026. The carrying amount of cash and cash equivalents, accounts receivable, refundable deposits receivable, other receivables, accounts payable, refundable deposits payable and other current liabilities approximated their fair values as of June 30, 2025 and 2026. For the years ended June 30, 2025 and 2026, the Company carried SAFEs and digital assets at their fair value (see Note 4-Fair Value Measurements for fair value information).
e. Functional currency
The accompanying consolidated financial statements are presented in the United States dollar (“US$”). The functional currency of the Company and its subsidiary is the US$.
All transactions are measured and recorded in the Company’s functional currency.
f. Cash and cash equivalents
The Company considers all highly liquid investments instruments purchased with a maturity period of three months or less to be cash or cash equivalents. The carrying amounts reported in the accompanying balance sheets for cash and cash equivalents approximate their fair value. As of June 30, 2025 and 2026, the Company does
F-9
2. Summary of significant accounting policies (Continued)
g. Crypto assets
The Company’s crypto assets classified in current assets are held primarily for use in the ordinary course of business which is expected to be actively utilized or converted within the normal operating cycle and such crypto assets can be sold in a highly liquid marketplace. During the year ended June 30, 2026, the Company only held crypto assets of Tether USD (“USDT”) and USDC, which are principally funded by SAFE investors and as a form of collection from revenue transactions. The Company’s crypto assets are held with a qualified third-party custodian who provide secure storage and safeguarding of the Company’s crypto assets.
USDC
USDC is a stablecoin redeemable on a one-to-one basis for U.S. dollars and is accounted for as a financial instrument in the consolidated balance sheets.
Crypto assets other than USDC
On December 13, 2023, the FASB issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain cryptocurrencies. The new guidance requires entities to subsequently measure certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period. The Company applied the ASU since its holding of crypto assets in December 2025.
Digital assets that are received as noncash consideration in the Company’s revenue arrangements and paid in purchases of professional service and others are presented as cash flows from operating activities in other operating activities settled in digital assets and USDC. Digital assets that are received in the Company’s revenue arrangements and sold for cash within seven days are presented as cash flows from operating activities, while other digital asset activity held longer than seven days is reflected as cash flows from investing activities under disposal of digital assets and USDC held in the consolidated statements of cash flows. The Company presents crypto assets other than USDC separately from other intangible assets and USDC, recorded as digital assets on the consolidated balance sheets.
For the year ended June 30, 2026, the Company recorded receipt and disbursement of digital assets amounted to $
h. Expected credit loss and accounts receivable
The Company adopted Financial Standards Accounting Board (“FASB”) Accounting Standards Codification (“ASC”) 326 “Financial Instruments — Credit Losses” (“ASC 326”) on July 1, 2023.
The Company’s accounts receivable are within the scope of ASC 326. ASC 326 introduces an approach based on expected credit losses on financial assets at amortized cost. Upon adoption of ASC 326, the Company estimates the expected credit losses for accounts receivable using the roll-rate method on a collective basis when similar risk characteristics exist. Expected credit losses are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
F-10
2. Summary of significant accounting policies (Continued)
h. Expected credit loss and accounts receivable (Continued)
Accounts receivable represents those receivables derived in the ordinary course of business, net of an allowance for any potentially uncollectible amounts. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon its assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions that may vary by geography, customer-type, or industry sub-vertical, and other factors that may affect its ability to collect from customers.
Although the Company has historically not experienced significant credit losses, they may experience increasing credit loss risks from accounts receivable in future periods if its customers are adversely affected by economic pressures or uncertainty associated with local or global economic recessions, or other customer-specific factors, and actual experience in the future may differ from their past experiences or current assessment.
i. Deferred offering costs
The Company follows the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A — “Expenses of Offering”. Deferred offering costs consist of underwriting, legal, and other professional expenses incurred through the balance sheet date that are directly related to the intended De-SPAC Transaction. These costs will be charged to shareholders’ equity, netted against the proceeds, upon the completion of the Business Combination. Should the transaction prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be charged to the statements of operations and comprehensive loss. As of June 30, 2025 and 2026, the Company deferred nil and $
j. Advance to suppliers
Advance to suppliers represent prepayments made to vendors in connection with the purchase of services. Advance is recorded at the amount paid and are classified as current assets when the related services are expected to be received within one year or the normal operating cycle.
k. Refundable deposits receivable
Refundable deposits receivable mainly represents security deposits and refundable cooperation deposits paid to suppliers and business partners that are contractually recoverable upon the completion of services. These amounts are recorded as assets when paid, generally at the amount paid. Deposits expected to be recovered within one year are classified as current; otherwise, they are classified as non-current. Allowance should be assessed under CECL, and write off when not recoverable. The Company evaluates the credit risk of refundable deposits receivable and recognizes an allowance for credit losses based on the current expected credit losses (“CECL”) model. Specific balances are written off when they are deemed uncollectible and all collection efforts have been exhausted. As of June 30, 2025 and 2026,
l. Other receivables
Other receivables represent funds temporarily held in trust by an employee acting as the Company’s behalf. As of June 30, 2025 and 2026, the balance were $
m. Equipment, net
Equipment, net is stated at cost less accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method over the estimated useful lives of three or five years, depending on the asset category.
F-11
2. Summary of significant accounting policies (Continued)
n. Refundable deposits payable
Refundable deposits payable represent security payments received from a third party and customers, which are required for certain intelligent computing power service arrangements. As of June 30, 2025 and 2026, the balances were $
o. Impairment of long-lived assets
The Company reviews its long-lived assets, equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the impaired assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. There was
p. Simple agreements for future equity
SAFEs issued by the Company are freestanding financial instruments. As they contain certain redemption or liquidation features that may require the Company to settle the obligation in cash upon the occurrence of defined events (e.g., a change of control or dissolution), the instruments create an obligation that meets the definition of a liability. Accordingly, the SAFEs are classified in their entirety as liabilities on the consolidated balance sheets.
These liabilities are measured at fair value upon initial recognition and are subsequently remeasured at fair value at each reporting date. All changes in their fair value are recognized in the consolidated statement of operations and comprehensive loss in the period in which they occur.
q. Revenue recognition
The Company applied ASC Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) for all periods presented.
The five-step model defined by ASC 606 requires the Company to (i) identify its contracts with clients, (ii) identify its performance obligations under those contracts, (iii) determine the transaction prices of those contracts, (iv) allocate the transaction prices to its performance obligations in those contracts, and (v) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the client in an amount that reflects the consideration expected in exchange for those goods or services.
The Company reports all of its revenues on a gross basis. This determination is based on the Company’s assessment that it is the principal in its revenue arrangements. The Company controls the service delivery platform and infrastructure before the service is provided to the customer. It is primarily responsible for fulfilling the service promise, has discretion in setting prices, and assumes the credit risk associated with the customer receivable.
As a practical expedient, the Company elected to expense the incremental costs of obtaining a contract when incurred if the amortization period of the asset that the Company otherwise would have recognized is one year or less.
Pursuant to ASC 606, the Company recognizes revenue based on the transaction price, which is the amount of consideration it expects to be entitled to exchange for transferring services to customers. For Intelligent Computing Power Services, contract consideration is generally fixed and is typically stated as a fixed monthly fee determined by (i) the contractually specified number of GPUs (capacity) and (ii) the service period. Accordingly, the transaction price is generally the fixed contractual amount. The Company recognizes revenue over time as the services are provided throughout the contract term. The Company offers payment terms ranging from 0 to 6 months, depending on customers’ credit profiles and service requirements.
F-12
2. Summary of significant accounting policies (Continued)
q. Revenue recognition (Continued)
The Company does not provide warranties for its services and does not offer service-type warranty arrangements.
The following is a description of the principal activities of the Company from which the Company generates its revenue under ASC 606.
(i) Revenue for intelligent computing power service
The Company leverages its expertise in high-performance computing and cloud-native architectures to build and operate stable, efficient, and scalable GPU computing platforms through modular data center design and liquid cooling technology. The Company uses these platforms to provide computing resources for large-scale AI training, model inference, and high-performance scientific computing to commercial enterprise clients with substantial GPU computing requirements. Supporting services include GPU server environment deployment, cluster scheduling and performance optimization, high-speed network interconnection, real-time monitoring and intelligent alerting systems, as well as industry-compliant security and regulatory assurance.
The Company accounts for the above promises as a single performance obligation because they are highly integrated and not separately identifiable in the context of the contract. The Company provides an integrated, managed GPU computing platform in which computing capacity, deployment/configuration, scheduling, networking, monitoring, and security/compliance are interdependent and together deliver a single combined service—continuous access to a functioning and secured platform over the contractual term.
The Company provides intelligent computing power services under two pricing models: (i) reserved capacity arrangements and (ii) on-demand (pay-as-you-go) arrangements. The following table presents revenue recognized during the period by arrangement type:
| Schedule of Revenue recognition | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Reserved capacity arrangements | $ | $ | ||||||
| On-demand arrangements | ||||||||
| Total | $ | $ | ||||||
Reserved capacity arrangements
The Company enters into reserved capacity arrangements, which generally provide committed intelligent computing power services for a defined service term ranging from 3 months to 3 years, with the majority of such arrangements having a one-year term. These contracts typically are non-cancelable, or may be canceled only under limited conditions with early notifications required. Payment terms generally range from 0-6 months upon the completion of services, and certain arrangements require prepayments. Any prepayments are recorded as contract liabilities and recognized over the service term.
The performance obligation is satisfied over time because the customer simultaneously receives and consumes the benefits. Revenue is recognized using a time-elapsed output method over the contractual service period.
F-13
2. Summary of significant accounting policies (Continued)
q. Revenue recognition (Continued)
On-demand (pay-as-you-go) arrangements
The Company provides customers with on-demand access to intelligent computing power and GPU resources under pay-as-you-go model which requires advance payment. Customer advances are recorded as contract liabilities and recognized as revenue over the time during the provision of related services underlying the contract term. The revenue is recognized over time because the customer can simultaneously receive and consume the benefits during the service period. These arrangements generally do not include a fixed contractual term or minimum usage commitments.
(ii) Revenue from comprehensive data center service
The Company leverages its project experience in infrastructure management, cluster optimization, and system monitoring to provide full-cycle operational support to data center asset owners. Services encompass facility environment deployment, network architecture implementation, security and compliance system development, daily operational monitoring, and emergency fault response. Revenue is recognized over time because the Company’s services are performed throughout the contract term and the customer benefits as the services are provided.
For the years ended June 30, 2025 and 2026, $
Revenue disaggregated by service lines for the years ended June 30, 2025 and 2026 was disclosed in the table below:
| Schedule of Revenue disaggregated | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Revenue from intelligent computing power service | $ | $ | ||||||
| Revenue from comprehensive data center service | ||||||||
| Total | $ | $ | ||||||
r. Contract liabilities
The Company receives advance payments from its customers for services to be provided in the future. These payments are recorded as contract liabilities on the balance sheet within “Contract liabilities”.
Contract liabilities are recognized when consideration is received from a customer prior to the Company satisfying its related performance obligations. For these service contracts, the Company recognizes revenue, and reduces the contract liabilities, over time as the services are rendered and the performance obligations are satisfied. Revenue recognized during the years ended June 30, 2025 and 2026 that was included in the contract liability balance at the beginning of the year was $
s. Cost of revenues
The Company’s cost of revenues primarily includes computing power service, professional service fees and staff costs and employee benefits. All the cost of revenues are recognized in the period in which the related services occur or the benefits are received.
F-14
2. Summary of significant accounting policies (Continued)
t. Selling and marketing expenses
The Company’s selling and marketing expenses primarily include: (i) advertising and promotion expenses, (ii) staff costs, employee benefits and share-based compensation, and (iii) travel and other routine office expenses. All expenses are recognized in the period in which the related services occur or the benefits are received. The Company expenses advertising costs as incurred, and for the years ended June 30, 2025 and 2026, the Company incurred advertising and promotion expenses of $
u. Research and development expenses
The Company’s research and development expenses mainly consist of software development outsourcing service fees, server cost, staff costs and employee benefits, and testing expenses.
v. General and administrative expenses
The Company’s general and administrative expenses mainly consist of staff costs and employee benefits, professional service fees, depreciation expenses and other operating expenses.
w. Other income
The Company safeguards its USDC through a third-party custodian. The Company’s other income represents the yield of USDC the Company earned through participation in a third-party custodian service.
x. Income tax
Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their consolidated financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.
y. Capital structure
The Company is authorized to issue shares of common stock of $ par value each. As of June 30, 2025, there were shares issued and outstanding.
Pursuant to the resolution of the board of directors on January 8, 2026, the authorized share capital of shares of common stock was re-designated to shares of Class A common stock and shares of Class B common stock. Holders of Class A common stock and Class B common stock have the same rights, except for voting and conversion rights. Each share of Class A common stock is entitled to one vote; and each share of Class B common stock is entitled to twenty votes and is convertible into one share of Class A common stock at any time by the holder thereof and upon transfer by the holder thereof other than certain permitted transfers. Class A common stock are not convertible into Class B common stock under any circumstances. Furthermore, all outstanding warrants, options, SAFEs and other convertible securities are designated to convert or settle exclusively into Class A common stock.
As of June 30, 2026, there were shares of Class A common stock and shares of Class B common stock outstanding.
F-15
2. Summary of significant accounting policies (Continued)
z. Share-based compensation
The Company grants share options of the Company to eligible employees and non-employees. The Company accounts for share-based awards issued to employees and non-employees in accordance with ASC Topic 718 Compensation – Stock Compensation. The Company recognizes forfeitures as they occur. The share-based compensation expenses have been categorized as either general and administrative expenses or selling and marketing expenses, depending on the job functions of the grantees.
The Company’s share-based compensation awards are expected to be settled through transfers of existing shares of common stock held by the controlling shareholder, rather than through the issuance of new shares by the Company. The underlying shares of common stock are included in issued and outstanding shares as of the balance sheet date; accordingly, such settlement is not expected to increase the Company’s total issued and outstanding shares.
Employees’ share-based awards and non-employees’ share-based awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at grant date if no vesting conditions are required; or b) using graded vesting method, net of estimated forfeitures, over the requisite service period, which is the vesting period.
The Company employs discounted cash flow method to determine the fair value of the Company’s share-based compensation arrangements, where the key valuation variables include risk free rate, discount rate, and perpetual rate.
aa. Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in consolidated financial statements for details on the Company’s business segments.
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s CODM is the chief executive officer. The CODM regularly reviews consolidated operating results and reviews consolidated revenues and net loss when making decisions about allocating resources and assessing performance of the segment, and hence, the Company has only one reportable segment. Therefore, as the Company has determined it operates as a single reportable segment, the CODM assesses the Company’s performance and results of operations on a consolidated basis.
bb. Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
cc. Comprehensive loss
Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss for all periods presented.
F-16
2. Summary of significant accounting policies (Continued)
Basic net loss per share of common stock attributable to common shareholders is calculated by dividing net loss attributable to common shareholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding share-based awards or options using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income per share of common stock attributable to common shareholders when their effect is dilutive.
Diluted net loss per share attributable to common shareholders is computed by adjusting the weighted-average number of shares of common stock outstanding for the dilutive effect of all potential common stock equivalents. These potential shares are included in the diluted earnings per share calculation only when their effect is dilutive.
In periods where the Company reports a net loss, diluted net loss per share is calculated in the same manner as basic net loss per share because the inclusion of any potential common stock would have an anti-dilutive effect. The Company had no potential common stock equivalents outstanding during the periods presented. Consequently, no potential common stock equivalents were included in the calculation for the years in which a net loss was incurred.
ee. Dividends
Dividends are recognized when declared.
ff. Emerging growth company
The Company intends to operate as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits companies with emerging growth company status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until such time as those standards would apply to private companies. The Company elected to use this extended transition period to enable it to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
gg. Recently accounting pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires entities to make incremental income tax disclosures on an annual basis. The amendments require that public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold. The amendments also require disclosure of income taxes paid to be disaggregated by jurisdiction, and the disclosure of income tax expense disaggregated by federal, state, and foreign. Amendments are effective for annual periods beginning after December 15, 2025 and thereafter, with early adoption permitted. The Company is currently evaluating the impact of the new accounting pronouncements or guidance on the consolidated financial statements. The Company will adopt this ASU for the fiscal year beginning July 1, 2026.
F-17
2. Summary of significant accounting policies (Continued)
gg. Recently accounting pronouncements (Continued)
In July 2025, the FASB issued Accounting Standards Update (ASU) No. 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendment provides (1) all entities with a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets and (2) entities other than public business entities with an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. This guidance is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of the new accounting pronouncements or guidance on the consolidated financial statements. The Company will adopt this ASU for the fiscal year beginning July 1, 2026.
In November 2024, the FASB issued ASU 2024-03 “Income Statement—Reporting comprehensive (loss) income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). The amendments in this update intend to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general and administrative expenses, and research and development). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is currently evaluating the impact from the adoption of this ASU on its consolidated financial statements. The Company will adopt this ASU for its annual report for the fiscal year beginning July 1, 2027 and for interim reports for periods beginning July 1, 2028.
In January 2025, the FASB issued Accounting Standards Update (ASU) No. 2025-01, Income Statement — Reporting comprehensive (loss) income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The amendment clarifies the effective date of ASU No. 2024-03 that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of Update 2024-03 is permitted. The Company is currently evaluating the impact of the above new accounting pronouncements or guidance on the consolidated financial statements. The Company will adopt this ASU for its annual report for the fiscal year beginning July 1, 2027 and for interim reports for periods beginning July 1, 2028.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Accounting for and Disclosure of Software Costs (“ASU 2025-06”), which amends certain aspects of the accounting for and disclosure of internal-use software costs. ASU 2025-06 is effective for annual reporting periods beginning with the year ending December 31, 2028, with early adoption permitted. The Company is currently evaluating the impact of the above new accounting pronouncements or guidance on the consolidated financial statements. The Company will adopt this ASU for the fiscal year beginning July 1, 2028.
Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the balance sheets, statements of income and comprehensive loss and cash flows.
3. Concentration and risk
Custodian Risk
The Company’s crypto assets are held exclusively with a single third-party custodian. Custodian risk refers to the potential loss, theft, or misappropriation of the Company’s assets held with its sole third-party custodian, due to the custodian’s operational failures, cybersecurity breaches, or financial difficulties experienced by the third-party custodian. The Company periodically monitor the financial health, insurance coverage, and security measures of the Company’s custodians, reliance on such third parties inherently exposes the Company to risks that the Company cannot fully mitigate.
F-18
3. Concentration and risk (Continued)
Concentration of credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and refundable deposits receivable. The Company performs ongoing credit evaluations of the customers’ financial condition and maintains an allowance for potential credit losses. This allowance consists of an amount identified for specific customers and an amount based on overall estimated exposure. The Company’s overall estimated exposure excludes amounts covered by credit insurance.
Concentration of customers
The Company’s revenue was concentrated among a limited number of customers during the periods presented. The following table summarized customers with greater than 10% of the total revenue:
| Schedule of concentration of customers | ||||||||
| For the | ||||||||
| Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Customer A | % | ** | ||||||
| Customer B | % | ** | ||||||
| Customer C | % | % | ||||||
| Customer D | ** | % | ||||||
| **: | less than 10% |
The Company’s account receivable was concentrated among a limited number of customers during the periods presented. The following table summarized customers with greater than 10% of the total account receivable:
| Schedule of account receivable | ||||||||
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Customer D | ** | % | ||||||
| Customer E | % | ** | ||||||
| Customer F | % | ** | ||||||
| Customer G | % | ** | ||||||
| Customer H | * | % | ||||||
| Customer I | ** | % | ||||||
| *: | nil, new customer for the year ended June 30, 2026 |
| **: | less than 10% |
F-19
3. Concentration and risk (Continued)
Concentration of suppliers
The Company’s purchases was concentrated among a limited number of suppliers during the periods presented. The following table summarized suppliers with greater than 10% of the total purchase:
| Schedule of concentration of suppliers | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Supplier A | % | ** | ||||||
| Supplier B | % | % | ||||||
| Supplier C | % | % | ||||||
| Supplier D | * | % | ||||||
| Supplier E | * | % | ||||||
| *: | nil, new supplier for the year ended June 30, 2026 |
| **: | less than 10% |
The Company’s account payable was concentrated among a limited number of suppliers during the periods presented. The following table summarized suppliers with greater than 10% of the total account payable:
| Schedule of account payable | ||||||||
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Supplier F | % | ** | ||||||
| Supplier G | % | ** | ||||||
| Supplier C | % | % | ||||||
| Supplier B | ** | % | ||||||
| Supplier E | ** | % | ||||||
| **: | less than 10% |
F-20
4. Fair value measurements
As of June 30, 2025 and 2026, information about inputs into the fair value measurement of the Company’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:
| Fair value measurement at reporting date using | ||||||||||||||||
| Description | Fair value as of June 30, 2025 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
| Liabilities: | ||||||||||||||||
| Simple agreements for future equity(1) | $ | $ | $ | $ | ||||||||||||
| Other payable related to the equity option(2) | ||||||||||||||||
| Fair value measurement at reporting date using | ||||||||||||||||
| Description | Fair value as of June 30, 2026 |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
| Liabilities: | ||||||||||||||||
| Simple agreements for future equity(1) | $ | $ | $ | $ | ||||||||||||
| Other payable related to the equity option(2) | ||||||||||||||||
| (1) |
The Company classifies its SAFEs as financial liabilities measured at fair value. The value of these agreements depends significantly on future financing activities, liquidity events, or other material milestones, and their valuation relies on significant inputs that are not observable in the public market. Accordingly, they are classified within Level 3 of the fair value hierarchy.
The fair value measurement is based on an integrated framework combining scenario analysis and financial instrument decomposition (i.e. Bond Plus Call Method). As of June 30, 2026, the proceeds of the SAFEs on the date of issuance were $14,092,500. The details of significant unobservable inputs can refer to Note 8-Simple Agreements for Future Equity for further details. |
| (2) |
|
F-21
5. Crypto assets
The Company uses crypto assets like USDT and USDC as medium of exchange for collecting and settling business-related payments and for receiving investment proceeds. As of June 30, 2025 and 2026, the Company held nil and $
The Company commenced the use of crypto assets in December 2025. The movements in digital assets and USDC for the year ended June 30, 2026 are set out below:
| Schedule of digital assets | ||||||||
| USDT | USDC | |||||||
| Balance as of June 30, 2025 | $ | $ | ||||||
| Additions(i) | ||||||||
| Disposals - sold for US dollars | ( |
) | ( |
) | ||||
| Disposals(ii) | ( |
) | ( |
) | ||||
| Balance as of June 30, 2026 | $ | $ | ||||||
| (i) |
| |
| (ii) |
|
The Company’s balances related to digital assets are USD-pegged stablecoins. No fair value gain or loss on digital assets was recognized for the year ended June 30, 2026 considering the low volatility in the fair value of USDT during the year ended June 30, 2026.
The following table summarizes other operating activities settled in digital assets and USDC:
| Schedule of operating activities | ||||
|
For the June 30, 2026 |
||||
| Revenue | $ | ( |
) | |
| Other receivables | ( |
) | ||
| Cost and expenses | ||||
| USDC rewards | ( |
) | ||
| Total operating activities settled in digital assets and USDC | $ | ( |
) | |
F-22
6. Accounts receivable
Accounts receivable consisted of the following:
| Schedule of accounts receivable | ||||||||
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( |
) | ||||||
| Accounts receivable, net | $ | $ | ||||||
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for credit losses for expected losses over the life of the accounts receivable using the current expected credit loss methodology. The Company determines the allowance based on historical loss experience, current conditions, and reasonable and supportable forecasts.
For the years ended June 30, 2025 and 2026, the movement of allowance for expected credit losses were as below:
|
For the June 30, |
||||||||
| 2025 | 2026 | |||||||
| Balance at beginning of the year | $ | $ | ||||||
| Addition | ||||||||
| Balance at end of the year | $ | $ | ||||||
7. Equipment, net
Equipment, net consisted of the following:
| Schedule of equipment | ||||||||
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Equipment | $ | $ | ||||||
| Total | ||||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||||
| Net carrying amount | $ | $ | ||||||
Depreciation expenses for the years ended June 30, 2025 and 2026 were $
F-23
8. Simple agreements for future equity
The Company has entered into SAFEs with various investors that were classified as liabilities on the Company’s balance sheets and accounted for at fair value, subject to remeasurement each reporting period. SAFEs have no maturity date, does not bear any interest and provides the investor with the right to convert into a variable number of shares of future equity in the Company at the stated conversion amount, if certain events or conditions are triggered.
During the period from October 2022 through June 30, 2026, the Company entered into Simple Agreements for Future Equity with third-party investors, receiving aggregate gross proceeds of $
On August 27, 2026, the Company consummated the Business Combination contemplated by the Agreement and Plan of Merger dated January 11, 2026. Upon the De-SPAC closing, all outstanding SAFEs of the Company were cancelled and converted into the right to receive shares of PubCo Class A common stock based on the applicable SAFE holders’ implied ownership percentages. The shares of PubCo Class A common stock received in connection with the SAFE conversion constituted full satisfaction of their rights under the applicable SAFEs and were subject to a six-month lock-up period following the Closing Date. No additional cash consideration was payable upon such conversion.
The SAFEs agreements grant investors the right to participate in the Company’s future equity financing events. The agreements contain various conversion and redemption provisions, including conversion upon an equity financing event, as well as settlement in the event of a liquidity event or dissolution of the Company. Key terms of the SAFEs are as follows:
Equity Financing – Upon the occurrence of an equity financing event, the SAFE instruments convert into shares of the Company’s Standard Preferred shares as follows:
| (i) | Price-based SAFEs: each SAFEs automatically converts into a greater of (a) the number of shares of preferred shares equal to SAFEs purchase amount divided by the lowest price per share paid for the standard preferred shares or (b) the number of shares of preferred shares equal to the SAFEs purchase amount divided by the SAFEs price. |
| ● | “SAFEs price” is calculated by dividing a fixed post-money valuation cap by the Company capitalization, a defined term that includes all outstanding equity and convertible instruments. | |
| ● | “Equity Financing” means a bona fide transaction or series of transactions with the principal purpose of raising capital, pursuant to which the Company issues and sells preferred share at a fixed valuation, including but not limited to, a pre-money or post-money valuation. |
| (ii) | Fixed-percentage SAFEs: on the initial closing of such Equity Financing, the SAFE automatically converts into that number of shares of the Standard Preferred Share representing a fixed percentage of total issued and outstanding shares of the Company immediately after the Closing. |
Not all SAFEs agreements contain the equity financing conversion provision described above. Certain SAFEs are structured without an Equity Financing conversion feature and are generally settled only upon a Liquidity Event or a Dissolution Event (as defined in the respective SAFEs agreements). The Company considered the contractual terms of the SAFEs, including whether an Equity Financing conversion feature is present and the settlement provisions upon a Liquidity Event or a Dissolution Event, in the valuation and measurement of these instruments. As of June 30, 2026,
The Company does not have any preferred shares outstanding as of the date these consolidated financial statements are issued; therefore, an equity financing event has not been triggered.
F-24
8. Simple agreements for future equity (Continued)
Liquidity Event – If there is a liquidity event before the conversion of each SAFE, the holder of each SAFEs will automatically be entitled to the greater of (i) SAFEs purchase amount, or (ii) the amount payable on the number of shares of common stock equal to the purchase amount divided by the Liquidity Price.
| ● | “Liquidity Price” is calculated by dividing the post-money valuation cap by the separately defined capital base, referred to as “liquidity capitalization” in the SAFEs agreements. | |
| ● | “Liquidity Event” means a change of control, a direct Listing or an initial public offering. |
Dissolution Event – If there is a dissolution event before the conversion of each SAFE, the holder of each SAFEs will automatically be entitled to receive a portion of proceeds equal to SAFEs purchase amount.
The Company classifies its SAFEs as financial liabilities measured at fair value. Since the value of these instruments depends on significant unobservable inputs, including future financing activities and liquidity events, they are classified as Level 3 within the fair value hierarchy.
The fair value measurement utilizes a combined scenario analysis and financial instrument decomposition approach. Based on management’s assessment of the Company’s prospects, probability distributions are assigned to potential settlement-triggering events. Valuation is performed using a “debt plus option” model: the debt component is valued using a discounted cash flow method with key assumptions including expected settlement timing, risk-free interest rate, and credit spread; the embedded conversion right is treated as a call option and valued using the Black-Scholes model, with key inputs including the fair value of common stock, expected term, and volatility. The overall fair value represents the probability-weighted sum across all scenarios, supported by an independent third-party valuation specialist.
As of June 30, 2025 and 2026, the SAFE liabilities were measured at fair value using the above Level 3 methodology. Significant unobservable inputs—including timing of events, volatility, and credit spreads—are based on management’s reasonable estimates as of each valuation date.
Major valuation inputs adopted in the valuation of the SAFE Instruments are as follows:
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Volatility(1) | % | % | ||||||
| Risk-free rate(2) | % | % | ||||||
| Credit spread(3) | % | % | ||||||
| Discount rate(4) | % | % | ||||||
| Dividend yield(5) | % | % | ||||||
| (1) |
| |
| (2) |
| |
| (3) |
| |
| (4) |
| |
| (5) |
|
F-25
8. Simple agreements for future equity (Continued)
The following tables set forth a summary of the activity of the SAFE liabilities, respectively, which represents a recurring fair value measurement at the end of each reporting period:
| Schedule of fair value measurement | ||||
| Amount | ||||
| Balance at June 30, 2024 | $ | |||
| Issuance of simple agreements for future equity | ||||
| Change in fair value | ||||
| Balance at June 30, 2025 | $ | |||
| Issuance of simple agreements for future equity | ||||
| Change in fair value | ||||
| Balance at June 30, 2026 | $ | |||
9. Income taxes
Exascale Labs Inc. is incorporated in the State of Delaware and is subject to U.S. federal income tax and Delaware corporate income tax, as well as income taxes in other jurisdictions where it conducts business. The statutory corporate income tax rate is
In addition, the Company files income or franchise tax returns in various other U.S. states and is subject to the applicable statutory tax rates in each jurisdiction based on income apportioned to those states.
Evana Alpha Pte. Ltd. is incorporated in Singapore and is subject to the statutory corporate income tax rate of
The current and deferred components of income tax expense reflected in the statements of operations and comprehensive loss were nil for the year ended June 30, 2025 and 2026.
The following table reconciles the statutory rate to the Company’s effective tax rate. The effective tax rate reconciliation is based on the U.S. federal statutory rate of 21%.
| Schedule of effective tax rate reconciliation | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| US Statutory income tax rate | % | % | ||||||
| State income tax | % | % | ||||||
| Tax differences from other jurisdictions | ( |
)% | ||||||
| R&D expense super deduction | ( |
)% | ||||||
| Change in fair value of simple agreements for future equity | ( |
)% | ( |
)% | ||||
| Change in valuation allowance | ( |
)% | ( |
)% | ||||
| Effective income tax rate | ||||||||
The Company’s effective income tax rate was
F-26
9. Income taxes (Continued)
The principal components of deferred tax assets and deferred tax liabilities were as follows:
| Schedule of deferred tax assets liabilities | ||||||||
| As of June 30, |
||||||||
| 2025 | 2026 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carry forward | $ | $ | ||||||
| R&D expense super deduction | ||||||||
| Bad provision | ||||||||
| Total deferred tax assets | ||||||||
| Less: valuation allowance | ( |
) | ( |
) | ||||
| Total deferred tax assets, net | $ | $ | ||||||
The changes in valuation allowance for the years ended June 30, 2025 and 2026 were as follows:
| Schedule of valuation allowance | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Balance at the beginning of the year | $ | ( |
) | $ | ( |
) | ||
| Additions | ( |
) | ( |
) | ||||
| Balance at the end of the year | $ | ( |
) | $ | ( |
) | ||
As of June 30, 2025 and 2026, Exascale Labs Inc. had net operating loss carryforwards (“NOLs”) of $
Evana Alpha Pte. Ltd. had NOLs of $
The Company recognizes deferred tax assets if it is more likely than not that those deferred tax assets will be realized. Management reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income in assessing the need for a valuation allowance to reduce deferred tax assets to their estimated realizable value. Realization of the Company’s deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
The Company had
F-27
For the years ended June 30, 2025 and 2026, total share-based compensation expenses recognized were $ and nil, respectively.
| (1) | Employee |
On January 6, 2025, with the approval from the Board of the Company, an employee was granted equity award from inception of the employment agreement, which represented 0.1% of the Company’s total shares outstanding at issuance date (the “0.1% Award”, i.e., 1.5 shares). The equity award had a vesting period of 24 months after grant, but with no requisite service period. Alongside the employee’s separation in September 2025, the equity award remained its vesting pace under the 24-month vesting schedule. As of June 30, 2026,
| (2) | Non-employee |
On December 2, 2024, with the approval from the Board of the Company, a contractor was granted equity award from inception of the contractor agreement representing 0.053333% of the Company’s total shares outstanding at issuance date (“0.05% Award”, i.e., 0.8 shares). The equity award had a vesting period of 24 months after grant, with half vested as of April 1, 2025 and remaining as of November 1, 2026, but with no requisite service period. As of June 30, 2026, the first half of the equity award had been vested, the remaining half had been outstanding.
The Company’s share-based compensation awards are expected to be settled through transfers of existing shares of common stock held by the controlling shareholder, rather than through the issuance of new shares by the Company. The underlying shares of common stock are included in the issued and outstanding shares as of the balance sheet date; accordingly, such settlement is not expected to increase the Company’s total issued and outstanding shares. The vested shares are not recorded in the individual names of the holders on the Company’s shares ledger, but held by the controlling shareholder on their behalf, mainly due to the plan to a direct register of shares under the listed company during De-SPAC transaction. The Company, as well as the controlling shareholder deemed the grant as the time when the employee and non-employees are entitled to economic benefits and risks of the subsequent changes in fair value of the granted shares accordingly to the agreed vesting period.
11. Related party transactions
Hoansoo Lee serves as the Company’s Chief Executive Officer and Chief Financial Officer. The Company has entered into a consulting services agreement with Hoansoo Lee, pursuant to which Hoansoo Lee provides strategic consulting and advisory services to the Company.
For the years ended June 30, 2025 and 2026, the Company incurred consulting service fees of $
F-28
Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260, “Earnings Per Share” on computation of earnings per share for the years ended June 30, 2025 and 2026 as follows:
| Schedule of basic share and diluted | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Net loss attributable to common shareholders | $ | ( |
) | ( |
) | |||
| Denominator: | ||||||||
| Weighted-average shares of common stock outstanding(i) | ||||||||
| Basic and diluted loss per share | $ | ) | ) | |||||
| (i) |
|
| (ii) | For the fiscal years ended June 30, 2026 and 2025, diluted net loss per share was calculated in the same manner as basic net loss per share because there were no potential common stock equivalents outstanding during the periods presented. |
13. Segment information
The Company manages its business in a centralized manner and operates as a single segment and accordingly has only one operating and reportable segment, the provision of GPU computing platform services. The Company’s Chief Executive Officer serves as the CODM. The CODM regularly reviews entity-wide operating results and reviews consolidated revenues and net loss as reported in the statement of operations and comprehensive loss when making decisions about allocating resources and assessing performance of the segment, and hence, the Company has only one reportable segment.
The primary measures of segment revenue and profitability for the Company’s operating segment are considered to be consolidated revenue and net loss. The CODM uses consolidated revenue to assess market performance and growth, and net loss to evaluate segment profitability and cost management. Both measures are used together to allocate resources, including employee or capital resources. Significant expense categories regularly provided to and reviewed by the CODM include those presented in the statements of operations and comprehensive loss as well as disaggregated expenses of staff costs and employee benefits, professional service expenses, share-based compensation, and other general and administrative expenses.
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13. Segment information (Continued)
The following table presents the segment information of the Company for the measurement of segment profitability for the years ended June 30, 2025 and 2026:
| Schedule of segment information | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( |
) | ( |
) | ||||
| Gross profit | $ | $ | ||||||
| Research and development expenses | ||||||||
| – Outsourcing research and development expenses | ( |
) | ( |
) | ||||
| – Computing power costs and others | ( |
) | ( |
) | ||||
| Selling and marketing expenses | ||||||||
| – Staff costs, employee benefits and office expenses | ( |
) | ( |
) | ||||
| – Share-based compensation | ( |
) | ||||||
| General and administrative expenses | ||||||||
| – Staff costs, employee benefits and Others | ( |
) | ( |
) | ||||
| – Professional service expenses | ( |
) | ( |
) | ||||
| Loss from operations | $ | ( |
) | $ | ( |
) | ||
| Change in fair value of simple agreements for future equity | ( |
) | ( |
) | ||||
| Other income | ||||||||
| Income tax expenses | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
Substantially all of the Company’s long-lived assets are located in the United States. The following table presents the Company’s revenue from major geographical areas for the periods indicated.
| Schedule of geographic information | ||||||||
| For the Years Ended June 30, |
||||||||
| 2025 | 2026 | |||||||
| Hong Kong | $ | $ | ||||||
| United States of America | ||||||||
| Canada | ||||||||
| Singapore | ||||||||
| United Kingdom | ||||||||
| Others | ||||||||
| Total | $ | $ | ||||||
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14. Commitments and contingencies
From inception to date, the Company has not been a party to any legal proceedings, claims, or disputes arising in the ordinary course of business. As of June 30, 2026, the Company had no outstanding litigation, and there were no commitments or contingencies that management believes would have a material effect on the consolidated financial statements.
15. Subsequent events
The Company evaluated all events and transactions that occurred after June 30, 2026, up through September 28, 2026, which is the date that these consolidated financial statements are issued, unless as disclosed elsewhere and below, no other material subsequent events occurred that would require recognition or disclosure in the Company’s consolidated financial statements.
SAFEs
From July 1, 2026 to September 28, 2026, an investor provided $
Convertible Loan
On July 16, 2026, the Company, as lender, entered into a convertible loan agreement with a third party in the principal amount of approximately $
Business combination and Conversion of SAFEs instruments
On August 27, 2026, Exascale Labs Holdings Inc. consummated the transactions contemplated by the Agreement and Plan of Merger dated January 11, 2026, by and among BCAR, PubCo, Merger Sub and the Company (the “Business Combination”).
Prior to the Acquisition Merger, BCAR completed its domestication from the British Virgin Islands to Delaware by merging with and into PubCo, with PubCo surviving as a Delaware corporation. In connection with the Domestication Merger, PubCo changed its name from “D. Boral ARC Merger Corporation” to “Exascale Labs Holdings Inc.” Following the Domestication Merger, Merger Sub merged with and into the Company, with the Company surviving as a wholly owned subsidiary of PubCo.
In connection with the Acquisition Merger, the outstanding equity interests of the Company were cancelled and converted into shares of PubCo common stock. The outstanding SAFEs of the Company were cancelled and converted into the right to receive shares of PubCo Class A common stock based on the applicable SAFE holders’ implied ownership percentages. The shares of PubCo Class A common stock received in connection with the SAFE conversion constituted full satisfaction of their rights under the applicable SAFEs and were subject to a six-month lock-up period following the Closing Date.
Upon the closing of the Business Combination, the
The Business Combination was accounted for as a reverse recapitalization, with the Company identified as the accounting acquirer and BCAR identified as the accounting acquiree for financial reporting purposes.
The Class A common stock and warrants of PubCo commenced trading on Nasdaq on August 28, 2026 under the symbols “XLAB” and “XLABW,” respectively.
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15. Subsequent events (Continued)
Non-Binding Memorandum of Understanding for Potential Data Center Collaboration
On July 21, 2026, the Company entered into a non-binding memorandum of understanding with a third party to explore the joint development and commercialization of multiple data centers in Japan with an aggregate targeted capacity of at least 20 MW, including the potential deployment of the Company’s GaaS and cluster management solutions on the third party’s infrastructure. The memorandum of understanding is not legally binding, other than with respect to customary confidentiality and termination provisions, and does not obligate either party to enter into a definitive agreement, and there can be no assurance that any transaction or definitive agreement will be consummated.
Compute Service Agreement for GPU Capacity
On July 15, 2026, the
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and our current Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2026, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, during the period covered by this Annual Report, our disclosure controls and procedures were not effective due to the identified material weaknesses described below.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on 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.
Management’s Annual Report on Internal Control over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
| (i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company, |
| (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and |
| (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
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Management assessed the effectiveness of our internal control over financial reporting at June 30, 2026. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on our assessments and those criteria, management determined that we did not maintain effective internal control over financial reporting as of June 30, 2026 due to the material weaknesses in the design or operation of internal controls which could adversely affect our ability to record, process, summarize, and report financial data, including:
| (i) | a lack of sufficient accounting personnel with appropriate knowledge and experience in U.S. GAAP and SEC financial reporting requirements to support financial information processing and reporting; and |
| (ii) | a lack of financial reporting policies and procedures that are commensurate with U.S. GAAP and SEC reporting requirements. |
Our management has concluded that these material weaknesses represent deficiencies in our overall internal control environment and could adversely affect our ability to accurately and timely report our financial condition and results of operations.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any policies and procedures may deteriorate. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. To the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. With proper funding we plan on remediating the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.
A material weakness is a control deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5) or combination of control deficiencies, that results in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
This Annual Report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors
The following table sets forth certain information regarding our executive officers and directors as of the date of this Annual Report.
| Name | Age | Position(s) | ||
| Hoansoo Lee | 42 | Chief Executive Officer and Class III Director | ||
| Jake Carney(1) | 38 | Chief Financial Officer | ||
| Wenying Jia | 57 | Chairperson of the Board and Class II Director | ||
| David Card | 70 | Class II Director and Lead Independent Director | ||
| Shachar Kariv | 55 | Class I Director | ||
| Jaeyoung Shin | 48 | Class I Director |
| (1) | Gildas Bonnier served as our Interim Chief Financial Officer and principal financial officer from September 4, 2026 until September 25, 2026, when Jake Carney was appointed as our Chief Financial Officer and principal financial officer. |
Hoansoo Lee has served as our Chief Executive Officer and a member of our Board since the Closing on August 27, 2026, and served as our Interim Chief Financial Officer from the Closing until September 4, 2026. Dr. Lee co-founded Legacy Exascale and served as its Chief Executive Officer and a member of its board of directors from June 2022 until the Closing, and its Chief Financial Officer from October 2025 until the Closing. Previously, from June 2020 to December 2025, Dr. Lee was the founder and Chief Executive Officer of HSL Capital Management LLC, a multi-strategy hedge fund. From June 2002 to May 2020, he served in roles of increasing responsibility, including as a Staff Economist for the Council of Economic Advisers, Executive Office of the President, in the Obama Administration; Assistant Professor of Finance in the School of Economics and Management at Tsinghua University; Portfolio Manager and Head of Quantitative Equities for China Merchants Bank International Asset Management; and Managing Director for TusPark Ventures, a subsidiary of Tsinghua Holdings, the endowment fund of Tsinghua University, where he led cross-border early-stage technology investments and university spin-outs. Dr. Lee earned a B.A. in Mathematics (Valedictorian and Highest Honors) and Economics (Highest Honors) from the University of California at Berkeley, and an A.M. and Ph.D. in Business Economics from Harvard University. We believe Dr. Lee is qualified to serve on our Board because, as the co-founder and Chief Executive Officer of Legacy Exascale, he brings deep operational leadership and expertise that are directly relevant to our future strategic growth and long-term value creation.
Jake Carney has served as our Chief Financial Officer since September 25, 2026. Mr. Carney is an investment professional with 15 years of experience across banking, investment advisory and fintech environments. Mr. Carney has served as Chief Financial Officer of ARC Group Securities Acquisition I, a Nasdaq-listed special purpose acquisition company, and previously served as Chief Financial Officer of Deal Flow Capital, a capital advisory firm, from February 2026 to August 2026. From June 2025 to July 2026, Mr. Carney worked in in-house fundraising and consulting roles for several companies. From September 2022 to April 2025, Mr. Carney served as Managing Director at ARC Group Limited, where he established and led the company’s United Arab Emirates office. From December 2017 to August 2022, Mr. Carney served as Investment Director at Beehive Fintech, based in Dubai, United Arab Emirates, where he led the origination and execution of investment opportunities focused on small and medium-sized enterprises, alternative credit and private investments across the Gulf Cooperation Council (GCC) region. Mr. Carney earned a Bachelor of Science degree in Accounting and Finance from Dublin Institute of Technology in 2009 and was awarded the Professional Diploma in Financial Advice by the Institute of Banking in 2013.
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Wenying Jia has served as the Chairperson, and a member, of our Board since the Closing on August 27, 2026, and previously served as a member of the board of directors of Legacy Exascale from its inception until the Closing. Ms. Jia is an angel investor with experience in digital assets, cloud computing, and emerging technology infrastructure, and has been involved in the digital asset sector since 2014. In 2017, Ms. Jia expanded her activities to include GPU-based mining operations as Ethereum’s proof-of-work network gained adoption, recognizing the potential of smart contract functionality alongside bitcoin’s role as a store of value. From 2017 through 2022, Ms. Jia invested in and supported multiple GPU- and data-storage-related infrastructure projects. During this period, she developed relationships with several individuals who later became core members of Legacy Exascale. Ms. Jia played a significant role in facilitating the formal establishment of Legacy Exascale in 2022 and was among its earliest investors. We believe Ms. Jia is qualified to serve on our Board because she brings early-stage investor experience and deep, long-standing expertise in GPU-based infrastructure, along with institutional knowledge as a founding-era director who helped establish Legacy Exascale and its core team.
David Card has served as a member of our Board since the Closing on August 27, 2026. Dr. Card is also our Lead Independent Director. Dr. Card is a renowned labor economist and Nobel Laureate (2021). Dr. Card is the Class of 1950 Emeritus Professor of Economics at the University of California, Berkeley, and has been a member of the University of California, Berkeley faculty since 1997. Prior to joining Berkeley, Dr. Card held academic appointments at Princeton University and the University of Chicago. Dr. Card is widely recognized for his contributions to empirical labor economics and applied econometrics, particularly in the analysis of labor markets, education, immigration and wage dynamics. Dr. Card was awarded half of the 2021 Nobel Memorial Prize in Economic Sciences for his empirical contributions to labor economics. Dr. Card previously served as President of the American Economic Association and has held editorial roles at several leading academic journals. He is a Fellow of the American Academy of Arts and Sciences and the Econometric Society. Dr. Card received his B.A. from Queen’s University and his M.A. and Ph.D. in Economics from Princeton University. We believe Dr. Card is qualified to serve on our Board due to his internationally recognized expertise in economics and his distinguished academic leadership and service in prominent economic institutions, which we believe provide strong governance insight and an independent perspective that contribute meaningfully to our Board’s decision-making processes.
Shachar Kariv has served as a member of our Board since the Closing on August 27, 2026. Dr. Kariv is an economist and the Benjamin N. Ward Professor of Economics at the University of California, Berkeley, a position he has held since 2014. Dr. Kariv has a rich academic career spanning over two decades. Prior to his current position, Dr. Kariv was a Professor in the Department of Economics at the University of California, Berkeley (2010 to 2014), an Associate Professor (with tenure) in the Department of Economics at the University of California, Berkeley (2008 to 2010), and an Assistant Professor in the Department of Economics at the University of California, Berkeley (2003 to 2008). Dr. Kariv also previously served as the Department Chair of the Department of Economics at the University of California, Berkeley, from 2014 to 2017 and from 2021 to 2022. Dr. Kariv’s research primarily focuses on economic theory, experimental economics, and behavioral economics. Dr. Kariv has held several visiting positions, including at the Institute for Advanced Studies, the European University Institute, Stanford University, the University of Cambridge and the Norwegian School of Economics. He has received numerous awards for his teaching excellence, including the Earl F. Cheit Award for Excellence in Teaching from the University of California, Berkeley, Haas School of Business, and the Dean’s Outstanding Teaching Award at New York University. Dr. Kariv earned his B.A. in Economics from Tel Aviv University, and an M.A. and Ph.D. in Economics from New York University. We believe Dr. Kariv is qualified to serve on our Board due to his extensive expertise in economics, as well as his experience leading a major academic department and collaborating across global research institutions, which we believe equips him with strong governance, analytical and strategic capabilities.
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Jaeyoung Shin has served as a member of our Board since the Closing on August 27, 2026. Mr. Shin is Vice President and Head of Asia at Samsung Ventures Investment Corporation, where he oversees the firm’s investment activities across Greater China, Japan, India, and Southeast Asia. In this role, he is responsible for sourcing, evaluating, and managing venture capital investments in technology and growth-stage companies, as well as overseeing portfolio strategy and regional investment execution. Mr. Shin has extensive experience in venture capital, corporate venture investing, and cross-border technology investments, with a focus on semiconductors, digital transformation, and emerging technologies. Since joining Samsung Ventures in 2010, Mr. Shin has led and supported investments across semiconductors, AI chips, image sensors, display technologies, and other advanced technology sectors, with notable IPO and M&A exits, including Montage Technology, VeriSilicon, Silergy, Amlogic, GalaxyCore, SmartSens, Deep Glint, DeePhi, and PlayNitride. Prior to Samsung Ventures, Mr. Shin worked as a fuel cell researcher at the Samsung Advanced Institute of Technology in Korea and as a Research and Development staff member at the Fuel Cell Lab of Forschungszentrum Jülich in Germany. Mr. Shin holds a Bachelor’s degree in Mechanical Engineering from Aachen University of Applied Science in Germany. We believe Mr. Shin is qualified to serve as a member of our Board due to his extensive experience in investing in technology companies and his leadership in evaluating and scaling businesses across technology ecosystems. Mr. Shin brings a combination of strategic investment expertise, technology sector knowledge, and market insight that we believe is highly relevant to our long-term growth objectives.
Board Composition
Our Board consists of five directors and is divided into three classes, designated Class I, Class II and Class III, with each class serving staggered three-year terms and one class standing for election at each annual meeting of stockholders. Shachar Kariv and Jaeyoung Shin are the Class I directors, David Card and Wenying Jia are the Class II directors, and Hoansoo Lee is the Class III director. The terms of the Class I, Class II and Class III directors will expire at the annual meetings of stockholders to be held in 2027, 2028 and 2029, respectively. Wenying Jia serves as Chairperson of the Board, and our Board has designated David Card as Lead Independent Director.
There are no family relationships among any of our directors or executive officers. To our knowledge, none of our directors or executive officers has been involved during the past ten years in any legal proceedings of the type described in Item 401(f) of Regulation S-K.
Board Committees
Our Board has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates under a written charter that is available on our website at https://www.exascalelabs.ai. The information on our website is not incorporated by reference into this Annual Report.
Audit Committee. Our audit committee consists of David Card, Shachar Kariv and Jaeyoung Shin, each of whom meets the definition of “independent director” for purposes of serving on an audit committee under the Nasdaq listing rules and the independence standards under Rule 10A-3 under the Exchange Act. Jaeyoung Shin is the chairperson of the audit committee. Our Board has determined that Jaeyoung Shin qualifies as an “audit committee financial expert,” as defined under the rules and regulations of the SEC. The audit committee is responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm, pre-approving audit and non-audit services, reviewing our annual and quarterly financial statements with management and the independent auditor, overseeing our internal control over financial reporting and reviewing and approving related party transactions.
Compensation Committee. Our compensation committee consists of David Card, Shachar Kariv and Jaeyoung Shin, each of whom meets the definition of “independent director” under the Nasdaq listing rules. Shachar Kariv is the chairperson of the compensation committee. The compensation committee is responsible for, among other things, reviewing and approving the compensation of our Chief Executive Officer and other executive officers, administering our equity incentive plans and reviewing and recommending changes to the compensation of our directors.
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Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of David Card, Shachar Kariv and Jaeyoung Shin. David Card is the chairperson of the nominating and corporate governance committee. The nominating and corporate governance committee is responsible for, among other things, identifying and recommending candidates for election to our Board and overseeing our corporate governance practices.
Code of Ethics
We have adopted a written code of ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our code of ethics is posted on our website at https://www.exascalelabs.ai and filed as an exhibit to this Annual Report. While we may make ministerial and technical amendments to our code of ethics from time to time, if we make any substantive amendments to, or grant any waivers from, our code of ethics for any officer or director, we will disclose the nature of such amendment or waiver in a current report on Form 8-K.
Insider Trading Policy
We have adopted an insider trading policy governing the purchase, sale and other dispositions of our securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations and the Nasdaq listing standards. A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report.
Section 16(a) Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Our Class A Common Stock was not registered under Section 12 of the Exchange Act until the Closing on August 27, 2026, and accordingly no Section 16(a) reports were required to be filed with respect to the fiscal year ended June 30, 2026.
ITEM 11. EXECUTIVE COMPENSATION
For the years ended June 30, 2025 and 2026, we had one named executive officer, Hoansoo Lee, who served as our Chief Executive Officer and Chief Financial Officer during those years.
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officer for the fiscal years ended June 30, 2026 and 2025.
| Name and Principal Position | Fiscal Year |
Salary ($) |
Stock Awards ($) |
All Other Compensation ($) |
Total ($) |
||||||||||||||
| Hoansoo Lee | 2026 | 108,000 | - | - | 108,000 | ||||||||||||||
| Chief Executive Officer and Chief Financial Officer | 2025 | 100,150 | - | - | 100,150 | ||||||||||||||
During the fiscal year ended June 30, 2025 and the subsequent three months ended September 30, 2025, Hoansoo Lee provided services to us pursuant to an independent contractor arrangement. During these periods, Mr. Lee was compensated as a non-employee consultant and received monthly consulting fees under that arrangement. He did not receive any employee benefits in connection with those services. For the fiscal year ended June 30, 2025 and the three months ended September 30, 2025, we paid consulting fees of $100,150 and $27,000, respectively.
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Effective October 1, 2025, we entered into an employment agreement with Mr. Lee, pursuant to which he transitioned from independent contractor status to full-time employee status. Under the employment agreement, Mr. Lee served as Chief Executive Officer and Chief Financial Officer and was entitled to a base salary of $9,000 per month, payable monthly. For the nine months ended June 30, 2026, we paid Mr. Lee salary totaling $81,000.
Effective August 27, 2026, this employment agreement was superseded by the Lee Employment Agreement described below.
Employment Agreements
We entered into an employment agreement with Mr. Lee, effective as of the Closing Date (the “Lee Employment Agreement”), pursuant to which Mr. Lee serves as our Chief Executive Officer. The Lee Employment Agreement provides for at-will employment. Under the Lee Employment Agreement, Mr. Lee is entitled to (i) an annual base salary of $420,000; (ii) an annual cash bonus of $150,000 for each fiscal year beginning with the fiscal year ending June 30, 2028, subject to his continued employment through the end of the applicable fiscal year; (iii) subject to approval by the compensation committee of our Board, an annual award of restricted stock units (“RSUs”) covering 300,000 shares of Class A Common Stock for each year of employment during the three-year period ending August 27, 2029 (the “Protection Period”), each vesting in three equal annual installments from its grant date; and (iv) additional RSU awards covering 150,000 shares of Class A Common Stock if our annual recurring revenue exceeds $20.0 million and a further 150,000 shares of Class A Common Stock if our annual recurring revenue exceeds $30.0 million, in each case measured as of a fiscal quarter-end during the Protection Period and vesting in three equal annual installments from the grant date. All equity awards are subject to the Equity Incentive Plan and our clawback policy.
Mr. Lee has committed to serve as our Chief Executive Officer through August 27, 2028 (the “Minimum Service Date”). If we terminate Mr. Lee’s employment without “cause” or Mr. Lee resigns for “good reason” (as such terms are defined in the Lee Employment Agreement) before the Minimum Service Date, he is entitled to continued payment of base salary for the longer of twelve months and the period through the Minimum Service Date, the annual bonus for the fiscal year ending June 30, 2028, accelerated vesting of RSUs that would have vested through the Minimum Service Date, any annual RSU award that would have been required to be granted on or before the Minimum Service Date, accelerated vesting of any ARR-based RSU award whose threshold has been achieved, and continued health benefits. If Mr. Lee’s employment terminates on or after the Minimum Service Date and before August 27, 2029 for any reason other than termination by us for cause, or if his employment is terminated by us without cause or by him for good reason in connection with or within twelve months following a change in control occurring before August 27, 2029, he is entitled to continued payment of base salary through August 27, 2029, each unpaid annual bonus for fiscal years ending on or before August 27, 2029, accelerated vesting in full of all annual RSU awards granted or required to be granted and of each ARR-based RSU award whose threshold has been achieved, and continued health benefits. Severance is conditioned on Mr. Lee’s execution of a release of claims, except in the case of death. The Lee Employment Agreement does not contain a post-employment non-competition covenant.
On September 25, 2026, we entered into an employment agreement with Jake Carney (the “Carney Employment Agreement”), pursuant to which Mr. Carney serves as our Chief Financial Officer and reports to our Chief Executive Officer. Mr. Carney’s employment is at will and may be terminated by us on one month’s prior written notice or by Mr. Carney on thirty days’ prior written notice. Under the Carney Employment Agreement, Mr. Carney receives a base salary of $6,000 per month and is not entitled to any bonus, equity award, incentive compensation or severance, and does not participate in the employee benefit plans and programs maintained by us. Mr. Carney was not an executive officer of Legacy Exascale during the fiscal year ended June 30, 2026 and is not a named executive officer for that fiscal year.
Outstanding Equity Awards at Fiscal Year-End
As of June 30, 2026, our named executive officer did not hold any unexercised options, unvested stock or equity incentive plan awards.
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Director Compensation
For the years ended June 30, 2026 and 2025, Legacy Exascale’s board of directors consisted of two directors, Hoansoo Lee and Wenying Jia, each of whom is a significant stockholder of us. Neither director received any cash compensation, equity compensation, or other remuneration for their service on Legacy Exascale’s board of directors during the years ended June 30, 2026 and 2025.
In September 2026, following the Closing, our Board adopted a Non-Employee Director Compensation Policy. Under the policy, each non-employee director is entitled to an annual cash retainer of $70,000, the Lead Independent Director is entitled to an additional annual cash retainer of $25,000, the chair of the audit committee is entitled to an additional annual cash retainer of $20,000, and the chairs of the compensation committee and the nominating and corporate governance committee are each entitled to an additional annual cash retainer of $15,000, in each case payable quarterly in arrears and prorated for partial periods of service. In addition, each of our independent directors is entitled to an initial award of 15,000 RSUs and, beginning with our 2027 annual meeting of stockholders, an annual award of 15,000 RSUs, each vesting in full on the first anniversary of the grant date or, if earlier, upon the expiration of the director’s term without re-election. Ms. Jia is entitled to the annual cash retainer but does not receive equity awards under the policy. No compensation was paid to any director under the policy during the fiscal year ended June 30, 2026.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our Class A Common Stock and Class B Common Stock as of September 25, 2026 by:
| (i) | each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of the outstanding shares of either class of our Common Stock; |
| (ii) | each of our current directors; |
| (iii) | each of our named executive officers; and |
| (iv) | all of our directors and executive officers as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options, warrants and other rights that are exercisable or convertible within 60 days of the filing date of this Annual Report. The information set forth in the table below is based on 33,689,050 shares of Class A Common Stock, each having one vote per share, and 30,645,739 shares of Class B Common Stock, each having 20 votes per share, outstanding as of September 25, 2026. Except as indicated in the footnotes to the table below, and subject to community property laws where applicable, we believe that each person named in the table has sole voting and investment power with respect to all shares shown as beneficially owned by such person.
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| Name of Beneficial Owner(1) | Class A Common Stock Beneficially Owned |
% of Class A Common Stock |
Class B Common Stock Beneficially Owned |
% of Class B Common Stock |
% of Total Voting Power(2) |
|||||||||||||||
| Directors and Named Executive Officers: | ||||||||||||||||||||
| Hoansoo Lee(3) | - | - | 5,000,000 | 16.3 | % | 15.5 | % | |||||||||||||
| Wenying Jia(4) | - | - | 25,645,739 | 83.7 | % | 79.3 | % | |||||||||||||
| Jake Carney | - | - | - | - | - | |||||||||||||||
| David Card | - | - | - | - | - | |||||||||||||||
| Shachar Kariv | - | - | - | - | - | |||||||||||||||
| Jaeyoung Shin | - | - | - | - | - | |||||||||||||||
| All directors and executive officers as a group (6 persons) | - | - | 30,645,739 | 100.0 | % | 94.8 | % | |||||||||||||
| 5% Stockholders: | ||||||||||||||||||||
| MFH 1, LLC(5) | 11,833,369 | 35.1 | % | - | - | 1.8 | % | |||||||||||||
| (1) | Unless otherwise noted, the business address of each of the persons listed in the table is c/o Exascale Labs Holdings Inc., 820 Gessner Road, Suite 332, Houston, Texas 77024. |
| (2) | Percentage of total voting power represents voting power with respect to all outstanding shares of Class A Common Stock and Class B Common Stock, voting together as a single class, based on an aggregate of 646,603,830 votes, consisting of 33,689,050 votes attributable to the outstanding shares of Class A Common Stock and 612,914,780 votes attributable to the outstanding shares of Class B Common Stock. |
| (3) | Consists of (i) 2,000,000 shares of Class B Common Stock held by HSL Capital Management LLC, (ii) 1,000,000 shares of Class B Common Stock held by the Jisu Paul Lee Non-Grantor Directed Trust, (iii) 1,000,000 shares of Class B Common Stock held by the Sophia Jisun Lee Non-Grantor Directed Trust and (iv) 1,000,000 shares of Class B Common Stock held by the Gabriel Jihwan Lee Non-Grantor Directed Trust. Mr. Lee is the sole member and manager of HSL Capital Management LLC and has sole voting and dispositive power with respect to the shares held by it. Mr. Lee is the settlor of, and serves as investment advisor to, each of the trusts, the beneficiaries of which are Mr. Lee’s children, and as such may be deemed to beneficially own the shares held by the trusts. Mr. Lee disclaims beneficial ownership of the shares held by the trusts except to the extent of his pecuniary interest therein, if any, and the inclusion of such shares in this table shall not be deemed an admission of beneficial ownership for any purpose. |
| (4) | Consists of shares of Class B Common Stock held by Zerowave Ltd. Ms. Jia is the sole member and manager of Zerowave Ltd and has sole voting and dispositive power with respect to the shares held by Zerowave Ltd. |
| (5) | Based on the records of our transfer agent. John Darwin is the manager of MFH 1, LLC and, accordingly, has sole voting and investment discretion with respect to the shares held of record by MFH 1, LLC. Mr. Darwin disclaims any economic interest in the shares held by MFH 1, LLC, except to the extent of his pecuniary interest therein. The business address of MFH 1, LLC is 10 E. 53rd Street, Suite 3001, New York, NY 10022. |
Securities Authorized for Issuance under Equity Compensation Plans
As of June 30, 2026, we did not have any equity compensation plan under which our equity securities were authorized for issuance. In connection with the Business Combination, the board of directors and the shareholders of BCAR approved the Equity Incentive Plan, which became effective upon the Closing. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Securities Authorized for Issuance under Equity Compensation Plans.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
From July 1, 2025 to September 30, 2025, we paid $27,000 in consulting fees to Dr. Lee, our Chief Executive Officer, pursuant to our consulting arrangement with Hoansoo Lee. Effective October 1, 2025, we entered into an employment agreement with Mr. Lee, pursuant to which Dr. Lee received a base salary of $9,000 per month. Effective August 27, 2026, such employment agreement was superseded by the Lee Employment Agreement. See “Item 11. Executive Compensation” for a description of Dr. Lee’s employment arrangements.
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Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Review and Approval of Related Party Transactions
Under its charter, our audit committee is responsible for reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K prior to our entering into such transaction.
Director Independence
Our Class A Common Stock is listed on Nasdaq. Under the Nasdaq listing rules, a majority of the members of our Board must qualify as “independent directors,” as affirmatively determined by our Board. Our Board has determined that each of David Card, Shachar Kariv and Jaeyoung Shin is an independent director under the Nasdaq listing rules, and that each of them also satisfies the heightened independence standards applicable to members of the audit committee under Rule 10A-3 under the Exchange Act and to members of the compensation committee under the Nasdaq listing rules. Hoansoo Lee and Wenying Jia are not independent directors because of their positions as our Chief Executive Officer and Chairperson of the Board, respectively.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Public Accounting Fees
The following table sets forth public accounting fees in connection with services rendered by HTL International, LLC for the years ended June 30, 2026 and 2025.
|
For the June 30, |
||||||||
| 2026 | 2025 | |||||||
| Audit Fees(1) | $ | 420,000 | $ | - | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| (1) | Audit fees consist of fees for professional services rendered by HTL International, LLC for the audit of our annual financial statements, and services that are normally provided by HTL International, LLC in connection with statutory and regulatory filings or engagements for that fiscal year, including in connection with our Business Combination. |
Pre-Approval of Services
After the Closing, our board of directors adopted a policy governing the pre-approval by the audit committee of all services, audit and non-audit, to be provided to us by our independent auditors, and our audit committee approved and ratified all of the foregoing services.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | Financial Statements: |
| (1) | The financial statements required to be included in this Annual Report on Form 10-K are included in Item 8 herein. |
| (2) | All supplemental schedules have been omitted since the information is either included in the financial statements or the notes thereto or they are not required or are not applicable. |
| (3) | See attached Exhibit Index of this Annual Report on Form 10-K |
| (b) | Exhibits |
The following exhibits are filed, furnished or incorporated by reference as part of this Annual Report.
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| 31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. | |
| 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. | |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934, as amended. | |
| 97.1 | Recovery of Erroneously Awarded Compensation. | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101). |
| * | Schedules and exhibits to this Exhibit have been omitted pursuant to Item 601(b)(2) and/or Item 601(a)(5), as applicable, of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. | |
| † | Indicates a management contract or compensatory plan or arrangement. |
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Exascale Labs Holdings Inc. | ||
| Dated: September 28, 2026 | By: |
/s/ Hoansoo Lee |
| Name: | Hoansoo Lee | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | Position | Date | ||
| /s/ Hoansoo Lee | Chief Executive Officer and Director | September 28, 2026 | ||
| Hoansoo Lee | (Principal Executive Officer) | |||
| /s/ Jake Carney | Chief Financial Officer | September 28, 2026 | ||
| Jake Carney | (Principal Financial Officer and Principal Accounting Officer) | |||
| /s/ Wenying Jia | Chairperson of the Board of Directors | September 28, 2026 | ||
| Wenying Jia | ||||
| /s/ Jaeyoung Shin | Director | September 28, 2026 | ||
| Jaeyoung Shin |
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Exhibit 4.2
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of the date of the Annual Report on Form 10-K of which this exhibit is a part, Exascale Labs Holdings Inc. (the “Company,” “we,” “us” or “our”) has two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (i) our Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), and (ii) our warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share (the “Warrants”). Our Class A Common Stock and Warrants are listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “XLAB” and “XLABW,” respectively.
The following summary of the material terms of our securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, our Amended and Restated Certificate of Incorporation (the “Charter”), our Bylaws (the “Bylaws”) and the Warrant Agreement, dated July 30, 2025, by and between D. Boral ARC Acquisition I Corp. (“BCAR”) and Odyssey Transfer and Trust Company, as warrant agent (the “Warrant Agreement”), each of which is incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part, and to the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL”). We encourage you to read the Charter, the Bylaws, the Warrant Agreement and the applicable provisions of the DGCL in their entirety.
Because the rights of the holders of our Class A Common Stock are affected by the terms of our Class B common stock, par value $0.0001 per share (the “Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”), and our preferred stock, par value $0.0001 per share (the “Preferred Stock”), this exhibit also describes certain terms of the Class B Common Stock and the Preferred Stock. Neither the Class B Common Stock nor the Preferred Stock are registered under Section 12 of the Exchange Act.
On August 27, 2026 (the “Closing Date”), we consummated the business combination (the “Business Combination”) contemplated by the Agreement and Plan of Merger, dated as of January 11, 2026, by and among BCAR, D. Boral ARC Merger Corporation, D. Boral ARC Merger Sub Inc. and Exascale Labs Inc. In connection with the Business Combination, BCAR redomiciled from the British Virgin Islands to the State of Delaware by merging with and into D. Boral ARC Merger Corporation, a Delaware corporation, which continued as the surviving corporation under the name “Exascale Labs Holdings Inc.” (the “Domestication Merger”), and each outstanding warrant of BCAR was assumed by us and became a Warrant exercisable for our Class A Common Stock on the terms described below.
Authorized Capital Stock
The Charter authorizes the issuance of 300,000,000 shares of capital stock, consisting of (i) 260,000,000 shares of Class A Common Stock, (ii) 35,000,000 shares of Class B Common Stock and (iii) 5,000,000 shares of Preferred Stock. Subject to the rights of the holders of any outstanding series of Preferred Stock, the number of authorized shares of any class of Common Stock or of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the stock of the Company entitled to vote, irrespective of Section 242(b)(2) of the DGCL.
Common Stock
Voting Rights
Except as otherwise provided in the Charter or required by applicable law, each holder of Common Stock is entitled to vote on each matter submitted to a vote of stockholders generally. Holders of Class A Common Stock are entitled to one (1) vote for each share held of record, and holders of Class B Common Stock are entitled to twenty (20) votes for each share held of record, in each case as of the applicable record date. Except as otherwise required by the Charter or the DGCL, the holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with the holders of Preferred Stock). Except as otherwise required by law, holders of Common Stock are not entitled to vote on any amendment to the Charter (including any certificate of designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or other classes of Common Stock if the holders of the affected series or class are entitled, exclusively, to vote thereon under the Charter or the DGCL.
The Charter also provides that (i) the Company may not issue any additional shares of Class B Common Stock after the effectiveness of the Charter, other than pursuant to a dividend or a Stock Adjustment (as defined below) effected in accordance with the Charter, unless such issuance is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A Common Stock, voting as a separate class, and (ii) any amendment to the Charter that increases the voting power of the Class B Common Stock or that alters or changes the conversion provisions of the Class B Common Stock in a manner that adversely affects the holders of Class A Common Stock may not be approved without the affirmative vote of the holders of at least a majority of the total voting power of all then outstanding shares of Class A Common Stock entitled to vote thereon, voting as a separate class.
Holders of Common Stock do not have cumulative voting rights in the election of directors. Because each share of Class B Common Stock is entitled to twenty (20) votes, the holders of our Class B Common Stock, all of whom are our founders, Hoansoo Lee and Wenying Jia (the “Founders”), or entities affiliated with them, hold a substantial majority of the voting power of our outstanding capital stock and are able to control the outcome of matters submitted to a vote of our stockholders, including the election of directors, amendments to our organizational documents and the approval of any merger, sale of assets or other major corporate transaction. We are a “controlled company” within the meaning of the Nasdaq listing rules.
Dividend Rights
Subject to applicable law and the rights and preferences of the holders of any outstanding series of Preferred Stock, the holders of Common Stock are entitled to receive dividends when, as and if declared by our board of directors (the “Board”) out of funds legally available therefor. Dividends of cash or property may not be declared or paid on any class of Common Stock unless a dividend of the same amount per share and of the same type of cash or property (or combination thereof) per share is concurrently declared or paid on the other classes of outstanding Common Stock. Stock dividends on a class of Common Stock may be paid only in shares of the same class of Common Stock. No stock dividend, stock split, reverse stock split, combination, subdivision, exchange, reclassification or recapitalization (each, a “Stock Adjustment”) may be declared or made on any class of Common Stock unless a corresponding Stock Adjustment is made in the same proportion and manner for all other classes of Common Stock then outstanding, unless such requirement is waived in advance by the holders of a majority of the voting power of the other class of Common Stock, voting separately as a single class.
Liquidation Rights
Subject to the rights and preferences of the holders of any outstanding series of Preferred Stock, in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the funds and assets of the Company legally available for distribution to stockholders will be distributed among the holders of the then outstanding Common Stock pro rata in accordance with the number of shares of Common Stock held by each such holder, without regard to class.
Mergers, Consolidations and Tender or Exchange Offers
Except as expressly provided in the Charter, all shares of Common Stock have the same rights, preferences and privileges and rank equally, share ratably and are identical in all respects as to all matters. Unless waived in advance by the holders of a majority of the voting power of the affected class of Common Stock, voting separately as a single class, (i) in any merger, consolidation or other business combination requiring the approval of our stockholders, and (ii) in any tender or exchange offer for shares of Common Stock made by a third party pursuant to an agreement to which the Company is a party or made by the Company, the holders of each class of Common Stock are entitled to receive, or to elect to receive, the same form of consideration and at least the same amount of consideration on a per share basis as the holders of the other class of Common Stock; provided that, if the consideration includes securities, the consideration payable to the holders of Class B Common Stock is deemed to be the same form and amount as that payable to the holders of Class A Common Stock if the only difference is that the securities distributed to the holders of Class B Common Stock have twenty (20) times the voting power of the securities distributed to the holders of Class A Common Stock.
2
Conversion of Class B Common Stock
Each share of Class B Common Stock is convertible into one share of Class A Common Stock at the option of the holder at any time upon written notice to our transfer agent. In addition, each share of Class B Common Stock will automatically, without any further action, convert into one share of Class A Common Stock upon a Transfer (as defined in the Charter) of such share other than to a Qualified Stockholder (as defined in the Charter). Shares of Class B Common Stock that are converted into shares of Class A Common Stock will be retired and may not be reissued.
“Qualified Stockholder” generally means (a) the Founders; (b) any other registered holder of a share of Class B Common Stock immediately after the effectiveness of the Charter; (c) the initial registered holder of any shares of Class B Common Stock originally issued by the Company upon the exercise, conversion or settlement of a Right (as defined in the Charter) that was issued to and at all times held by a person who would have been a Qualified Stockholder had the Right been a share; (d) each natural person who Transfers shares of, or Rights for, Class B Common Stock to a Permitted Trust, Permitted IRA, Permitted Entity or Permitted Foundation (each as defined in the Charter) that is or becomes a Qualified Stockholder in connection with such Transfer; and (e) a transferee of shares of Class B Common Stock received in a Permitted Transfer (as defined in the Charter). Permitted Transfers are generally limited to Transfers by a Qualified Stockholder to a Permitted Trust, Permitted IRA, Permitted Entity or Permitted Foundation of such Qualified Stockholder, and Transfers by any such entity back to such Qualified Stockholder or to another Permitted Entity of such Qualified Stockholder, in each case subject to the Qualified Stockholder retaining Dispositive Power and Voting Control (each as defined in the Charter) over the shares.
“Transfer” is broadly defined in the Charter to include any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of a share of Class B Common Stock or any legal or beneficial interest therein, whether or not for value and whether voluntary or involuntary or by operation of law, including a transfer to a broker or other nominee and the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise, subject to certain exceptions, including the granting of a revocable proxy to our officers or directors at the request of the Board in connection with a stockholder meeting. A Transfer is also deemed to occur with respect to shares of Class B Common Stock held by a Permitted Trust, Permitted IRA, Permitted Entity or Permitted Foundation if such entity ceases to qualify as such or if a majority of the voting power of such entity (or of an entity that is itself a Qualified Stockholder) is Transferred, in each case as more fully described in the Charter.
The Company may establish policies and procedures relating to the conversion of Class B Common Stock and the administration of the multi-class stock structure, and may request that holders of Class B Common Stock furnish certifications, affidavits or other proof to verify their ownership and to confirm that a conversion has not occurred. A determination in good faith by our Secretary that a Transfer has resulted in a conversion is conclusive and binding. The Company is required at all times to reserve a sufficient number of authorized but unissued shares of Class A Common Stock to effect the conversion of all outstanding shares of Class B Common Stock.
Other Rights
Holders of Class A Common Stock have no preemptive, subscription, redemption or conversion rights, and there are no sinking fund provisions applicable to the Class A Common Stock. Subject to applicable law, the transfer restrictions applicable to the Class B Common Stock described above and any transfer restrictions set forth in the Bylaws, shares of Common Stock are fully transferable. All outstanding shares of Class A Common Stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of Preferred Stock that the Board may designate and issue in the future.
3
Preferred Stock
The Charter authorizes the Board, without further action by our stockholders, to issue up to 5,000,000 shares of Preferred Stock from time to time in one or more series and, by adopting a resolution or resolutions and filing a certificate of designation with the Secretary of State of the State of Delaware, to fix the number of shares of each such series and the voting powers (full, limited or none), designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, redemption privileges and liquidation preferences, and to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The Board could authorize the issuance of Preferred Stock with voting, conversion or other rights that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of Preferred Stock, while providing flexibility in connection with possible acquisitions, financings and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company and could adversely affect the market price of our Class A Common Stock. No shares of Preferred Stock are currently designated or outstanding, and we have no present plans to issue any shares of Preferred Stock.
Warrants
General
The Warrants were originally issued by BCAR in registered form under the Warrant Agreement, as part of the 28,000,000 units sold in BCAR’s initial public offering, each consisting of one BCAR Class A ordinary share and one-half of one warrant (the warrants so issued, the “Public Warrants”), and as part of the 200,000 private placement units purchased by MFH 1, LLC, BCAR’s sponsor (the “Sponsor”), in a private placement that closed simultaneously with BCAR’s initial public offering (the warrants so issued, the “Private Placement Warrants”). At the effective time of the Domestication Merger, each outstanding warrant of BCAR was assumed by us and became a Warrant exercisable for our Class A Common Stock on the same terms. As of the Closing Date, we had 14,099,992 Warrants issued and outstanding, including 100,000 Private Placement Warrants. Odyssey Transfer and Trust Company serves as warrant agent for the Warrants.
Exercisability and Term
Each whole Warrant entitles the registered holder to purchase one share of Class A Common Stock at a price of $11.50 per share, subject to adjustment as described below, at any time commencing 30 days after the completion of the Business Combination, provided that we have an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), covering the shares of Class A Common Stock issuable upon exercise of the Warrants and a current prospectus relating to them is available (or we permit holders to exercise their Warrants on a cashless basis under the circumstances specified in the Warrant Agreement), and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. A holder may exercise Warrants only for a whole number of shares of Class A Common Stock; no fractional shares will be issued upon exercise, and only whole Warrants may be exercised. The Warrants will expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. We may, in our sole discretion, lower the exercise price of the Warrants at any time prior to their expiration for a period of not less than 20 business days, provided that we give at least three days’ prior written notice to the registered holders and that any such reduction is applied consistently to all of the Warrants.
We are not obligated to deliver any shares of Class A Common Stock pursuant to the exercise of a Warrant, and have no obligation to settle such exercise, unless a registration statement under the Securities Act with respect to the shares of Class A Common Stock underlying the Warrants is then effective and a prospectus relating thereto is current, subject to our obligations described below. No Warrant is exercisable, and we are not obligated to issue shares of Class A Common Stock upon exercise of a Warrant, unless the shares issuable upon such exercise have been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder. If these conditions are not satisfied with respect to a Warrant, the holder will not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In no event will we be required to net cash settle any Warrant.
4
Under the Warrant Agreement, we have agreed to use our commercially reasonable efforts to file with the Securities and Exchange Commission (the “SEC”), as soon as practicable, but in no event later than 20 business days after the closing of the Business Combination, a registration statement covering the issuance of the shares of Class A Common Stock issuable upon exercise of the Warrants, to use our commercially reasonable efforts to cause the same to become effective within 60 business days following the closing of the Business Combination, and to maintain a current prospectus relating to such shares until the expiration of the Warrants in accordance with the Warrant Agreement. If a registration statement covering such shares is not effective by the 60th business day after the closing of the Business Combination, holders may, until such time as there is an effective registration statement and during any period when we have failed to maintain an effective registration statement, exercise Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition, if our Class A Common Stock is, at the time of any exercise of a Warrant, not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, if we so elect, we will not be required to file or maintain in effect a registration statement.
Redemption of Warrants
Once the Warrants become exercisable, we may redeem the outstanding Warrants:
| ● | in whole and not in part; |
| ● | at a price of $0.01 per Warrant; |
| ● | upon a minimum of 30 days’ prior written notice of redemption to each holder; and |
| ● | if, and only if, the closing price of the Class A Common Stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Warrant as described below) for any 20 trading days within a 30-trading day period commencing at least 30 days after the completion of the Business Combination and ending three business days before we send the notice of redemption to the holders. |
We will not redeem the Warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A Common Stock issuable upon exercise of the Warrants is then effective and a current prospectus relating to those shares is available throughout the 30-day redemption period. If and when the Warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares upon exercise of the Warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. If the foregoing conditions are satisfied and we issue a notice of redemption, each holder will be entitled to exercise its Warrants prior to the scheduled redemption date. The price of the Class A Common Stock may, however, fall below the $18.00 redemption trigger price (as adjusted) and the $11.50 exercise price after the notice of redemption is issued.
A holder of a Warrant may notify us in writing that it elects to be subject to a requirement that such holder will not have the right to exercise such Warrant to the extent that, after giving effect to such exercise, such holder (together with its affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder) of the shares of Class A Common Stock outstanding immediately after giving effect to such exercise.
5
Anti-Dilution Adjustments
If the number of outstanding shares of Class A Common Stock is increased by a stock dividend payable in shares of Class A Common Stock, or by a split-up of shares or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A Common Stock issuable on exercise of each Warrant will be increased in proportion to such increase in the outstanding shares. A rights offering made to all or substantially all holders of Class A Common Stock entitling holders to purchase Class A Common Stock at a price less than the fair market value (as determined under the Warrant Agreement) will be deemed a stock dividend of a number of shares equal to the product of (i) the number of shares of Class A Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Common Stock) and (ii) one (1) minus the quotient of (x) the price per share paid in such rights offering divided by (y) the fair market value.
If we, at any time while the Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to all or substantially all of the holders of Class A Common Stock on account of such shares (or other securities into which the Warrants are convertible), other than as described above and other than certain ordinary cash dividends, then the exercise price of the Warrants will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Common Stock in respect of such event.
If the number of outstanding shares of Class A Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of Class A Common Stock or other similar event, then, on the effective date of such event, the number of shares of Class A Common Stock issuable on exercise of each Warrant will be decreased in proportion to such decrease in outstanding shares. Whenever the number of shares of Class A Common Stock purchasable upon the exercise of the Warrants is adjusted as described above, the exercise price will be adjusted by multiplying the exercise price immediately prior to such adjustment by a fraction, the numerator of which is the number of shares purchasable upon the exercise of the Warrants immediately prior to such adjustment and the denominator of which is the number of shares so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding Class A Common Stock (other than those described above or that solely affects the par value of the Class A Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Class A Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Class A Common Stock immediately theretofore purchasable and receivable upon the exercise of the Warrants, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder would have received if such holder had exercised its Warrants immediately prior to such event (the “Alternative Issuance”).
Exercise Procedures; No Rights as Stockholders
The Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Warrants being exercised. The holders of Warrants do not have the rights or privileges of holders of Class A Common Stock, including any voting rights, until they exercise their Warrants and receive shares of Class A Common Stock. After the issuance of shares of Class A Common Stock upon exercise of the Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
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Amendments
The Warrant Agreement provides that the terms of the Warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correcting any defective provision or mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the Warrants and the Warrant Agreement set forth in the prospectus for BCAR’s initial public offering, (ii) adjusting the provisions relating to cash dividends on shares of Class A Common Stock as contemplated by and in accordance with the Warrant Agreement, (iii) adding or changing any provisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Warrants, or (iv) providing for the delivery of the Alternative Issuance. All other modifications or amendments of the Warrant Agreement require the vote or written consent of the holders of at least 50% of the then outstanding Warrants and, solely with respect to any amendment to the terms of the Private Placement Warrants or any provision of the Warrant Agreement with respect to the Private Placement Warrants (including the forfeiture or cancellation of any Private Placement Warrants), the vote or written consent of the holders of at least 50% of the then outstanding Private Placement Warrants (including the vote or written consent of D. Boral Capital LLC, the underwriter in BCAR’s initial public offering).
Private Placement Warrants
The Private Placement Warrants are identical to the Public Warrants, except that, so long as they are held by the Sponsor or its permitted transferees, the Private Placement Warrants are entitled to registration rights. The Private Placement Warrants were subject to a lock-up that expired upon the completion of the Business Combination and may be redeemed by the Company following the Business Combination in accordance with the Warrant Agreement.
Exclusive Forum for Warrant Agreement Claims
The Warrant Agreement provides that, subject to applicable law, any action, proceeding or claim against us arising out of or relating in any way to the Warrant Agreement will be brought and enforced in the courts of the State of New York located in the County of New York or the United States District Court for the Southern District of New York, and we have irrevocably submitted to such jurisdiction, which will be the exclusive forum for any such action, proceeding or claim. This provision applies to claims under the Securities Act but does not apply to claims under the Exchange Act or any claim for which the federal district courts of the United States of America are the sole and exclusive forum. This provision may limit the ability of holders of Warrants to obtain a favorable judicial forum for disputes with the Company.
Anti-Takeover Effects of the Charter, the Bylaws and Delaware Law
Certain provisions of the Charter, the Bylaws and the DGCL, which are summarized below, could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock. These provisions could make it more difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to be in their best interests or in our best interests. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the Board and in the policies formulated by the Board, and to discourage certain types of transactions that may involve an actual or threatened change of control of the Company.
Dual-Class Structure. As described above, each share of Class B Common Stock is entitled to twenty (20) votes, and the holders of Class B Common Stock, all of whom are the Founders or entities affiliated with them, control a substantial majority of the voting power of our outstanding capital stock. This concentration of voting control may discourage, delay or prevent a change in control of the Company that other stockholders may view as beneficial.
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Classified Board of Directors. The Charter provides that, subject to the rights of the holders of any series of Preferred Stock to elect directors, the Board is divided into three classes, designated Class I, Class II and Class III, with each class consisting, as nearly as possible, of one-third of the total number of directors. The initial Class I, Class II and Class III directors serve for terms expiring at the 2027, 2028 and 2029 annual meetings of stockholders, respectively, and, beginning with the 2027 annual meeting, directors of each class are elected for three-year terms. As a result, only approximately one-third of the Board is elected at each annual meeting of stockholders, which could delay the ability of stockholders to change the composition of a majority of the Board.
Number of Directors; Removal; Vacancies. The Charter provides that the number of directors constituting the whole Board is fixed exclusively by resolution of the Board. Subject to the rights of the holders of any series of Preferred Stock, directors may be removed only for cause and only by the affirmative vote of the holders of at least 66⅔% of the voting power of all of the then outstanding shares of voting stock entitled to vote generally in the election of directors, voting together as a single class. Any vacancy on the Board resulting from death, resignation, disqualification, retirement, removal or other cause, and any newly created directorship resulting from an increase in the number of directors, may be filled (i) for so long as any shares of Class B Common Stock are outstanding, only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of voting stock entitled to vote at an election of directors, and (ii) after no shares of Class B Common Stock are outstanding, by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director.
No Cumulative Voting. The DGCL provides that stockholders are not entitled to cumulate votes in the election of directors unless the certificate of incorporation provides otherwise. The Charter does not provide for cumulative voting.
Special Meetings of Stockholders. The Charter provides that, subject to the rights of the holders of any series of Preferred Stock and to applicable law, special meetings of stockholders may be called only (i) by or at the direction of the Board, the Chairperson of the Board or the Chief Executive Officer, in each case in accordance with the Bylaws, or (ii) by the Secretary of the Company upon the written request of any holder of record of at least 25% of the voting power of the issued and outstanding shares of stock of the Company. Business transacted at any special meeting is limited to the matters relating to the purpose or purposes stated in the notice of meeting.
Stockholder Action by Written Consent. The Charter provides that any action required or permitted to be taken by our stockholders may be taken at a duly called annual or special meeting or, except as otherwise required by applicable law or the Charter, without a meeting, without prior notice and without a vote, by a consent in writing signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Because of the voting power of the Class B Common Stock, the holders of Class B Common Stock may be able to take stockholder action by written consent without the participation of the holders of Class A Common Stock.
Advance Notice Requirements for Stockholder Proposals and Director Nominations. The Bylaws establish advance notice procedures for stockholders seeking to bring business before an annual meeting of stockholders or to nominate candidates for election as directors at an annual or special meeting of stockholders. To be timely for an annual meeting, a stockholder’s notice generally must be delivered to our Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting, subject to alternative deadlines if no annual meeting was held in the preceding year or if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary. The notice must contain the information required by the Bylaws. These provisions may preclude stockholders from bringing matters before an annual meeting or from making nominations for directors.
Amendment of the Bylaws. The Charter authorizes the Board to adopt, amend or repeal the Bylaws without the assent or vote of the stockholders. The adoption, amendment or repeal of the Bylaws by the stockholders requires the affirmative vote of the holders of at least 66⅔% of the voting power of all of the then outstanding shares of voting stock entitled to vote generally in an election of directors, in addition to any other vote required by applicable law, the Charter or the Bylaws.
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Amendment of the Charter. The Charter provides that Articles V (terms of the Common Stock and Preferred Stock), VI (the Board), VII (stockholder action; special meetings), VIII (limitation of director liability), IX (indemnification), X (exclusive forum) and XI (amendments) of the Charter may not be amended, altered, repealed or rescinded, in whole or in part, and no provision inconsistent therewith may be adopted, without the affirmative vote of the holders of at least 66⅔% of the total voting power of all of the then outstanding shares of stock entitled to vote thereon, voting together as a single class, in addition to any vote required by applicable law. In addition, as described above under “Common Stock — Voting Rights,” any amendment that increases the voting power of the Class B Common Stock or that adversely alters the conversion provisions of the Class B Common Stock requires the separate approval of the holders of a majority of the total voting power of the then outstanding shares of Class A Common Stock.
Authorized but Unissued Shares; Preferred Stock. Our authorized but unissued shares of Common Stock and Preferred Stock are available for future issuance without stockholder approval, subject to applicable Nasdaq rules, and could be used for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved shares of Common Stock and Preferred Stock, and the ability of the Board to issue Preferred Stock with terms it determines, could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger or otherwise.
Section 203 of the DGCL. We are subject to Section 203 of the DGCL, which, subject to certain exceptions, prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time that such stockholder became an interested stockholder, unless (i) prior to such time, the board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or (iii) at or subsequent to such time, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66⅔% of the outstanding voting stock that is not owned by the interested stockholder. A “business combination” generally includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” generally is a person who, together with its affiliates and associates, owns, or within the previous three years owned, 15% or more of a corporation’s outstanding voting stock. Section 203 could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire the Company.
Exclusive Forum
The Charter provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) and any appellate court thereof will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, stockholder or employee of the Company to the Company or its stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL, the Charter or the Bylaws, (iv) any action, suit or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery, or (v) any action, suit or proceeding asserting a claim against the Company or any current or former director, officer or stockholder governed by the internal affairs doctrine. This provision does not apply to suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction. The Charter further provides that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in any security of the Company is deemed to have notice of and consented to these provisions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder; accordingly, the exclusive forum provisions of the Charter do not apply to such claims. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or our directors, officers or other employees, and may discourage such lawsuits. There is uncertainty as to whether a court would enforce the federal forum provision with respect to Securities Act claims, and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
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Limitation of Liability and Indemnification
The Charter provides that no director of the Company will have any personal liability to the Company or its stockholders for monetary damages for any breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as it now exists or may hereafter be amended. The Charter further provides that the Company will indemnify, and advance expenses to, its current and former directors and officers to the fullest extent permitted by the DGCL, subject to the procedures and limitations set forth in the Charter, and that the Company is the indemnitor of first resort with respect to its directors, officers, employees and agents. The Charter also authorizes the Company to purchase and maintain directors’ and officers’ liability insurance. In addition, we have entered into indemnification agreements with each of our directors and executive officers. These provisions may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duties and may reduce the likelihood of derivative litigation against our directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders.
Listing
Our Class A Common Stock and Warrants are listed on Nasdaq under the symbols “XLAB” and “XLABW,” respectively. Our Class B Common Stock is not listed on any securities exchange and is not publicly traded.
Transfer Agent, Registrar and Warrant Agent
The transfer agent and registrar for our Class A Common Stock and Class B Common Stock, and the warrant agent for our Warrants, is Odyssey Transfer and Trust Company.
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Exhibit 10.3
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this “Agreement”), dated as of [ ], is by and between Exascale Labs Holdings Inc., a Delaware corporation (the “Company”) and [ ] (the “Indemnitee”).
WHEREAS, the Company expects Indemnitee to join the Company as [a director/an officer] of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and/or other claims being asserted against directors and officers of public companies;
WHEREAS, the board of directors of the Company (the “Board”) has determined that enhancing the ability of the Company to retain and attract the most capable persons as directors and officers is in the best interests of the Company and its stockholders and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and
WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s service as [a director/an officer] of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “Constituent Documents”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined herein) to, Indemnitee as set forth in this Agreement and for the coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.
NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to provide services to the Company, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Beneficial Owner” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
(b) “Change in Control” means the occurrence after the date of this Agreement of any of the following events:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding Voting Securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;
(ii) the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;
(iii) during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or
(iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
(c) “Claim” means:
(i) any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or
(ii) any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.
(d) “Delaware Court” shall have the meaning ascribed to it in Section 8(e) below.
(e) “Disinterested Director” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.
(f) “Expenses” means any and all expenses, including attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 4 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.
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(g) “Expense Advance” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 3 or Section 4 hereof.
(h) “Indemnifiable Event” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “Enterprise”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).
(i) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five (5) years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.
(j) “Losses” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.
(k) “Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.
(l) “Standard of Conduct Determination” shall have the meaning ascribed to it in Section 8(b) below.
(m) “Voting Securities” means any securities of the Company that vote generally in the election of directors.
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2. Indemnification. Subject to Section 8 and Section 9 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.
3. Advancement of Expenses. Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within thirty (30) calendar days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.
4. Indemnification for Expenses in Enforcing Rights. To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 3, any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 4 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.
5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
6. Notification and Defense of Claims.
(a) Notification of Claims. Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder unless the Company’s ability to participate in the defense of such claim was materially and adversely affected by such failure.
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(b) Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided, however, that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.
7. Procedure upon Application for Indemnification. In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 8 below.
8. Determination of Right to Indemnification.
(a) Mandatory Indemnification; Indemnification as a Witness.
(i) To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 2 to the fullest extent allowable by law, and no Standard of Conduct Determination (as defined in Section 8(b)) shall be required.
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(ii) To the extent that Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law and no Standard of Conduct Determination (as defined in Section 8(b)) shall be required.
(b) Standard of Conduct. To the extent that the provisions of Section 8(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “Standard of Conduct Determination”) shall be made as follows:
(i) if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum, (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee or (D) by the stockholders of the Company; and
(ii) if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.
The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within thirty (30) calendar days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.
(c) Making the Standard of Conduct Determination. The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 8(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 8(b) shall not have made a determination within thirty (30) calendar days after the later of (A) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 7 (the date of such receipt being the “Notification Date”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such thirty (30) calendar-day period may be extended for a reasonable time, not to exceed an additional thirty (30) calendar days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.
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(d) Payment of Indemnification. If, in regard to any Losses:
(i) Indemnitee shall be entitled to indemnification pursuant to Section 8(a);
(ii) no Standard of Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or
(iii) Indemnitee has been determined or deemed pursuant to Section 8(b) or Section 8(c) to have satisfied the Standard of Conduct Determination,
then the Company shall pay to Indemnitee, within thirty (30) calendar days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.
(e) Selection of Independent Counsel for Standard of Conduct Determination. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 8(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising [him/her] of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 8(b)(ii), the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within five (5) business days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 8(e) to make the Standard of Conduct Determination shall have been selected within twenty (20) calendar days after the Company gives its initial notice pursuant to the first sentence of this Section 8(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 8(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware (“Delaware Court”) to resolve any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 8(b).
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(f) Presumptions and Defenses.
(i) Indemnitee’s Entitlement to Indemnification. In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.
(ii) Reliance as a Safe Harbor. For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.
(iii) No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.
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(iv) Defense to Indemnification and Burden of Proof. It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.
(v) Resolution of Claims. The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 8(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration), it shall be presumed that Indemnitee has been successful on the merits or otherwise for purposes of Section 8(a)(i). The Company shall have the burden of proof to overcome this presumption.
9. Exclusions from Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:
(a) indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:
(i) proceedings referenced in Section 4 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or
(ii) where the Company has joined in or the Board has consented to the initiation of such proceedings.
(b) indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law.
(c) indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.
(d) indemnify or advance funds to Indemnitee for Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee, or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or under any clawback policy adopted by the Company, including to comply with Rule 10D-1 under the Exchange Act and applicable stock exchange listing requirements, or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).
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10. Settlement of Claims. The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld; provided, however, that if a Change in Control has occurred, the Company shall be liable for indemnification of the Indemnitee for amounts paid in settlement if an Independent Counsel has approved the settlement. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.
11. Duration. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret such party’s rights under this Agreement, even if, in either case, Indemnitee may have ceased to serve in such capacity at the time of any such Claim or proceeding.
12. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, “Other Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the effect of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under this Agreement or any Other Indemnity Provision.
13. Liability Insurance. For the duration of Indemnitee’s service as [a director/an officer] of the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director, or of the Company’s officers, if Indemnitee is an officer (and not a director) by such policy.
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14. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.
15. Subrogation. In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
16. Amendments. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.
17. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
18. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
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19. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail or by confirmed email:
(a) if to Indemnitee, to the address set forth on the signature page hereto.
(b) if to the Company, to:
Exascale Labs Holdings Inc.
Attn: [ ]
820 Gessner Road, Suite 332
Houston, TX 77024
Email: [ ]
Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing, or if by email sent during normal business hours, on confirmation, or if by email sent after normal business hours and not confirmed, on the next business day.
20. Governing Law and Forum. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement and (c) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
21. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
22. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| EXASCALE LABS HOLDINGS INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| INDEMNITEE | ||
| By: | ||
| Name: | ||
| Address: | ||
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Exhibit 10.5
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE EXASCALE LABS HOLDINGS INC.
2026 OMNIBUS EQUITY INCENTIVE PLAN
| Name of Optionee: | |
| No. of Option Shares: | |
| Option Exercise Price per Share: | |
| Grant Date: | |
| Expiration Date: |
Pursuant to the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan as amended through the date hereof (the “Plan”), Exascale Labs Holdings Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Class A Common Stock, par value $0.0001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable in accordance with the following schedule so long as the Optionee maintains a continuous Service Relationship with the Company or a Subsidiary on such dates:
| ● | [__]% of the Option Shares shall become exercisable [__] months after the Grant Date, and |
| ● | [__]% of the Option Shares shall become exercisable each [year/quarter/month] thereafter. |
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionee’s Service Relationship is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
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(c) Termination for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.
(d) Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, the Optionee’s disability, or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Status of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code, as amended (the “Code”), but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of this Stock Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company within 30 days after such disposition.
7. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
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8. No Obligation to Continue Service. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in employment or any other Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Service Relationship of the Optionee at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| EXASCALE LABS HOLDINGS INC. | |||
| By: | |||
| Title: | |||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
| Dated: | |||
| Optionee’s Signature | |||
| Optionee’s name and address: | |||
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NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE EXASCALE LABS HOLDINGS INC.
2026 OMNIBUS EQUITY INCENTIVE PLAN
(Employees)
| Name of Optionee: | |
| No. of Option Shares: | |
| Option Exercise Price per Share: | |
| Grant Date: | |
| Expiration Date: |
Pursuant to the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan as amended through the date hereof (the “Plan”), Exascale Labs Holdings Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Class A Common Stock, par value $0.0001 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code, as amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable in accordance with the following schedule so long as Optionee maintains a continuous Service Relationship with the Company or a Subsidiary on such dates:
| ● | [__]% of the Option Shares shall become exercisable [__] months after the Grant Date, and |
| ● | [__]% of the Option Shares shall become exercisable each [year/quarter/month] thereafter. |
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
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Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionee’s Service Relationship is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
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(c) Termination for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.
(d) Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, the Optionee’s disability or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
7. No Obligation to Continue Service. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in employment or any other Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Service Relationship of the Optionee at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
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9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| EXASCALE LABS HOLDINGS INC. | |||
| By: | |||
| Title: | |||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
| Dated: | |||
| Optionee’s Signature | |||
| Optionee’s name and address: | |||
8
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE EXASCALE LABS HOLDINGS INC.
2026 OMNIBUS EQUITY INCENTIVE PLAN
(Non-Employee Directors)
| Name of Optionee: | |
| No. of Option Shares: | |
| Option Exercise Price per Share: | |
| Grant Date: | |
| Expiration Date: |
Pursuant to the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan as amended through the date hereof (the “Plan”), Exascale Labs Holdings Inc. (the “Company”) hereby grants to the Optionee named above, who is a Non-Employee Director of the Company but is not an employee of the Company, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Class A Common Stock, par value $0.0001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code, as amended.
1. Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable in accordance with the following schedule so long as the Optionee maintains a continuous Service Relationship with the Company or a Subsidiary on such dates:
| ● | [__]% of the Option Shares shall become exercisable [__] months after the Grant Date[, and |
| ● | [__]% of the Option Shares shall become exercisable each [year/quarter/month] thereafter]. |
Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
9
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.
(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Other Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three (3) months from the date the Optionee’s Service Relationship terminates or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date the Optionee’s Service Relationship terminates shall terminate immediately and be of no further force or effect.
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4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. No Obligation to Continue Service. Neither the Plan nor this Stock Option confers upon the Optionee any rights with respect to continuance as a Non-Employee Director or in any other Service Relationship.
7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| EXASCALE LABS HOLDINGS INC. | |||
| By: | |||
| Title: | |||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
| Dated: | |||
| Optionee’s Signature | |||
| Optionee’s name and address: | |||
11
RESTRICTED STOCK UNIT AWARD AGREEMENT
UNDER THE EXASCALE LABS HOLDINGS INC.
2026 OMNIBUS EQUITY INCENTIVE PLAN
(Employees)
| Name of Grantee: | |
| No. of Restricted Stock Units: | |
| Grant Date: |
Pursuant to the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan as amended through the date hereof (the “Plan”), Exascale Labs Holdings Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Class A Common Stock, par value $0.0001 per share (the “Stock”) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee maintains a continuous Service Relationship with the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
| Incremental Number of Restricted Stock Units Vested | Vesting Date | ||
| ____________________ (___%) | |||
| ____________________ (___%) | |||
| ____________________ (___%) | |||
| ____________________ (___%) |
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service. If the Grantee’s Service Relationship with the Company and its Subsidiaries terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
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6. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Grantee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such transfer.
7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
8. No Obligation to Continue Service. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment or any other Service Relationship and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Service Relationship of the Grantee at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| EXASCALE LABS HOLDINGS INC. | |||
| By: | |||
| Title: | |||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
| Dated: | |||
| Grantee’s Signature | |||
| Grantee’s name and address: | |||
13
RESTRICTED STOCK UNIT AWARD AGREEMENT
UNDER THE EXASCALE LABS HOLDINGS INC.
2026 OMNIBUS EQUITY INCENTIVE PLAN
(Non-Employee Directors)
| Name of Grantee: | |
| No. of Restricted Stock Units: | |
| Grant Date: |
Pursuant to the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan as amended through the date hereof (the “Plan”), Exascale Labs Holdings Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Class A Common Stock, par value $0.0001 per share (the “Stock”) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee maintains a continuous Service Relationship with the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.
| Incremental Number of Restricted Stock Units Vested | Vesting Date | ||
| ____________________ (___%) | |||
| ____________________ (___%) | |||
| ____________________ (___%) | |||
| ____________________ (___%) |
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service. If the Grantee’s Service Relationship terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units.
4. Issuance of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
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6. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code.
7. No Obligation to Continue Service. Neither the Plan nor this Award confers upon the Grantee any rights with respect to continuance as a Non-Employee Director or in any other Service Relationship.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
9. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Grantee, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such transfer.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
| EXASCALE LABS HOLDINGS INC. | |||
| By: | |||
| Title: | |||
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
| Dated: | |||
| Grantee’s Signature | |||
| Grantee’s name and address: | |||
15
Exhibit 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered into as of September 28, 2026 (the “Execution Date”), by and between Exascale Labs Holdings Inc., a Delaware corporation (the “Company”), and Hoansoo Lee (the “Executive”).
The Company and the Executive are sometimes referred to individually as a “Party” and collectively as the “Parties.”
Notwithstanding the Execution Date, the Parties expressly agree that the Executive’s employment with the Company commenced and shall be deemed effective as of August 27, 2026 (the “Employment Effective Date”), which is the date on which the Company’s business combination closed.
| 1. | Employment |
| 1.1. | Position |
The Company hereby employs the Executive as its Chief Executive Officer (“CEO”), and the Executive hereby accepts such employment, subject to the terms and conditions of this Agreement.
The Executive shall report directly to the Board of Directors of the Company (the “Board”) and shall have the duties, authority and responsibilities customarily associated with the position of chief executive officer of a company of the Company’s size and stage, together with such additional duties, authority and responsibilities as may reasonably be assigned by the Board.
| 1.2. | At-Will Employment |
The Executive’s employment with the Company is at will. Either the Executive or the Company may terminate the employment relationship at any time, with or without Cause, subject to the terms of this Agreement.
Nothing in this Agreement shall be construed to create an employment relationship for a specified term or to limit either Party’s right to terminate the Executive’s employment at any time, except that a termination of the Executive’s employment may give rise to the severance rights described in Section 5 of this Agreement.
For purposes of determining the Executive’s compensation and severance rights, the Parties have agreed to a three-year protection period beginning August 27, 2026 and ending August 27, 2029 (the “Protection Period”). The Protection Period is not an employment term and does not alter the at-will nature of the Executive’s employment.
| 1.3. | Principal Place of Employment |
The Executive’s principal place of employment shall initially be at the Company’s principal place of business in Houston, Texas. The Executive acknowledges that the nature of the Company’s business may require reasonable domestic and international travel.
| 1.4. | Duties and Authority |
The Executive shall devote substantially all of the Executive’s business time, attention and efforts to the business and affairs of the Company.
The Executive shall have such authority over the Company’s day-to-day operations as is customarily exercised by a chief executive officer, subject to the oversight and lawful authority of the Board.
The Executive may engage in passive investments and other outside activities that do not materially interfere with the Executive’s duties to the Company and do not compete with the Company’s business.
| 1.5. | Minimum Service Commitment |
| (a) | The Executive commits to serve as CEO from the Employment Effective Date through August 27, 2028 (the “Minimum Service Date”) and shall not resign without Good Reason before the Minimum Service Date except for an Excused Reason. “Excused Reason” means (i) the Executive’s death or Disability; (ii) a serious illness or injury of the Executive or of the Executive’s spouse, child or parent that reasonably requires the Executive to cease full-time work, as supported by medical evidence; or (iii) any other circumstance beyond the Executive’s reasonable control that makes continued service impracticable, as determined in good faith by the Board with the Executive abstaining. |
| (b) | This commitment does not alter the at-will nature of the Executive’s employment under Section 1.2, and the Company may not compel the Executive’s continued service. The consequences of a termination of the Executive’s employment before the Minimum Service Date are solely those set forth in Section 5 of this Agreement. |
| (c) | The Executive shall give the Company not less than ninety (90) days’ prior written notice of any resignation without Good Reason. The Company may shorten or waive the notice period, in which case the Company shall continue to pay Base Salary and provide benefits through the last day of the original notice period, and such last day shall be treated as the termination date for purposes of the Minimum Service Date. During the notice period the Executive shall remain employed and shall reasonably assist in the transition of the Executive’s duties, and the Company may relieve the Executive of some or all duties during such period. For sixty (60) days following any termination of employment, the Executive shall provide reasonable transition assistance upon the Company’s request, at mutually convenient times and without unreasonable interference with the Executive’s other activities. |
| (d) | Company Minimum Commitment. In consideration of the Executive’s commitment to serve through the Minimum Service Date, the Company acknowledges a corresponding commitment to the Executive through the Minimum Service Date. Nothing in this Section shall limit the authority of the Board to terminate the Executive’s employment at any time in accordance with Section 1.2; provided, however, that if the Company terminates the Executive’s employment without Cause before the Minimum Service Date, or if the Executive resigns for Good Reason before the Minimum Service Date, the Executive shall receive the compensation and benefits provided in Section 5.2, which are intended to provide the Executive with the economic protection of the Company’s corresponding minimum commitment. |
| 2. | Compensation |
| 2.1. | Base Salary |
During the Executive’s employment, the Company shall pay the Executive a base salary at an annualized rate of $420,000 (the “Base Salary”), payable in accordance with the Company’s customary payroll practices and subject to applicable tax withholdings and deductions.
The Board (or its Compensation Committee) may increase the Executive’s Base Salary from time to time in its discretion, but may not reduce the Base Salary without the Executive’s written consent.
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| 2.2. | Annual Cash Bonus |
| 2.2.1. | Fiscal Year Eligibility |
The Company’s fiscal year ends on June 30 of each year (each, a “Fiscal Year”).
The Executive shall become eligible to receive an annual cash bonus of $150,000 (the “Annual Bonus”) beginning with the Company’s fiscal year ending June 30, 2028 (“Fiscal Year 2028”), which is the second Fiscal Year following the Employment Effective Date. For the avoidance of doubt, the Executive shall not be eligible for an Annual Bonus for the fiscal year ending June 30, 2027, notwithstanding that the Executive commenced employment on August 27, 2026.
Subject to the terms of this Agreement, the Executive shall be eligible to receive an Annual Bonus of $150,000 for each Fiscal Year beginning with Fiscal Year 2028 during which the Executive remains employed by the Company.
Unless otherwise agreed in writing, the Annual Bonus shall not be subject to any additional discretionary performance conditions.
| 2.2.2. | Payment of Annual Bonus |
The Annual Bonus for each Fiscal Year shall be paid within thirty calendar (30) days following the completion of such Fiscal Year.
| 2.2.3. | Annual Bonus Upon Termination |
The treatment of the Annual Bonus upon a termination of the Executive’s employment is governed by Section 5 of this Agreement.
For the avoidance of doubt:
| (i) | The Executive shall not be entitled to an Annual Bonus for Fiscal Year 2027; |
| (ii) | The Executive shall be entitled to the $150,000 Annual Bonus for Fiscal Year 2028 if the Executive remains employed through June 30, 2028, subject to the terms of this Agreement; and |
| (iii) | The Executive shall be entitled to the $150,000 Annual Bonus for Fiscal Year 2029 if the Executive remains employed through June 30, 2029, subject to the terms of this Agreement. |
| 2.3. | Annual RSU Award |
Subject to approval by the Compensation Committee of the Board (the “Compensation Committee”), and the terms of the Company’s applicable equity incentive plan and the applicable restricted stock unit award agreement, the Executive shall be granted an annual award of restricted stock units (“RSUs”) representing the right to receive 300,000 shares of the Company’s Class A common stock (each, an “Annual RSU Award” and, collectively, the “Annual RSU Awards”).
The first Annual RSU Award shall be granted with respect to the Executive’s first year of employment commencing on the Employment Effective Date, and the Company shall thereafter grant an additional Annual RSU Award representing 300,000 shares of the Company’s Class A common stock for each subsequent annual period during the Protection Period, with each such Annual RSU Award subject to the approval of the Compensation Committee and the terms of the applicable equity incentive plan and award agreement.
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For the avoidance of doubt, the Executive’s annual equity compensation opportunity pursuant to this Section 2.3 is 300,000 RSUs per annual grant year, and the grant of an Annual RSU Award for one year shall not reduce, offset, or satisfy the Company’s obligation to make the Annual RSU Award for any subsequent year.
Each Annual RSU Award shall constitute part of the Executive’s compensation package for the applicable annual period.
Each Annual RSU Award shall vest over three (3) years commencing on its applicable grant date, with one-third (1/3) of the applicable Annual RSU Award vesting on each of the first three anniversaries of such grant date, subject to the Executive’s continued employment through the applicable vesting date and the accelerated vesting provisions of Section 5 of this Agreement.
The vesting commencement date of the first Annual RSU Award shall be the Employment Effective Date, and the vesting commencement date of each subsequent Annual RSU Award shall be the corresponding anniversary of the Employment Effective Date, in each case regardless of the actual grant date. The Company shall grant each Annual RSU Award no later than thirty (30) days following its vesting commencement date. Notwithstanding the foregoing vesting schedule, any portion of an Annual RSU Award or ARR-based RSU Award that remains unvested on August 27, 2029 shall vest on such date, subject to the Executive’s continued employment through such date.
The Parties may instead implement substantially equivalent monthly or quarterly vesting over the three-year period, as specified in the applicable equity award agreement.
The actual issuance and administration of the Annual RSU Award shall be governed by the Company’s applicable equity incentive plan and a written RSU award agreement.
Notwithstanding anything to the contrary in this Agreement, the Company shall not amend, cancel, reduce, defer or otherwise materially adversely affect an Annual RSU Award after its approval and grant except with the Executive’s written consent or as otherwise expressly permitted under the applicable equity incentive plan without materially impairing the Executive’s contractual rights under this Agreement.
Notwithstanding the foregoing and Section 2.5, all compensation under this Agreement, including each Annual RSU Award and ARR-based RSU Award, is subject to the Company’s Clawback Policy as in effect from time to time and to any recovery of compensation required by applicable law or Nasdaq listing rules.
| 2.4. | ARR-Based RSU Awards |
In addition to the Annual RSU Awards, the Executive shall be eligible to receive the following additional RSU awards:
| 2.4.1. | $20 Million ARR Award |
If the Company’s Annual Recurring Revenue (“ARR”) exceeds $20,000,000, the Executive shall receive an additional RSU award representing 150,000 shares of the Company’s Class A common stock (the “$20M RSU Award”).
| 2.4.2. | $30 Million ARR Award |
If the Company’s ARR exceeds $30,000,000, the Executive shall receive an additional RSU award representing 150,000 shares of the Company’s Class A common stock (the “$30M RSU Award”).
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| 2.4.3. | ARR Awards Cumulative |
The $20M RSU Award and the $30M RSU Award are cumulative. Accordingly, if the Company’s ARR exceeds $30,000,000, the Executive shall be entitled to both the $20M RSU Award and the $30M RSU Award, for a total RSU award representing 300,000 shares of the Company’s Class A common stock.
| 2.4.4. | Measurement of ARR |
For purposes of this Agreement, “ARR” means, as of the last day of any fiscal quarter, the aggregate monthly recurring fees payable under bona fide customer contracts for recurring products and/or services in effect on such date, multiplied by twelve (12), calculated in accordance with the Company’s consistently applied accounting and revenue-recognition practices.
ARR shall exclude one-time fees, non-recurring services, extraordinary or unusual revenue, and amounts attributable to cancelled or terminated customer contracts.
The Board (or the Compensation Committee) shall certify the Company’s ARR as of the end of each fiscal quarter within forty-five (45) days following the end of such fiscal quarter, for purposes of determining whether an ARR-based RSU award has been earned. Such certification shall be made in good faith and shall not be unreasonably withheld, delayed, or manipulated for the purpose of preventing the Executive from earning an award under this Agreement.
| 2.4.5. | Grant Date and Vesting of ARR-Based RSU Awards |
An ARR-based RSU award shall be deemed earned, and the applicable ARR threshold shall be treated as achieved, as of the first fiscal quarter-end during the Protection Period on which the Company’s ARR exceeds such threshold, whether or not the certification described in Section 2.4.4 has occurred as of any relevant date.
The applicable RSU Award shall be formally granted as soon as reasonably practicable following certification by the Board that the applicable threshold has been achieved.
Each ARR-based RSU award shall vest over three (3) years from its applicable grant date, with one-third (1/3) vesting on each anniversary of such grant date, subject to the Executive’s continued employment and the accelerated vesting provisions of Section 5 of this Agreement.
The Company shall cause each ARR-based RSU Award to be documented under the Company’s equity incentive plan and a written award agreement consistent with this Agreement.
| 2.4.6. | Subsequent ARR Milestones |
Upon the Company exceeding any ARR milestone set forth in this Section 2.4, the applicable ARR milestone shall be subject to revision for subsequent performance periods. Following achievement of such milestone, the Company and the Executive shall establish a revised ARR milestone or milestones applicable to subsequent performance periods for purposes of determining eligibility for subsequent performance-based RSU awards or other performance-based bonuses. Any such revised milestone or milestones shall be proposed to, and shall require the prior approval of, the Compensation Committee. The Compensation Committee shall consider in good faith the Company’s then-current business plan, growth expectations, financial performance, and other relevant performance objectives in establishing or approving such revised milestone or milestones. No revised milestone shall reduce, eliminate, or otherwise impair any RSU award or other compensation previously earned by the Executive under this Agreement.
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| 2.5. | Equity Plan and Authorization |
All equity awards shall be subject to the Company’s equity incentive plan and applicable award agreement, provided that no provision of such plan or award agreement shall materially reduce or eliminate the contractual economic rights expressly granted to the Executive under this Agreement without the Executive’s written consent.
The Company shall obtain all corporate approvals necessary to authorize and issue the equity awards contemplated by this Agreement. If additional stockholder or Board approval is required to authorize any award, the Company shall use reasonable best efforts to obtain such approval.
| 3. | Employee Benefits |
The Executive shall be eligible to participate in employee benefit plans and programs generally made available by the Company to its senior executives, including health insurance, retirement benefits, paid time off, and other benefits, subject to the terms and conditions of such plans and programs.
Nothing in this Agreement shall require the Company to maintain any particular employee benefit plan or program, except as expressly provided herein.
The Company shall reimburse the Executive for reasonable and necessary business expenses incurred in connection with the Executive’s duties, subject to the Company’s reasonable expense reimbursement policies.
| 4. | Termination of Employment |
| 4.1. | General |
The Executive’s employment may be terminated:
| (i) | by the Company for Cause; |
| (ii) | by the Company without Cause; |
| (iii) | by the Executive for Good Reason; |
| (iv) | by the Executive voluntarily without Good Reason; or |
| (v) | upon the Executive’s death or Disability. |
| 4.2. | Cause |
For purposes of this Agreement, “Cause” means:
| (i) | the Executive’s conviction of, or plea of guilty or nolo contendere to, a felony involving fraud, embezzlement, theft, or other material dishonesty; |
| (ii) | the Executive’s material fraud, embezzlement, misappropriation, or theft involving the Company; |
| (iii) | the Executive’s material and willful violation of a lawful written directive of the Board, following written notice and a reasonable opportunity to cure, if curable; |
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| (iv) | the Executive’s material breach of this Agreement or any confidentiality, intellectual property, invention assignment, or similar agreement with the Company, following written notice and a thirty (30)-day opportunity to cure, if curable; or |
| (v) | the Executive’s willful misconduct that causes material harm to the Company. |
No event shall constitute Cause unless the Company provides the Executive with written notice describing the grounds for Cause in reasonable detail and, where the conduct is reasonably capable of cure, provides the Executive the applicable opportunity to cure.
| 4.3. | Good Reason |
For purposes of this Agreement, “Good Reason” means, without the Executive’s written consent:
| (i) | any reduction in the Executive’s Base Salary; |
| (ii) | a material diminution in the Executive’s authority, duties, or responsibilities as CEO; |
| (iii) | a material breach by the Company of this Agreement or any other material written agreement with the Executive; |
| (iv) | relocation of the Executive’s principal place of employment more than fifty (50) miles from Houston, Texas; or |
| (v) | removal of the Executive from the position of CEO other than in circumstances constituting Cause. |
The Executive must provide written notice to the Company within ninety (90) calendar days following the occurrence of an event constituting Good Reason, and the Company shall have thirty (30) calendar days following receipt of such notice to cure the condition, if reasonably curable. If the Company fails to cure the condition, the Executive may resign for Good Reason within thirty (30) calendar days thereafter.
| 4.4. | Disability |
For purposes of this Agreement, “Disability” means the Executive’s inability, by reason of a physical or mental impairment, to perform the essential functions of the Executive’s position for a period of at least one hundred eighty (180) consecutive days or for one hundred eighty (180) days in any twelve (12)-month period, as determined in good faith by the Board (with the Executive abstaining) based on competent medical evidence, and in a manner intended to comply with the requirements of Section 409A of the Internal Revenue Code and the regulations thereunder.
| 5. | Severance |
| 5.1. | Full Protection |
If the Executive’s employment terminates (a) on or after the Minimum Service Date and before August 27, 2029 for any reason other than a termination by the Company for Cause, or (b) at any time before August 27, 2029 under the circumstances described in Section 6 of this Agreement, the Executive shall be entitled to receive, in addition to all accrued but unpaid compensation and benefits: (i) continued payment of Base Salary through August 27, 2029; (ii) each Annual Bonus for a Fiscal Year ending on or before August 27, 2029 that has not been paid as of the termination date; (iii) accelerated vesting in full of all Annual RSU Awards granted or required to be granted under Section 2.3, any such award not yet granted being deemed granted as of the termination date; (iv) accelerated vesting in full of each ARR-based RSU Award for which the applicable ARR threshold has been achieved on or before the termination date, whether or not certified or granted as of such date; and (v) continuation of health benefits as provided in Section 5.4.
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In the case of a resignation without Good Reason, the entitlements described in this Section 5.1 are subject to the Executive’s compliance with Section 1.5(c), unless waived by the Company. Except as provided in Section 5.2.1 with respect to a termination by the Company without Cause or by the Executive for Good Reason, no ARR-based RSU Award for which the applicable ARR threshold has not been achieved as of the termination date shall thereafter be earned, granted or vested.
| 5.2. | Termination Without Cause or for Good Reason Before the Minimum Service Date |
If, before the Minimum Service Date, the Company terminates the Executive’s employment without Cause or the Executive resigns for Good Reason, other than under the circumstances described in Section 6 of this Agreement, the Executive shall be entitled to receive, in addition to all accrued but unpaid compensation and benefits:
| (i) | continued payment of Base Salary for the longer of (A) twelve (12) months following the termination date or (B) the period from the termination date through the Minimum Service Date; |
| (ii) | any Annual Bonus that has been earned but remains unpaid as of the termination date and, if the termination date occurs before June 30, 2028, the Annual Bonus for Fiscal Year 2028 if such bonus would have become payable had the Executive remained employed through the Minimum Service Date; |
| (iii) | accelerated vesting of all Annual RSU Awards granted as of the termination date to the extent such awards would have vested through the Minimum Service Date had the Executive remained employed through such date; |
| (iv) | any Annual RSU Award that would have been required to be granted under Section 2.3 on or before the Minimum Service Date had the Executive remained employed through such date, with such award deemed granted as of the applicable vesting commencement date and vested to the extent it would have vested through the Minimum Service Date; |
| (v) | accelerated vesting in full of each ARR-based RSU Award for which the applicable ARR threshold has been achieved on or before the termination date, whether or not certified or granted as of such date; |
| (vi) | the treatment of ARR-based RSU Awards for which the applicable ARR threshold is first achieved after the termination date, as provided in Section 5.2.1; and |
| (vii) | continuation of health benefits through the longer of (A) twelve (12) months following the termination date or (B) the Minimum Service Date, subject to Section 5.4. |
| 5.2.1. | Post-Termination ARR Measurement |
Notwithstanding the termination of the Executive’s employment, if the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason prior to August 27, 2029, ARR shall continue to be measured through August 27, 2029 for purposes of Section 2.4 as though the Executive had remained employed through such date. Any ARR-based RSU Award for which the applicable ARR threshold is first achieved during such period shall be deemed earned as of the applicable fiscal quarter-end, shall be granted promptly following certification pursuant to Section 2.4.4, and shall vest in full upon grant. The Executive’s termination of employment shall not affect the Company’s obligation to measure and certify ARR in accordance with Section 2.4.4.
| 5.3. | Death, Disability or Excused Reason Before the Minimum Service Date |
If, before the Minimum Service Date, the Executive’s employment terminates by reason of the Executive’s death or Disability, or the Executive resigns for an Excused Reason, the Executive (or, in the case of death, the Executive’s estate, designated beneficiary or other person legally entitled thereto) shall be entitled to receive, in addition to all accrued but unpaid compensation and benefits, the amounts described in clauses (ii) through (v) of Section 5.2.
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| 5.3.1. | Release |
The severance payable under this Section 5.3 shall not be conditioned upon the execution of a release in the case of death. In the case of Disability or an Excused Reason, the Company may require the Executive’s execution and non-revocation of the release described in Section 5.5, to the extent permitted by applicable law; provided that the Company shall not condition payment of accrued compensation, vested equity, or other amounts that cannot lawfully be conditioned upon a release upon execution of such release.
| 5.3.2. | Equity Administration |
The Company shall take all actions reasonably necessary to give effect to the accelerated vesting contemplated by this Section 5.3 and shall cause any shares or other amounts payable following the Executive’s death to be issued or paid to the person legally entitled thereto in accordance with the applicable equity incentive plan, award agreement, and applicable law.
| 5.4. | Form of Payment; Benefits Continuation |
Base Salary continuation under Section 5.1 or Section 5.2 shall be paid in substantially equal installments in accordance with the Company’s regular payroll schedule over the applicable period, subject to Section 9 of this Agreement. Equity compensation shall be accelerated and settled as provided in Section 5.1, 5.2 or 5.3, as applicable.
To the extent permitted by applicable law and the Company’s applicable benefit plans, the Company shall continue the Executive’s participation in the Company’s health insurance program or, if continued participation is not available, shall pay or reimburse the premiums for continuation coverage under COBRA, in each case through the earlier of: (i) August 27, 2029, in the case of a termination described in Section 5.1, or the later of the twelve (12)-month anniversary of the termination date and the Minimum Service Date, in the case of a termination described in Section 5.2; or (ii) the date the Executive becomes eligible for comparable health coverage through another employer.
If continuation of benefits is not legally or administratively practicable, the Company shall instead provide the Executive with a taxable cash payment reasonably equivalent to the Company’s cost of providing such benefits.
| 5.5. | Conditions to Severance |
Except as set forth in Section 5.3.1 of this Agreement, payment of severance shall be conditioned upon the Executive’s execution and non-revocation of a customary general release of claims in favor of the Company, its affiliates, and their respective directors, officers, employees, and representatives.
The Company shall provide such release within five (5) business days following termination. The Executive shall have at least twenty-one (21) calendar days, or such longer period as required by applicable law, to consider the release, and the release must become effective and irrevocable no later than sixty (60) days following the termination date. If such sixty (60)-day period begins in one calendar year and ends in the next, any payment conditioned on the release shall be made or commence in the second calendar year.
Nothing in the release shall waive rights that cannot lawfully be waived, including rights to vested equity, accrued compensation, indemnification, or rights to enforce this Agreement.
| 5.6. | Termination for Cause or Unexcused Resignation |
If the Executive’s employment is terminated by the Company for Cause at any time, or if the Executive resigns without Good Reason and without an Excused Reason before the Minimum Service Date, the Executive shall be entitled only to accrued but unpaid Base Salary, vested equity, and other amounts required by applicable law or the applicable benefit plans.
Any unvested RSUs shall be treated in accordance with the applicable equity plan and award agreement.
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| 6. | Change in Control |
If, prior to August 27, 2029, the Company undergoes a Change in Control and, in connection with or within twelve (12) months following such Change in Control, the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, the Executive shall be entitled to the severance described in Section 5.1 of this Agreement, regardless of whether such termination occurs before or after the Minimum Service Date.
For purposes of this Agreement, “Change in Control” means:
| (i) | a merger, consolidation, reorganization or similar transaction following which the Company’s stockholders immediately prior to the transaction own less than fifty percent (50%) of the voting power of the surviving or resulting entity; |
| (ii) | a sale of all or substantially all of the Company’s assets; or |
| (iii) | a transaction or series of related transactions resulting in any person or group acquiring more than fifty percent (50%) of the voting power of the Company’s voting securities; |
provided that the applicable transaction constitutes a “change in control” under applicable tax law and the Company’s applicable equity incentive plan.
If a Change in Control occurs during the Protection Period, the Company shall ensure that the surviving or acquiring entity assumes this Agreement and all outstanding RSU awards.
| 7. | Confidentiality and Intellectual Property |
| 7.1. | Confidential Information |
The Executive shall maintain the confidentiality of all non-public information concerning the Company, including its technology, trade secrets, customers, employees, business plans, financial information and other proprietary information.
This obligation shall continue following termination of the Executive’s employment for so long as the applicable information remains confidential or constitutes a trade secret under applicable law.
Nothing in this Agreement prohibits the Executive from reporting possible violations of law to a governmental agency or otherwise exercising rights protected by applicable law.
| 7.2. | Intellectual Property |
All inventions, discoveries, developments, works of authorship, designs, processes, software, business concepts, materials and other intellectual property created by the Executive within the scope of the Executive’s employment or using Company resources shall be owned by the Company to the fullest extent permitted by applicable law.
The Executive shall execute such documents as reasonably necessary to confirm the Company’s ownership of such intellectual property, provided that such agreement shall not conflict with the express compensation and severance rights set forth in this Agreement.
| 8. | Indemnification |
The Company shall provide the Executive with indemnification to the fullest extent permitted by the Company’s certificate of incorporation, the Company’s bylaws, applicable law, and any separate indemnification agreement between the Company and the Executive.
The Company shall maintain directors’ and officers’ liability insurance covering the Executive in his or her capacity as an officer and director, if applicable, on terms no less favorable than those applicable to other senior officers of the Company.
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| 9. | Section 409A |
The Parties intend that payments and benefits under this Agreement either comply with or be exempt from Section 409A of the Internal Revenue Code (“Section 409A”), and this Agreement shall be interpreted and administered consistently with such intent.
Notwithstanding anything herein to the contrary, if any payment or benefit constitutes deferred compensation subject to Section 409A, such payment or benefit shall be administered in a manner consistent with Section 409A.
To the extent required by Section 409A, payments shall be treated as separate payments for purposes of Section 409A.
If the Executive is a “specified employee” within the meaning of Section 409A on the date of the Executive’s separation from service, any payment of deferred compensation subject to Section 409A that is payable on account of such separation from service and that would otherwise be paid within six (6) months following such separation shall instead be paid, without interest, on the first business day following the six (6)-month anniversary of such separation (or, if earlier, upon the Executive’s death), and the remaining payments shall be made as otherwise scheduled. Each installment payment under this Agreement shall be treated as a separate payment for purposes of Section 409A.
| 10. | Taxes |
All compensation payable under this Agreement shall be subject to applicable federal, state, local, and other tax withholding requirements.
The Executive shall be responsible for all taxes arising from compensation and equity awards, except for taxes that the Company is legally required to pay.
| 11. | Representations |
The Executive represents that the Executive’s execution and performance of this Agreement will not violate any agreement or obligation binding upon the Executive.
The Executive shall not use or disclose confidential information belonging to any former employer or other third party in connection with the Executive’s employment with the Company.
| 12. | Notices |
All notices under this Agreement shall be in writing and shall be delivered personally, by nationally recognized overnight courier, or by email followed by confirmation of receipt, to the addresses designated by the Parties.
If to the Company:
Exascale Labs Holdings Inc.
820 Gessner Road, Suite 332
Houston, Texas 77024
Attn: Board of Directors/Chairperson
If to the Executive:
Hoansoo Lee
[ ]
Houston, Texas 77024
Email: [ ]
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| 13. | Assignment |
The Company may assign this Agreement to any successor to substantially all of its business or assets, provided that such successor assumes the Company’s obligations under this Agreement.
The Executive may not assign this Agreement or any rights or obligations under this Agreement, without the Company’s prior written consent, except that the Executive’s rights to receive payments may pass to the Executive’s estate upon death or, with respect to amounts payable following death, to the person designated by the Executive in accordance with the applicable equity plan or award agreement or, absent such designation, the Executive’s estate.
| 14. | Governing Law |
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict-of-law principles, except to the extent that mandatory provisions of Texas law apply to the Executive’s employment in Texas.
The Parties consent to the jurisdiction of the state and federal courts located in Harris County, Texas, and the federal courts having jurisdiction over Harris County, Texas, for disputes arising out of or relating to this Agreement, subject to any mandatory jurisdictional requirements.
| 15. | Entire Agreement |
This Agreement, together with the Company’s applicable equity incentive plan, RSU award agreements, confidentiality and intellectual property agreements, and any separate indemnification agreement, constitutes the entire agreement between the Parties concerning the Executive’s employment with the Company and supersedes all prior oral or written agreements, understandings, and representations concerning such subject matter.
In the event of a conflict between this Agreement and an RSU award agreement, this Agreement shall control with respect to the Executive’s contractual compensation and severance rights, while the applicable equity incentive plan shall control to the extent required for the administration and issuance of equity awards.
The Independent Contractor Agreement between the Executive and Exascale Labs Inc., as amended, terminated effective as of the Employment Effective Date, and no amounts are payable thereunder for any period on or after such date. The Company may satisfy any payment obligation under this Agreement through any of its subsidiaries or affiliates.
| 16. | Amendments and Waiver |
No amendment, modification, or waiver of this Agreement shall be effective unless in writing and signed by the Executive and an authorized representative of the Company.
No waiver of any breach shall constitute a waiver of any subsequent breach.
| 17. | Severability |
If any provision of this Agreement is determined to be invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be modified to the minimum extent necessary to make it enforceable.
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| 18. | Retroactive Effect |
The Parties expressly acknowledge and agree that, notwithstanding the Execution Date, this Agreement memorializes and governs the terms of the Executive’s employment effective as of August 27, 2026, the date on which the Company’s business combination closed.
All compensation, benefits, vesting, service periods, and other employment-related rights under this Agreement shall be calculated from the Employment Effective Date unless expressly provided otherwise herein or otherwise required by applicable law.
| 19. | Headings |
The headings and captions contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of any provision of this Agreement.
| 20. | Mutual Drafting; No Construction Against Drafter |
The Parties acknowledge and agree that this Agreement has been negotiated by the Parties and their respective counsels, is the product of mutual drafting and negotiation, and shall not be construed for or against either Party by reason of the fact that such Party or its counsel drafted or prepared any particular provision of this Agreement.
Accordingly, the rule of construction that an agreement or instrument shall be construed against the drafter shall not apply to this Agreement. Each Party acknowledges that it has had the opportunity to review, negotiate, and propose revisions to this Agreement and has entered into this Agreement voluntarily and with the opportunity to consult with independent legal counsel.
| 21. | Counterparts; Electronic Signatures |
This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together constitute one instrument.
Electronic signatures and electronically transmitted copies shall have the same force and effect as original signatures.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the respective dates set forth below, with the terms of the Executive’s employment being effective as of August 27, 2026.
| EXASCALE LABS HOLDINGS INC. | ||
| By: | /s/ Wenying Jia | |
| Name: | Wenying Jia | |
| Title: | Chairperson of the Board | |
| Date: | September 28, 2026 | |
| EXECUTIVE | ||
| /s/ Hoansoo Lee | ||
| Hoansoo Lee | ||
| Date: | September 28, 2026 | |
[Signature Page to Employment Agreement Between Exascale Labs Holdings Inc. and Hoansoo Lee]
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Exhibit 10.7
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered into as of September 25, 2026 (the “Effective Date”), by and between Exascale Labs Holdings Inc., a Delaware corporation (the “Company”), and Jake Carney (the “Executive”).
The Company and the Executive are sometimes referred to individually as a “Party” and collectively as the “Parties.”
| 1. | Employment |
| 1.1. | Position |
The Company hereby employs the Executive as its Chief Financial Officer (“CFO”), and the Executive hereby accepts such employment, subject to the terms and conditions of this Agreement.
The Executive shall report to the Chief Executive Officer of the Company and shall have the duties, authority, and responsibilities customarily associated with the position of chief financial officer of a company of the Company’s size and stage, together with such additional duties and responsibilities as may reasonably be assigned by the Chief Executive Officer of the Company or the board of directors of the Company (the “Board”). The Executive acknowledges that, as CFO, the Executive shall serve as a senior executive officer of the Company and shall at all times act in a manner consistent with the fiduciary, statutory, contractual, and other duties applicable to the Executive as an officer of the Company.
If the Board designates the Executive as the Company’s principal financial officer or principal accounting officer, the Executive shall perform the duties of that role under the U.S. federal securities laws and the rules of The Nasdaq Stock Market, including signing the Company’s periodic reports and the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, complying with Section 16 of the Securities Exchange Act of 1934 and the Company’s insider trading policy, and being subject to the Company’s clawback policy.
The Executive shall perform such duties faithfully, diligently, competently, and in the best interests of the Company and its subsidiaries and affiliates, as applicable. The Executive shall have no authority to bind the Company or any subsidiary or affiliate except as expressly authorized by the Board, the Chief Executive Officer, or pursuant to duly adopted policies, delegated authority, or other applicable corporate authorization.
The Executive acknowledges that the Company’s business, organizational structure, reporting relationships, products, services, financing arrangements, and strategic priorities may change from time to time, and that the Executive’s duties and reporting relationships may reasonably be modified by the Company in light of such changes.
| 1.2. | At-Will Employment |
The Executive’s employment with the Company is at will. Either the Executive or the Company may terminate the employment relationship at any time, with or without cause, subject to the notice requirements in Section 4.1 of this Agreement and applicable law.
Nothing in this Agreement shall be construed to create employment for any specified term or to limit either Party’s right to terminate the Executive’s employment at any time, subject to the notice requirements in Section 4.1 of this Agreement.
Without limiting the foregoing, the Company may terminate the Executive’s employment upon one (1) month’s prior written notice, and may terminate the Executive’s authority to act on behalf of the Company or any subsidiary or affiliate immediately, at any time and for any reason.
Exascale Labs Holdings Inc. / Jake Carney | Page 1
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
The Executive acknowledges that no representation, promise, course of dealing, or statement by any officer, employee, director, stockholder, or other representative of the Company has created or shall create any employment relationship other than employment at will, except as expressly set forth in a written agreement signed by an authorized representative of the Company.
| 1.3. | Duties |
The Executive shall devote substantially all of the Executive’s business time, attention, and efforts to the business and affairs of the Company and shall faithfully and diligently perform the duties of CFO and such other duties as may reasonably be assigned by the Chief Executive Officer of the Company or the Board.
The Executive’s positions, engagements, and business activities outside the Company as of the Effective Date are listed in Schedule A to this Agreement. On or before the Effective Date, and thereafter upon the Company’s request, the Executive shall provide the Company with a written statement of the expected time commitment of each item listed in Schedule A, together with such supporting information as the Company may reasonably request to confirm that the Executive is able to devote substantially all of the Executive’s business time to the Company. The Executive shall update Schedule A promptly upon any change.
The Executive shall comply with all lawful policies, procedures, and directives of the Company applicable to the Executive’s position.
The Executive shall not engage in any other employment, consulting arrangement, or business activity that materially interferes with the performance of the Executive’s duties to the Company or conflicts with the interests of the Company.
The Executive shall promptly disclose to the Company any actual or potential conflict of interest, including any financial interest, outside business relationship, or other circumstance that could reasonably be expected to interfere with the Executive’s duties or obligations to the Company.
The Executive shall comply with all applicable laws, rules, regulations, accounting standards, securities laws, tax laws, and Company policies applicable to the Executive’s position and shall promptly notify the Chief Executive Officer and the Board of any material actual or suspected violation thereof.
| 1.4. | Company Policies; Code of Ethics |
The Executive shall comply with all policies, procedures, codes of ethics, information-security requirements, insider-trading policies, expense policies, accounting policies, document-retention policies, anti-bribery and anti-corruption policies, and other rules adopted or amended by the Company from time to time. To the extent of any conflict between this Agreement and a generally applicable Company policy, this Agreement shall control solely with respect to the subject matter expressly addressed herein.
| 2. | Compensation |
| 2.1. | Base Salary |
During the Executive’s employment, the Company shall pay the Executive a base salary at the rate of $6,000 per month (the “Base Salary”), payable monthly in U.S. dollars by wire transfer to a personal bank account designated by the Executive in writing, subject to Section 9 of this Agreement. The Company may cause a subsidiary or affiliate of the Company to make any payment under this Agreement on the Company’s behalf, and any such payment shall discharge the Company’s obligation to the extent of the amount paid.
The Company may increase the Executive’s Base Salary from time to time in its discretion.
The Base Salary may be reviewed periodically by the Company but shall not be deemed to constitute a guarantee of any particular compensation level for any period.
Exascale Labs Holdings Inc. / Jake Carney | Page 2
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 2.2. | No Additional Compensation |
Except for the Base Salary expressly provided in Section 2.1 of this Agreement and reimbursement of properly documented business expenses pursuant to Section 3.2 of this Agreement, the Executive shall not be entitled to any bonus, commission, equity award, incentive compensation, severance, or other additional compensation from the Company unless separately approved by the Company in writing.
Nothing in this Agreement shall obligate the Company to provide the Executive with any bonus, equity award, incentive compensation, severance, or other additional compensation.
Any bonus, incentive compensation, equity award, commission, or other discretionary compensation, if granted, shall be subject to the terms and conditions established by the Company or the applicable plan or award agreement and, unless expressly provided otherwise in a written agreement signed by an authorized representative of the Company, shall not be earned until all applicable conditions to payment have been satisfied.
No discretionary compensation shall be deemed earned, vested, accrued, or payable merely because the Executive has been employed for any particular period or because the Company has paid discretionary compensation to the Executive in a prior period.
| 2.3. | No Guaranteed Severance |
Except as expressly required by applicable law, the Executive shall not be entitled to severance or other termination compensation by reason of the termination of the Executive’s employment, regardless of whether the termination is initiated by the Company or the Executive.
| 3. | Benefits and Expenses |
| 3.1. | Employee Benefits |
The Executive will not participate in the employee benefit plans and programs maintained by the Company.
Nothing in this Agreement shall require the Company to establish or maintain any particular employee benefit plan or program or provide the Executive with any particular level of benefits.
| 3.2. | Business Expenses |
The Company shall reimburse the Executive for reasonable and necessary business expenses actually incurred by the Executive in connection with the performance of the Executive’s duties, provided that such expenses are properly documented and submitted in accordance with the Company’s applicable expense reimbursement policies.
The Executive shall not incur any material expense or financial obligation on behalf of the Company except in accordance with applicable Company policies or with the prior authorization of the Chief Executive Officer or the Board.
| 4. | Termination |
| 4.1. | Termination by Either Party |
Either the Company or the Executive may terminate the Executive’s employment at any time, with or without cause, subject to applicable law. The Company shall give the Executive not less than one (1) month’s prior written notice of termination. The Executive shall give the Company not less than thirty (30) days’ prior written notice of resignation.
Exascale Labs Holdings Inc. / Jake Carney | Page 3
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 4.2. | Effect of Termination |
Upon termination of the Executive’s employment for any reason, the Company shall pay the Executive all accrued and unpaid Base Salary through the effective date of termination and any other amounts required to be paid under applicable law.
Except as expressly required by applicable law, the Executive shall have no right to any additional compensation or benefits following termination of employment.
Any unpaid expense reimbursement shall be paid in accordance with the Company’s applicable expense-reimbursement policies and applicable law.
Upon termination of employment for any reason, the Executive shall immediately cease to represent himself as an employee, officer, agent, representative, or authorized signatory of the Company or any subsidiary or affiliate of the Company, except as otherwise expressly authorized in writing by the Company.
For a period of thirty (30) days following termination of employment for any reason, the Executive shall, at the Company’s request, cooperate reasonably with the Company in the transition of the Executive’s duties, including any pending financial reporting, audit, or regulatory matter relating to the period of the Executive’s employment. The Company shall reimburse the Executive’s reasonable documented out-of-pocket expenses incurred in providing such cooperation.
| 5. | Confidentiality |
As a condition to, or contemporaneously with, the Executive’s employment, the Executive shall execute and deliver to the Company a separate confidentiality agreement (the “Confidentiality Agreement”).
The Confidentiality Agreement is incorporated herein by reference solely for purposes of establishing the Executive’s continuing obligations concerning confidential information, proprietary information, and trade-secret information and related matters.
If any provision of the Confidentiality Agreement is determined to be unenforceable, the Executive shall nevertheless remain obligated to protect and refrain from using or disclosing the Company’s confidential, proprietary, and trade-secret information to the fullest extent permitted by applicable law.
The Executive acknowledges that, by virtue of the Executive’s position as CFO, the Executive will receive and have access to highly sensitive information concerning the Company’s financial condition, forecasts, capitalization, financing activities, investors, customers, suppliers, strategic plans, technology, intellectual property, personnel, compensation, business relationships, and other confidential matters.
The Executive agrees that unauthorized use or disclosure of such information could cause irreparable harm to the Company for which monetary damages may be inadequate.
Nothing in this Agreement or the Confidentiality Agreement prohibits or restricts the Executive from (i) reporting a possible violation of law or regulation to any governmental agency or entity, including the Securities and Exchange Commission, Department of Justice, Equal Employment Opportunity Commission, National Labor Relations Board, or any other federal, state, or local governmental authority, (ii) making any disclosure protected by applicable whistleblower law, or (iii) participating in any governmental investigation or proceeding.
Exascale Labs Holdings Inc. / Jake Carney | Page 4
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 6. | Representations and Warranties |
The Executive represents and warrants that:
| (i) | the Executive’s execution and performance of this Agreement does not and will not violate any agreement or obligation binding upon the Executive; |
| (ii) | the Executive is not subject to any agreement that would prohibit or materially restrict the Executive from performing the duties contemplated by this Agreement; |
| (iii) | the Executive will not use or disclose any confidential or proprietary information belonging to any former employer or any other third party in connection with the Executive’s employment with the Company; |
| (iv) | the Executive has provided the Company with complete and accurate information concerning any contractual, fiduciary, confidentiality, restrictive-covenant, intellectual-property, or other obligation that could reasonably affect the Executive’s ability to perform the Executive’s duties, and Schedule A to this Agreement is a complete and accurate list of the Executive’s positions, engagements, and business activities outside the Company as of the Effective Date; |
| (v) | the Executive has not been debarred, suspended, excluded, or otherwise prohibited from serving as an officer, director, accountant, financial professional, or fiduciary by any governmental or regulatory authority, to the extent applicable to the Executive; and |
| (vi) | the Executive will promptly notify the Company if any representation in this Section 6 of this Agreement becomes inaccurate or incomplete during employment. |
| 7. | Company Property; Information Security |
| 7.1. | All Company Property |
All documents, records, files, correspondence, memoranda, reports, financial information, forecasts, analyses, customer information, investor information, devices, equipment, keys, access credentials, software, storage media, databases, and other materials provided to or created by the Executive in connection with employment, whether in physical or electronic form (collectively, “Company Property”), shall remain the exclusive property of the Company.
| 7.2. | Return of Property |
Upon the Company’s request and in all events immediately upon termination of employment, the Executive shall return or permanently delete all Company Property in the Executive’s possession, custody, or control, except to the extent retention is required by law. At the Company’s request, the Executive shall certify in writing compliance with this Section 7.2 of this Agreement.
| 7.3. | Electronic Accounts |
The Executive shall not transfer Company information to personal email accounts, personal cloud-storage accounts, unauthorized devices, or other systems not approved by the Company. The Executive acknowledges that Company systems and accounts may be monitored, accessed, preserved, and reviewed by the Company to the extent permitted by applicable law and Company policy.
Exascale Labs Holdings Inc. / Jake Carney | Page 5
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 8. | Indemnification |
The Company shall provide the Executive with indemnification to the fullest extent permitted by applicable law and the Company’s certificate of incorporation, bylaws, and any applicable indemnification agreement between the Company and the Executive.
Nothing in this Agreement limits any rights the Executive may have to indemnification or advancement of expenses under applicable law, the Company’s organizational documents, or a separate indemnification agreement.
| 9. | Taxes |
The Executive is not a U.S. person for U.S. federal income tax purposes. The Company shall not withhold U.S. federal, state, or local taxes from the compensation payable under this Agreement except to the extent required by applicable law. The Executive shall deliver to the Company a properly completed IRS Form W-8BEN before the first payment under this Agreement and shall update it as required.
The Executive shall be solely responsible for all income taxes, social security or similar contributions, and other charges imposed on the Executive under the laws of the Executive’s country of residence or any other jurisdiction in respect of the compensation paid under this Agreement, except for taxes that the Company is legally required to pay.
| 10. | Notices |
All notices under this Agreement shall be in writing and shall be delivered personally, by nationally recognized overnight courier, or by email followed by confirmation of receipt, to the addresses designated by the Parties.
If to the Company:
Exascale Labs Holdings Inc.
820 Gessner Road, Suite 332
Houston, Texas 77024
Attn: Chief Executive Officer/Board of Directors
If to the Executive:
Jake Carney
[ ]
Email: [ ]
Either Party may change its address for notices by written notice to the other Party.
| 11. | Assignment |
The Company may assign this Agreement to any successor to substantially all of its business or assets, provided that such successor assumes the Company’s obligations under this Agreement.
The Executive may not assign this Agreement or any rights or obligations under this Agreement without the Company’s prior written consent.
Exascale Labs Holdings Inc. / Jake Carney | Page 6
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 12. | Governing Law |
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict-of-law principles.
The Parties consent to the jurisdiction of the state and federal courts located in Harris County, Texas, and the federal courts having jurisdiction over Harris County, Texas, for disputes arising out of or relating to this Agreement, subject to applicable jurisdictional requirements.
| 13. | Entire Agreement |
This Agreement, together with the Confidentiality Agreement and any separate indemnification agreement between the Company and the Executive, constitutes the entire agreement between the Parties concerning the Executive’s employment and supersedes all prior oral or written agreements, understandings, and representations concerning such subject matter.
The Executive acknowledges that, except as expressly set forth herein, the Executive has not relied upon any promise, representation, or assurance concerning compensation, duties, employment duration, promotion, equity, severance, benefits, or other terms of employment.
In the event of a conflict between this Agreement and the Confidentiality Agreement, the provision imposing the greater protection on the Company’s confidential information and proprietary rights shall control to the maximum extent permitted by law, except to the extent the documents expressly provide otherwise.
| 14. | Amendments and Waiver |
No amendment, modification, or waiver of this Agreement shall be effective unless in writing and signed by the Executive and an authorized representative of the Company.
No waiver of any breach shall constitute a waiver of any subsequent breach.
| 15. | Severability |
If any provision of this Agreement is determined to be invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid or unenforceable provision shall be modified to the minimum extent necessary to make it enforceable.
| 16. | Mutual Drafting; No Construction Against Drafter |
The Parties acknowledge and agree that this Agreement has been negotiated by the Parties and their respective counsels, is the product of mutual drafting and negotiation, and shall not be construed for or against either Party by reason of the fact that such Party or its counsel drafted or prepared any particular provision of this Agreement.
Each Party acknowledges that it has had the opportunity to review, negotiate, and propose revisions to this Agreement and to consult with independent legal counsel.
| 17. | Headings |
The headings and captions contained in this Agreement are for convenience only and shall not affect the interpretation or meaning of any provision of this Agreement.
Exascale Labs Holdings Inc. / Jake Carney | Page 7
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
| 18. | Counterparts; Electronic Signatures |
This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together constitute one instrument.
Electronic signatures and electronically transmitted copies shall have the same force and effect as original signatures.
[Signature Page Follows]
Exascale Labs Holdings Inc. / Jake Carney | Page 8
EXASCALE LABS HOLDINGS INC. | EMPLOYMENT AGREEMENT
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the respective dates set forth below.
| EXASCALE LABS HOLDINGS INC. | ||
| By: | /s/ Hoansoo Lee | |
| Name: | Hoansoo Lee | |
| Title: | Chief Executive Officer | |
| Date: | September 25, 2026 | |
| EXECUTIVE | ||
| By: | /s/ Jake Carney | |
| Name: | Jake Carney | |
| Date: | September 25, 2026 | |
[Signature Page to Employment Agreement between Exascale Labs Holdings Inc. and Jake Carney]
Exascale Labs Holdings Inc. / Jake Carney | Page 9
Exhibit 10.8
EXASCALE LABS HOLDINGS INC.
NON-EMPLOYEE DIRECTOR COMPENSATION POLICY
Exascale Labs Holdings Inc., a Delaware corporation (the “Company”), believes that the granting of cash and equity compensation to the members of its Board of Directors (the “Board,” and members of the Board, the “Directors”) represents an effective tool to attract, retain and reward Directors who are not employees of the Company (the “Non-Employee Directors”). This Non-Employee Director Compensation Policy (this “Policy”) is intended to formalize the Company’s policy regarding cash compensation and grants of equity to its Non-Employee Directors. Unless otherwise defined herein, capitalized terms used in this Policy will have the meaning given such term in the Exascale Labs Holdings Inc. 2026 Omnibus Equity Incentive Plan (the “Plan”). Each Non-Employee Director will be solely responsible for any tax obligations incurred by such Non-Employee Director as a result of the cash payments paid and equity awards granted to such Non-Employee Director under this Policy.
| 1. | ANNUAL CASH COMPENSATION |
Annual Cash Retainer
Each Non-Employee Director will be paid an annual cash retainer of $70,000. There are no per-meeting attendance fees for attending Board meetings or meetings of stockholders of the Company.
Additional Chair and Lead Director Annual Cash Retainer
Each Non-Employee Director who serves as a lead director or chairperson of a committee of the Board will be paid additional annual cash fees as follows:
| Lead Independent Director: | $ | 25,000 | ||
| Audit Committee Chair: | $ | 20,000 | ||
| Compensation Committee Chair: | $ | 15,000 | ||
| Nominating and Corporate Governance Committee Chair: | $ | 15,000 |
All cash retainers will be paid quarterly in arrears on a prorated basis to each Non-Employee Director who has served in the relevant capacity at any time during the immediately preceding fiscal quarter of the Company (“Fiscal Quarter”), and such payment will be made no later than 30 days following the end of such immediately preceding Fiscal Quarter. For clarity, a Non-Employee Director who has served as a Non-Employee Director or as a member of an applicable committee (or chair thereof) during only a portion of the relevant Fiscal Quarter will receive a prorated payment of the quarterly installment of the applicable cash retainer(s), calculated based on the number of days during such Fiscal Quarter such Non-Employee Director has served in the relevant capacities. For clarity, a Non-Employee Director who has served as a Non-Employee Director or as a member of an applicable committee (or chair thereof) from the closing of the Company’s business combination (the “Closing”) through the end of the Fiscal Quarter containing the Closing (the “Initial Period”), as applicable, will receive a prorated payment of the quarterly installment of the applicable cash retainer(s), calculated based on the number of days during the Initial Period that such Non-Employee Director has served in the relevant capacities.
The Board in its discretion may change and otherwise revise the terms of the cash compensation granted under this Policy, including, without limitation, the amount of cash compensation to be paid, on or after the date the Board determines to make any such change or revision.
| 2. | EQUITY COMPENSATION |
Non-Employee Directors will be eligible to receive all types of Awards (excluding Incentive Stock Options) under the Plan (or the applicable equity plan in place at the time of grant). All grants of Awards to Non-Employee Directors pursuant to this Section 2 of this Policy will be automatic and nondiscretionary, except as otherwise provided herein, and will be made in accordance with the following provisions and subject to applicable provisions of the Plan:
| (a) | Initial Award. Each individual who first becomes a Non-Employee Director after the adoption of this Policy will be granted an Award of Restricted Stock Units (the “Initial Award”) covering an aggregate of 15,000 shares of Class A Common Stock, par value $0.0001 per share, of the Company (“Class A Common Stock”), which grant will be effective on the date on which such individual first becomes a Non-Employee Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy; provided, however, that the Initial Award to Non-Employee Directors who first became non-Employee Directors upon the Closing shall be effective on the first trading day after the date of the adoption of this Policy. |
| (b) | Annual Award. Each Non-Employee Director will be granted an Award of Restricted Stock Units (an “Annual Award”) covering an aggregate of 15,000 shares of Class A Common Stock, on the first trading day following each annual meeting of the stockholders of the Company (unless the Board determines to award them on a different date), beginning with the annual meeting of stockholders of the Company held in 2027; provided that any Non-Employee Director who is not continuing as a Director during the calendar year following such annual meeting of stockholders of the Company will not receive an Annual Award with respect to such meeting. |
| (c) | Vesting. Subject to Sections 2(d) and 5 below, the Initial Award and each Annual Award will vest entirely on the earlier of (i) the one (1) year anniversary of the applicable grant date and (ii) the scheduled expiration of the Non-Employee Director’s term as a director at an annual meeting of the stockholders of the Company at which the Non-Employee Director is not nominated for re-election, in each case subject to the Non-Employee Director continuing to provide service to the Company through such vesting date. |
| (d) | Change in Control. In the event of a Change in Control, each Non-Employee Director will fully vest in his or her Initial Award and/or each Annual Award provided that the Non-Employee Director continues to provide service through such date. |
| (e) | Excluded Director. Notwithstanding anything in this Policy to the contrary, Wenying Jia, for so long as she serves as a Non-Employee Director, will not be eligible to receive an Initial Award or any Annual Award under this Section 2, and will be entitled only to the cash compensation set forth in Section 1 for her service as a Non-Employee Director. |
| 3. | TRAVEL EXPENSES |
Each Non-Employee Director’s reasonable, customary and documented travel expenses to Board meetings will be reimbursed by the Company.
| 4. | ADDITIONAL PROVISIONS |
All provisions of the Plan not inconsistent with this Policy will apply to Awards granted to Non-Employee Directors.
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| 5. | ADJUSTMENTS |
In the event that any dividend or other distribution (whether in the form of cash, stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of stock or other securities of the Company or other change in the corporate structure of the Company affecting the Class A Common Stock occurs, the Board, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under this Policy, will adjust the number of shares of Class A Common Stock issuable pursuant to Awards granted under this Policy.
| 6. | LIMITATIONS |
No Non-Employee Director may be issued in any fiscal year cash payments (including the fees under Section 1 above) and Awards (including Awards under Section 2 above) with aggregate value greater than $750,000, increased to $1,000,000 in the fiscal year of his or her initial service as a Non-Employee Director. Any Awards or other compensation granted to an individual for his or her services as an employee, or for his or her services as a consultant other than a Non-Employee Director, will be excluded for purposes of the limitations under this Section 6.
| 7. | SECTION 409A |
In no event will cash compensation or expense reimbursement payments under this Policy be paid after the later of (a) the fifteenth (15th) day of the third (3rd) month following the end of the Company’s fiscal year in which the compensation is earned or expenses are incurred, as applicable, or (b) the fifteenth (15th) day of the third (3rd) month following the end of the calendar year in which the compensation is earned or expenses are incurred, as applicable, in compliance with the “short-term deferral” exception under Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and guidance thereunder, as may be amended from time to time (together, “Section 409A”). It is the intent of this Policy that this Policy and all payments hereunder be exempt from or otherwise comply with the requirements of Section 409A so that none of the compensation to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be so exempt or comply. In no event will the Company reimburse a Non-Employee Director for any taxes imposed or other costs incurred as a result of Section 409A.
| 8. | REVISIONS |
The Board or any committee designated by the Board may amend, alter, suspend or terminate this Policy at any time and for any reason. No amendment, alteration, suspension or termination of this Policy will materially impair the rights of a Non-Employee Director with respect to compensation that already has been paid or awarded, unless otherwise mutually agreed between the Non-Employee Director and the Company. Termination of this Policy will not affect the Board’s or the Compensation Committee of the Board’s ability to exercise the powers granted to it under the Plan with respect to Awards granted under the Plan pursuant to this Policy prior to the date of such termination.
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Exhibit 14.1
EXASCALE LABS HOLDINGS INC.
CODE OF ETHICS
1. Introduction.
1.1 The Board of Directors (the “Board”) of Exascale Labs Holdings Inc. (together with its subsidiaries, the “Company”) has adopted this Code of Ethics (the “Code”) in order to:
(a) promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest;
(b) promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company;
(c) promote compliance with applicable governmental laws, rules and regulations;
(d) promote the protection of Company assets, including corporate opportunities and confidential information;
(e) promote fair dealing practices;
(f) deter wrongdoing; and
(g) ensure accountability for adherence to the Code.
1.2 All directors, officers and employees are required to be familiar with the Code, comply with its provisions and report any suspected violations as described below in Section 10 (Reporting and Enforcement).
2. Honest and Ethical Conduct.
2.1 The Company’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.
2.2 Each director, officer and employee must act with integrity and observe the highest ethical standards of business conduct in their dealings with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom they have contact in the course of performing their job.
3. Conflicts of Interest.
3.1 A conflict of interest occurs when an individual’s private interest (or the interest of a member of their family) interferes, or even appears to interfere, with the interests of the Company as a whole. A conflict of interest can arise when an employee, officer or director (or a member of their family) takes actions or has interests that may make it difficult to perform their work for the Company objectively and effectively. Conflicts of interest also arise when an employee, officer or director (or a member of their family) receives improper personal benefits as a result of their position in the Company.
3.2 Loans by the Company to, or guarantees by the Company of obligations of, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees, depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of obligations of, any director or officer, or any of their family members, are expressly prohibited.
3.3 Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest should be avoided unless specifically authorized as described in Section 3.4.
3.4 Persons other than directors and executive officers who have questions about a potential conflict of interest or who become aware of an actual or potential conflict should discuss the matter with, and seek a determination and prior authorization or approval from, their supervisor or the Company’s General Counsel (the “Chief Compliance Officer”). A supervisor may not authorize or approve conflict of interest matters or make determinations as to whether a problematic conflict of interest exists without first providing the Chief Compliance Officer with a written description of the activity and seeking the Chief Compliance Officer’s written approval. If the supervisor is themself involved in the potential or actual conflict, the matter should instead be discussed directly with the Chief Compliance Officer.
Directors and executive officers must seek determinations and prior authorizations or approvals of potential conflicts of interest exclusively from the Audit Committee of the Board (the “Audit Committee”).
4. Compliance.
4.1 Employees, officers and directors should comply, both in letter and spirit, with all applicable laws, rules and regulations in the cities, states and countries in which the Company operates.
4.2 Although not all employees, officers and directors are expected to know the details of all applicable laws, rules and regulations, it is important to know enough to determine when to seek advice from appropriate personnel. Questions about compliance should be addressed to the Company’s Chief Executive Officer or the Company’s legal department.
4.3 No director, officer or employee may purchase or sell any Company securities while in possession of material nonpublic information regarding the Company, nor may any director, officer or employee purchase or sell another company’s securities while in possession of material nonpublic information regarding that company. It is against Company policies and illegal for any director, officer or employee to use material nonpublic information regarding the Company or any other company to:
(a) obtain profit for themself; or
(b) directly or indirectly “tip” others who might make an investment decision on the basis of that information.
5. Disclosure.
5.1 The Company’s periodic reports and other documents filed with the SEC, including all financial statements and other financial information, must comply with applicable federal securities laws and SEC rules.
5.2 Each director, officer and employee who contributes in any way to the preparation or verification of the Company’s financial statements and other financial information must ensure that the Company’s books, records and accounts are accurately maintained. Each director, officer and employee must cooperate fully with the Company’s accounting and internal audit departments, as well as the Company’s independent public accountants and counsel.
5.3 Each director, officer and employee who is involved in the Company’s disclosure process must:
(a) be familiar with and comply with the Company’s disclosure controls and procedures and its internal control over financial reporting; and
(b) take all necessary steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Company provide full, fair, accurate, timely and understandable disclosure.
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6. Protection and Proper Use of Company Assets.
6.1 All directors, officers and employees should protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s profitability and are prohibited.
6.2 All Company assets should be used only for legitimate business purposes. Any suspected incident of fraud or theft should be reported for investigation immediately.
6.3 The obligation to protect Company assets includes the Company’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business and marketing plans, engineering and manufacturing ideas, designs, databases, records and any nonpublic financial data or reports. Unauthorized use or distribution of this information is prohibited and could also be illegal and result in civil or criminal penalties.
7. Corporate Opportunities. All directors, officers and employees owe a duty to the Company to advance its interests when the opportunity arises. Directors, officers and employees are prohibited from taking for themselves personally (or for the benefit of friends or family members) opportunities that are discovered through the use of Company assets, property, information or position. Directors, officers and employees may not use Company assets, property, information or position for personal gain (including gain of friends or family members). In addition, no director, officer or employee may compete with the Company.
8. Confidentiality. Directors, officers and employees should maintain the confidentiality of information entrusted to them by the Company or by its customers, suppliers or partners, except when disclosure is expressly authorized or is required or permitted by law. Confidential information includes all nonpublic information (regardless of its source) that might be of use to the Company’s competitors or harmful to the Company or its customers, suppliers or partners if disclosed.
9. Fair Dealing. Each director, officer and employee must deal fairly with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom they have contact in the course of performing their job. No director, officer or employee may take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.
10. Reporting and Enforcement.
10.1 Reporting and Investigation of Violations.
(a) Actions prohibited by this Code involving directors or executive officers must be reported to the Audit Committee.
(b) Actions prohibited by this Code involving anyone other than a director or executive officer must be reported to the reporting person’s supervisor or the Chief Compliance Officer.
(c) After receiving a report of an alleged prohibited action, the Audit Committee, the relevant supervisor or the Chief Compliance Officer must promptly take all appropriate actions necessary to investigate.
(d) All directors, officers and employees are expected to cooperate in any internal investigation of misconduct.
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10.2 Enforcement.
(a) The Company must ensure prompt and consistent action against violations of this Code.
(b) If, after investigating a report of an alleged prohibited action by a director or executive officer, the Audit Committee determines that a violation of this Code has occurred, the Audit Committee will report such determination to the Board.
(c) If, after investigating a report of an alleged prohibited action by any other person, the relevant supervisor or the Chief Compliance Officer determines that a violation of this Code has occurred, the supervisor or the Chief Compliance Officer will report such determination to the Company’s chief legal counsel.
(d) Upon receipt of a determination that there has been a violation of this Code, the Board of Directors or the Company’s chief legal counsel will take such preventative or disciplinary action as it deems appropriate, including, but not limited to, reassignment, demotion, dismissal and, in the event of criminal conduct or other serious violations of the law, notification of appropriate governmental authorities.
10.3 Waivers.
(a) Each of the Audit Committee (in the case of a violation by a director or executive officer) and the Company’s chief legal counsel (in the case of a violation by any other person) may, in its discretion, waive any violation of this Code.
(b) Any waiver for a director or an executive officer shall be disclosed as required by SEC and Nasdaq rules.
10.4 Prohibition on Retaliation.
The Company does not tolerate acts of retaliation against any director, officer or employee who makes a good faith report of known or suspected acts of misconduct or other violations of this Code.
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Acknowledgment of Receipt and Review
I, _______________________, acknowledge that I have received and read a copy of the Exascale Labs Holdings Inc. Code of Ethics. I understand the contents of the Code and I agree to comply with the policies and procedures set out in the Code.
I understand that I should approach the Chief Compliance Officer if I have any questions about the Code generally or any questions about reporting a suspected conflict of interest or other violation of the Code.
| By: | ||
| Name: | ||
| Date: |
[Acknowledgment of Receipt and Review – Exascale Labs Holdings Inc. – Code of Ethics]
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Exhibit 19.1
EXASCALE LABS HOLDINGS INC.
INSIDER TRADING POLICY
Section 1. All Employees, Officers, Directors and their Family Members and Affiliates Are Subject to this Policy.
This Insider Trading Policy (this “Policy”) applies to all employees, outside directors, officers, and consultants of Exascale Labs Holdings Inc., a Delaware corporation (the “Company”), their family members and entities over which such individuals have or share voting or investment control. This Policy also applies to any other person who receives material nonpublic information from any Company Insider or is otherwise designated by the Compliance Officer (as appointed per Section 12 of this Policy). The Company is also subject to Appendix I of this Policy to ensure fair practices when the Company transacts in securities. For purposes of this Policy, “family members” include immediate family, people who live with you or are financially dependent on you, and also include those whose transactions in securities are directed by you or are subject to your influence or control.
Every director, officer and employee of the Company has the individual responsibility (and must take appropriate measures to cause such person’s family members) to comply with this Policy regardless of whether a transaction is executed outside a blackout period or is pre-cleared by the Compliance Officer. The restrictions and procedures are intended to help avoid inadvertent instances of improper insider trading, but appropriate judgment should always be exercised by each director, officer and employee of the Company in connection with any transaction in the Company’s securities. Employees, officers and directors of the Company are responsible for ensuring compliance with this Policy by their family members.
This Policy continues to apply following termination of employment or other relationship with the Company until after the second trading day that any material non-public information in your possession has become public or is no longer material. Each employee, officer, consultant and director is personally responsible for the actions of their family members and other persons with whom they have a relationship who are subject to this Policy, including any pre-clearances required.
As used in this Policy, the term “trading day” shall mean a day on which the Nasdaq Stock Market (“Nasdaq”) or the primary quotation system or national securities exchange on which the Company’s common stock is then traded or listed is open for trading. As used in this Policy, the term “business day” shall mean a day on which the Securities and Exchange Commission’s (the “SEC”) EDGAR system will receive and accept filings.
Section 2. Trading in Company Securities While in Possession of Material Nonpublic Information is Prohibited.
The purchase or sale of securities by any person who possesses material nonpublic information is a violation of U.S. federal and state securities laws. It is important to avoid the appearance, as well as the fact, of trading based on material nonpublic information.
No person subject to this Policy who is aware of material nonpublic information relating to the Company may, directly or indirectly (through family members, other persons, entities or otherwise) buy, sell, or otherwise trade in the securities of the Company, or advise anyone else to do so, other than pursuant to a trading plan that complies with Rule 10b5-1 promulgated by the SEC or as specifically exempted in Section 9(B) of this Policy, or otherwise engage in any action to take personal advantage of that information. For purposes of this Policy, the term “trade” includes any transaction in the Company’s securities, including gifts and pledges.
Each person subject to this Policy may, from time to time, be required to forego a proposed transaction upon learning new material nonpublic information even if he or she planned to make the transaction before learning such information, even though the employee may suffer economic loss or forego anticipated profit by waiting.
Section 3. Trading in Other Public Companies’ Securities While in Possession of Material Nonpublic Information is Prohibited.
No person subject to this Policy who possesses material nonpublic information relating to other publicly traded companies, including the Company’s vendors, customers and partners, as a result of employment with the Company or the performance of services on the Company’s behalf, may, directly or indirectly (through family members, other persons, entities or otherwise) buy or sell securities of such companies, or advise anyone else to do so, or otherwise engage in any action to take personal advantage of that information. Civil and criminal penalties and termination of employment or removal from the Company’s board of directors (the “Board”) may result from trading on inside information regarding the Company’s business partners. All Company employees should treat material nonpublic information about the Company’s business partners with the same care required with respect to information related directly to the Company.
Section 4. Certain Types of Transactions Are Prohibited.
A. Short Sales. Short sales of the Company’s securities, including a “sale against the box,” are prohibited, as short sales evidence the seller’s expectation that the Company’s securities will decline in value, signal to the market that the seller has no confidence in the Company or its short-term prospects, and may reduce the seller’s incentive to improve the Company’s performance. In addition, Section 16(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), expressly prohibits certain officers and directors from engaging in short sales.
B. Publicly Traded Options. Transactions in puts, calls or other derivative securities involving the Company’s stock are prohibited, as any such transaction is, in effect, a bet on the short-term movement of the Company’s stock, creates the appearance of trading based on inside information, and may focus attention on short-term performance at the expense of the Company’s long-term objectives.
C. Hedging Transactions. Hedging or monetization transactions (including, but not limited to, zero-cost collars, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments) are prohibited, as such transactions allow you to continue to own securities of the Company without the full risks and rewards of ownership. When that occurs, your interests and the interests of the Company and its stockholders may be misaligned and may signal a message to the trading market when disclosed in Section 16 reports that may not be in the best interests of the Company and its stockholders at the time it is conveyed.
D. Margin Accounts and Pledges. Directors, officers and other employees are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, as such securities may be traded without your consent (for failing to meet a margin call or if you default on the loan) at a time when you possess material nonpublic information or otherwise are not permitted to trade. An exception to the foregoing prohibition on pledging Company securities may be granted with the approval of the Audit Committee of the Board (the “Audit Committee”), the Compensation Committee of the Board or the Nominating and Corporate Governance Committee of the Board where a person wishes to pledge securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities; provided that any person who wishes to pledge Company securities as collateral for a loan must further submit a request for approval to the Compliance Officer at least two weeks prior to the proposed execution of documents evidencing the proposed pledge.
E. Gifts. Because charitable and other nonprofit organizations may sell securities given to them very soon after receiving them, and because there is also the potential for manipulation (or perceived manipulation) by the donor to gain a larger tax deduction by donating securities before the release of material negative news, charitable gifts may not be made at a time when the donor is aware of material nonpublic information.
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Section 5. Sharing Material Nonpublic Information is Prohibited.
No person subject to this Policy who possesses material nonpublic information relating to the Company or any other publicly traded companies may directly or indirectly (through family members, other persons, entities or otherwise) pass that information on to others outside the Company, including friends, family or other acquaintances (referred to as “tipping”) until such information has been disseminated to the public. You must treat material nonpublic information about our business partners with the same care required with respect to such information related directly to the Company.
Tipping includes passing information under circumstances that could suggest that you were trying to help another profit or avoid a loss. Exercise care when speaking with others who do not “need to know”, even if they are subject to this Policy, as well as when communicating with family, friends and others not associated with the Company. To avoid the appearance of impropriety, refrain from discussing the Company’s business or prospects or making recommendations about buying or selling the Company’s securities or the securities of other companies with which the Company has a relationship. Inquiries about the Company should be directed to the Company’s Corporate Communications, Investor Relations or Legal teams.
Section 6. Recommendations Regarding Trading in Company Securities are Prohibited.
No person subject to this Policy may make recommendations or express opinions on trading in the Company’s securities while in possession of material nonpublic information, except to advise others not to trade in the Company’s securities if doing so might violate the law or this Policy.
Section 7. Only Designated Company Spokespersons Are Authorized to Disclose Material Nonpublic Information.
U.S. federal securities laws prohibit the Company from selectively disclosing material nonpublic information. The Company has established procedures for releasing material information in a manner that is designed to achieve broad dissemination of the information immediately upon its release. Employees may not, therefore, disclose material nonpublic information to anyone outside the Company, including family members and friends, other than in accordance with those established procedures. Any inquiries about the Company should be directed to the Company’s Corporate Communications or Investor Relations teams. Additionally, the Company’s legal advisors will be involved in handling legal matters that may involve certain disclosures.
Section 8. Employees Must Follow Company Guidelines Pertaining to Electronic Communications.
Employees must follow the Company’s Regulation FD Policy before participating in any Internet electronic communication forums concerning the Company.
Section 9. Other Transactions in Company Securities.
A. General Rule. This Policy applies to all transactions in the Company’s securities, including any securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by the Company, such as exchange-traded options.
B. Exclusions.
1. Equity Award Exercises. The trading restrictions set forth in this Policy do not apply to the cash exercise of stock options or other equity awards, but do apply to all sales of securities acquired through the exercise of stock options or other equity awards, including “same-day sale” or cashless exercise of Company stock options.
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2. Restricted Stock Awards; Restricted Stock Unit Awards. This Policy does not apply to the vesting of restricted stock or restricted stock units or the exercise of a tax-withholding right pursuant to which an individual elects to have the Company withhold shares of stock to satisfy tax-withholding requirements upon the vesting of any restricted stock or restricted stock units. The Policy does apply, however, to any market sale of stock or restricted stock.
3. 401(k) Plan. This Policy does not apply to purchases of Company stock in the Company’s 401(k) plan resulting from periodic contributions of money to the plan pursuant to payroll deduction elections. This Policy does apply, however, to certain elections that may be made under the 401(k) plan, including: (a) an election to increase or decrease the percentage of periodic contributions that will be allocated to the Company stock fund, if any; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company stock fund; (c) an election to borrow money against a 401(k) plan account if the loan will result in a liquidation of some or all of a participant’s Company stock fund balance; and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the Company stock fund.
4. Employee Stock Purchase Plans. The trading restrictions set forth in this Policy do not apply to purchases of Company securities pursuant to the employee’s advance instructions under employee stock purchase plans. However, no alteration to instructions regarding the level of withholding or the purchase of Company securities in such plans is permitted while in the possession of material nonpublic information. Any sale of securities acquired under such plans remains subject to the prohibitions and restrictions of this Policy.
Section 10. Directors, Officers and Certain Named Employees Are Subject to Additional Restrictions.
A. Section 16 Insiders. The Company’s directors and certain officers (“Section 16 Insiders”) are subject to the reporting provisions and trading restrictions of Section 16 of the Exchange Act and the underlying rules and regulations promulgated by the SEC.
B. Insider Employees. The Company has designated persons with the roles/titles listed on Exhibit A as employees who have frequent access to material nonpublic information concerning the Company (“Insider Employees”). The Company will amend Exhibit A from time to time as necessary.
C. Additional Restrictions. Because Section 16 Insiders and Insider Employees regularly possess material nonpublic information about the Company, and in light of the reporting requirements to which Section 16 Insiders are subject under Section 16 of the Exchange Act, Section 16 Insiders and Insider Employees are subject to the additional restrictions set forth in Appendix II hereto. For purposes of this Policy, Section 16 Insiders and Insider Employees are each referred to as “Insiders.”
Section 11. Suspected Policy Violations Must Be Reported.
Any person who violates this Policy, the Company’s Regulation FD Policy or any federal or state laws governing insider trading, or knows of or suspects any such violation by any other person, must report the violation immediately to the Compliance Officer. Upon learning of any such violation, the Compliance Officer will determine whether the Company should release any material nonpublic information or whether the Company should report the violation to the SEC or other appropriate governmental authority. The Company will comply with all requests from the SEC, the Financial Industry Regulatory Authority, Inc., Nasdaq and any other quotation system or national securities exchange on which the Company’s common stock is then traded or listed, and other agencies for information related to insider trading investigations.
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Section 12. Insider Trading Compliance Officers.
Unless the Board provides otherwise, the Company’s General Counsel (the “General Counsel”) shall act as the Company’s initial Insider Trading Compliance Officer (“Compliance Officer”); provided, however, that if the General Counsel is a party to a proposed trade, transaction or inquiry relating to this Policy, the Company’s Chief Executive Officer shall act as the Compliance Officer with respect to such proposed trade, transaction or inquiry. The Compliance Officer may delegate his or her authority to act as the Compliance Officer as he or she deems necessary or appropriate in his or her sole discretion. The duties of the Compliance Officer and his or her delegees may include the following:
| ● | Administering, monitoring and enforcing compliance with this Policy. |
| ● | Responding to all inquiries relating to this Policy and its procedures. |
| ● | Designating and announcing special trading blackout periods during which no Insiders may trade in the Company’s securities. |
| ● | Providing copies of this Policy and other appropriate materials to all current and new directors, officers and employees, and such other persons as the Compliance Officer determines have access to material nonpublic information concerning the Company. |
| ● | Administering, monitoring and enforcing compliance with federal and state insider trading laws and regulations. |
| ● | Assisting in the preparation and filing of all required SEC reports relating to trading in Company securities, including, without limitation, Forms 3, 4, 5 and 144 and Schedules 13D and 13G. |
| ● | Maintaining as Company records originals or copies of all documents required by the provisions of this Policy or the procedures set forth herein, and copies of all required SEC reports relating to insider trading, including without limitation Forms 3, 4, 5 and 144 and Schedules 13D and 13G. |
| ● | Revising this Policy as necessary to reflect changes in federal or state insider trading laws and regulations. |
| ● | Maintaining the accuracy of the list of roles/titles as set forth on Exhibit A, and updating such list periodically as necessary to reflect additions or deletions. |
| ● | Designing and requiring training about the obligations of this Policy as the Compliance Officer considers appropriate. |
Section 13. Definition of “Material Nonpublic Information”
A. “Material.” Information about the Company is “material” if it would be expected to affect the investment or voting decisions of a reasonable stockholder or investor, or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about the Company. In simple terms, material information is any type of information which could reasonably be expected to affect the market price of the Company’s securities or an investor’s decision to buy or sell the Company’s securities. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed material, the following information ordinarily would be considered material:
| ● | Financial performance, including operating results and changes in performance or liquidity. |
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| ● | Projections of future earnings or losses, or other earnings guidance, and any changes to previously announced earnings guidance or any decision to suspend earnings guidance. |
| ● | Communications with government agencies, such as the SEC. |
| ● | Company projections and strategic plans. |
| ● | New major contracts, suppliers, or finance sources or the loss thereof. |
| ● | Development or release of a significant new service. |
| ● | Major discoveries or significant changes or developments in products or product lines, services, research or technologies. |
| ● | Significant pricing or cost changes. |
| ● | Issuance of patents or the acquisition or disposition of other material intellectual property rights. |
| ● | Regulatory changes, actions, approvals or rejections or material correspondence from regulatory bodies. |
| ● | Impending bankruptcy or financial liquidity problems. |
| ● | Defaults on borrowings. |
| ● | Gain or loss of a significant customer or supplier. |
| ● | Significant expansion or curtailment of operations. |
| ● | Significant write-downs in assets or increases or decreases in revenues. |
| ● | Potential mergers or acquisitions, the sale of Company assets or subsidiaries, tender offers or major partnering, joint venture or collaboration agreements. |
| ● | Changes in senior management or the Board. |
| ● | Significant labor disputes or negotiations. |
| ● | A change in auditors or notification that an auditor’s report may no longer be relied upon. |
| ● | Significant changes in the Company’s capital structure or distribution policies. |
| ● | Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts. |
| ● | A significant cybersecurity incident, such as a data breach or a significant disruption or unauthorized access to information technology infrastructure. |
| ● | Actual or threatened major litigation, or the resolution of such litigation. |
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| ● | The imposition of an event-specific restriction on trading in Company securities or the securities of another company or the extension or termination of such restriction. |
B. “Nonpublic”. Material information is “nonpublic” if it has not been widely disseminated to the general public through a report filed with the SEC or through major newswire services, national news services or financial news services. For purposes of this Policy, information will be considered public after the close of trading on the second full trading day following the Company’s widespread public release of the information.
C. Consult Compliance Officer When in Doubt. Any employees who are unsure whether the information that they possess is material or nonpublic must consult the Compliance Officer for guidance before trading in any Company securities.
Section 14. The Company May Suspend All Trading Activities by Employees.
In order to avoid any questions and to protect both employees and the Company from any potential liability, from time to time, the Company may impose a “blackout” period during which some or all employees may not buy or sell the Company’s securities. The Compliance Officer will impose such a blackout period if, in his or her judgment, there exists nonpublic information that would make trades by the Company’s employees (or certain employees) inappropriate in light of the risk that such trades could be viewed as violating applicable securities laws. If you are made aware of such a blackout period, do not disclose its existence to anyone.
Section 15. Violations of Insider Trading Laws or This Policy Can Result in Severe Consequences.
A. Civil and Criminal Penalties. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be required to disgorge profit made or loss avoided, pay civil penalties, face private action for damages, as well as be subject to criminal penalties. The Company and/or the supervisors of the person violating the rules may also be required to pay major civil or criminal penalties.
B. Company Discipline. Violation of this Policy or federal or state insider trading laws by any director, officer or employee may subject the director to removal proceedings and the officer or employee to disciplinary action by the Company, including termination for cause.
Section 16. This Policy Is Subject to Revision.
The Company may change the terms of this Policy from time to time and reserves the right to amend, supplement or discontinue this Policy and the matters addressed herein without prior notice at any time. The Company anticipates that modifications to this Policy will be necessary from time to time, as the Company’s needs and circumstances evolve and to respond to developments in law and practice, and will take steps to inform all affected persons of any material changes. The Audit Committee will be responsible for monitoring and recommending any modification to this Policy, if necessary or advisable, to the Board.
Section 17. All Persons Must Acknowledge Their Agreement to Comply with This Policy.
This Policy will be available on the Company’s internal website. Upon first receiving a copy of this Policy or any revised versions, each such person shall be requested to sign an acknowledgment that they have received a copy and agree to comply with this Policy’s terms. This acknowledgment and agreement will constitute consent for the Company to impose sanctions for violation of this Policy and to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with this Policy.
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APPENDIX I
Policy Regarding Company Transactions in Securities
Section 1. General Statement. The board of directors (the “Board”) of Exascale Labs Holdings Inc. (the “Company”) recognizes the importance of adhering to fair practices when the Company transacts in securities. As the “ultimate insider” with respect to information regarding the Company, and as an investor when transacting in securities for its own account, the Company may find itself in circumstances that could raise insider trading, market manipulation, or other deceptive or unfair practices. The Company’s policy is to comply with all laws applicable to its transactions in securities, to avoid the appearance of impropriety in connection with its transactions, and to ensure appropriate Board oversight of such transactions. While this policy describes the Company’s general approach to the main anticipated circumstances in which it will transact in securities, this policy applies to any direct or indirect transaction by or for the benefit of the Company. In grey areas, management of the Company is expected to seek direction from the Board and its legal and financial advisors, and to develop a thoughtful compliance strategy.
Section 2. Equity Awards. Equity awards (“Equity Awards”) under the Company’s equity compensation plans (“Equity Plans”), including stock options, stock appreciation rights, restricted stock, or restricted stock units (including performance-based restricted stock and restricted stock units), must generally be granted (a) during open trading windows, and (b) more than four business days before, and more than one business day after, the Company’s release of earnings for the most recently completed fiscal period or filing with the SEC of an annual report on Form 10-K, quarterly report on Form 10-Q, or current report on Form 8-K that discloses material nonpublic information (each, an “SEC Report”). As administrator of the Equity Plans, the Compensation Committee of the Board and any of its designees may determine that special circumstances require different timing, provided that such exceptions comply with all applicable law. Equity Awards may not be backdated or otherwise manipulated. When Equity Awards are granted in a number intended to approximate an aggregate dollar value, due regard shall be given as to whether the per share price used in such calculations reasonably reflects fair market value. The release of material nonpublic information may not be timed or otherwise manipulated with the intent of affecting the value of an Equity Award.
Section 3. Share Repurchases. Any repurchases of the Company’s securities will be approved by the Board in the context of the Company’s then-existing financial condition and general market conditions. While the Board may approve any repurchase structure consistent with applicable law, the Board anticipates that Company share repurchases would generally be made pursuant to a Rule 10b5-1 trading plan, comply with Rule 10b5-18, and be administered by an independent third-party broker-dealer reasonably satisfactory to the Board. The Company will not establish a Rule 10b5-1 trading plan at a time when the Company possesses material nonpublic information. In addition, the Company will generally announce the size, time horizon, method of repurchase, and other material terms of a Company repurchase program before commencing repurchases, and the timing of repurchases will generally avoid the four business days before, and the business day after, the planned filing of any SEC Report. The Company will generally suspend sale transactions by directors and executive officers while Company repurchases are pending; when such suspensions are impracticable or would impose an undue hardship on directors and officers, the Company will generally avoid repurchase dates in the two days prior to anticipated sales by directors or executive officers. The release of material nonpublic information may not be timed or otherwise manipulated with the intent of affecting the repurchase price of the Company’s securities in a repurchase transaction.
Section 4. Offerings of the Company’s Securities. Any offers and sales of the Company’s securities in a public offering, private offering, strategic transaction, or similar circumstances will be approved by the Board in the context of the proposed transaction. In any such transaction, the Company’s disclosure to the applicable purchasers must 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, in the light of the circumstances under which they are made, not misleading. The Company will comply with all applicable laws relating to the offer and sale of securities. The Company will generally suspend purchases and sales of securities by directors and executive officers a reasonable period before and after the Company’s transactions. Material nonpublic information disclosed in connection with a sale of Company securities will be so disclosed sufficiently in advance of the sale for the purchaser to digest the information.
APPENDIX I-1
Section 5. Purchases or Sales of Securities of Other Issuers. The Company will maintain an investment policy related to securities purchased or sold for its account, overseen by the Audit Committee of the Board (the “Audit Committee”). Such transactions will generally be conducted by an independent registered broker-dealer.
If the Company obtains material nonpublic information regarding a vendor, distributor, strategic partner or other company, the Company will take reasonable steps to safeguard such information and to avoid trading in the securities of the applicable company until such time as the Company reasonably concludes the information is either publicly known or no longer material.
Section 6. Controls and Procedures. The Company will maintain disclosure controls and procedures regarding its transactions in securities, including internal control over financial reporting. Without limiting the foregoing, the Company shall ensure there are appropriate controls and procedures regarding:
| ● | access to Company funds to purchase securities; |
| ● | the authorization of Company brokers or agents to sell Company securities; |
| ● | disclosure of required information prior to a Company transaction; |
| ● | accurate and timely documentation and recordation of transactions; and |
| ● | disclosure of consummated transactions. |
APPENDIX I-2
APPENDIX II
Special Restrictions on Transactions in Company Securities by Insiders
To minimize the risk of apparent or actual violations of the rules governing insider trading, the Company has adopted these special restrictions relating to transactions in the Company’s securities by Insiders. Insiders are responsible for ensuring compliance with this Appendix II, including restrictions on all trading during certain periods, by family members and members of their households and by entities over which they exercise voting or investment control. Insiders should provide each of these persons or entities with a copy of this Policy.
Section 1. Trading Window. Any trade by an Insider that is subject to this Policy will be permitted only during an open “trading window.” Even when the window is open, all Company personnel are prohibited from trading in Company securities while in possession of material nonpublic information. The trading window generally opens following the close of trading on the second full trading day following the public issuance of the Company’s earnings release for the most recent fiscal quarter and closes at the close of trading on the 16th day of the last month of a fiscal quarter. In addition to when the trading window is scheduled to be closed, the Company may impose a special blackout period at its discretion due to the existence of material nonpublic information. The Compliance Officer may advise Insiders when the trading window opens and closes; provided that in any event, Insiders are charged with the knowledge of and compliance to this Policy.
Section 2. Trade Pre-Clearance Required. As part of this Policy, all purchases and sales of equity securities of the Company by Insiders, other than transactions that are not subject to this Policy or transactions pursuant to a Rule 10b5-1 trading plan (a “10b5-1 Plan”) authorized by the Compliance Officer, must be pre-cleared by the Compliance Officer. This requirement is intended to prevent inadvertent Policy violations, avoid trades involving the appearance of improper insider trading, facilitate timely Form 4 reporting by Section 16 Insiders and avoid transactions that are subject to disgorgement under Section 16(b) of the Exchange Act.
Requests for pre-clearance must be submitted via email to the Compliance Officer at least two business days in advance of each proposed transaction unless consent is given for a shorter time period. If the Insider does not receive a response from a Compliance Officer within 24 hours, the Insider must follow up to ensure that the message was received. Each request by a Section 16 Insider for pre-clearance outside of a 10b5-1 Plan should generally include the following information:
| ● | The nature of the proposed transaction. |
| ● | The expected date of the transaction. |
| ● | Number of shares involved. |
| ● | If the transaction involves a stock option exercise, the specific option to be exercised. |
| ● | Contact information for the broker who will execute the transaction. |
| ● | A confirmation that the Insider has carefully considered whether he or she may be aware of any material nonpublic information relating to the Company (describing any borderline matters or items of potential concern) and has concluded that he or she does not. |
| ● | Whether the transaction complies with all rules and regulations, including Rule 144, Rule 701, Form S-8, and Section 16 of the Exchange Act, applicable to securities transactions by the Insider. |
| ● | Any other information that is material to the Compliance Officer’s consideration of the proposed transaction. |
APPENDIX II-1
The Compliance Officer may withhold or condition pre-clearance in his or her sole discretion. Once the proposed transaction is pre-cleared, the Insider may proceed with it on the approved terms, which will generally require the transaction to occur within four trading days unless a longer or shorter period is specified by the Compliance Officer. The Insider must comply with all other securities law requirements, such as Rule 144 and prohibitions regarding trading on the basis of inside information, and with any special trading blackout imposed by the Company prior to the completion of the trade.
Section 3. Pre-Clearance of Rule 10b5-1 Plans Required. Pre-clearance by the Compliance Officer is required for an Insider to enter into or modify a 10b5-1 Plan. Plans that are not pre-cleared may not be used by an Insider. Pre-clearance must be requested at least five full trading days prior to entry into or modification of the plan. However, pre-clearance will not be required for individual transactions effected pursuant to a pre-cleared Rule 10b5-1 trading plan. All Section 16 Insiders must immediately report the results of transactions effected under a trading plan to the Compliance Officer since they will be reportable on Form 4 within two business days following execution. Notwithstanding the foregoing, any 10b5-1 Plan for the Compliance Officer shall be subject to pre-clearance by the Chief Executive Officer.
Section 4. Hardship Exemptions. The Compliance Officer may, on a case-by-case basis, exempt a transaction by an Insider from this Policy due to financial or other hardship. Any request for a hardship exemption must be in writing and must describe the amount and nature of the proposed transaction and the circumstances of the hardship. The Insider requesting the hardship exemption must also certify to the Compliance Officer that he or she is not in possession of material nonpublic information concerning the Company or (such as in the case of a gift or other non-monetization transaction to a party who promises not to sell the securities received for some time or to a party subject to this Policy) that the transaction does not misuse the Company’s information. The existence of this process does not in any way obligate the Compliance Officer to approve any hardship exemption requested by an Insider, and all Insiders are cautioned that this exemption is intended to address limited and unusual circumstances.
Section 5. Brokers. All Insiders must ensure that their broker does not execute any transaction for the Insider (other than under a pre-cleared Rule 10b5-1 Plan) until the broker has verified with the Compliance Officer that the transaction has been pre-cleared.
Section 6. Reporting of Transactions Required. To facilitate timely reporting under Section 16 of the Exchange Act, Section 16 Insiders are required to on the same day as the trade date, or, with respect to transactions effected pursuant to a Rule 10b5-1 Plan, on the day the Insider is advised of the terms of the transaction, (a) report the details of each transaction to the Compliance Officer and (b) arrange with persons whose trades must be reported by the Insider under Section 16 (such as immediate family members living in the Insider’s household) to immediately report directly to the Company and to the Insider the following transaction details:
| ● | Transaction date (trade date). |
| ● | Number of shares involved. |
| ● | Price per share at which the transaction was executed (before addition or deduction of brokerage commission and other transaction fees). |
| ● | For stock option exercises, the specific option exercised. |
| ● | Contact information for the broker who executed the transaction. |
| ● | A specific representation that the Insider is not in possession of material nonpublic information. |
| ● | For a Section 16 Insider, a specific representation whether the transaction was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). |
The transaction details must be reported to the Compliance Officer, with copies to Company personnel who will assist the Section 16 Insider in preparing his or her Form 4.
APPENDIX II-2
Section 7. Oversight by the Audit Committee. The Audit Committee will be responsible for monitoring and recommending any modification to this Policy, if necessary or advisable, to the Board.
Section 8. Special Guidelines for 10b5-1 Trading Plans. Notwithstanding the foregoing, an Insider will not be deemed to have violated this Policy for transactions pursuant to a 10b5-1 Plan that has been pre-cleared by the Compliance Officer. The Compliance Officer may withhold or condition pre-clearance of any proposed 10b5-1 Plan (each, a “Proposed Plan”) for any reason, in his or her sole discretion.
A. The Compliance Officer will not pre-clear a Proposed Plan if he or she concludes that the Proposed Plan:
| ● | Fails to comply with the requirements of Rule 10b5-1, as amended from time to time; |
| ● | Would permit a transaction to occur before the later of (i) 90 days after adoption (including deemed adoption) of the Proposed Plan or (ii) two business days after disclosure of the issuer’s financial results in a Form 10-Q or Form 10-K for the quarter in which the Proposed Plan was adopted (subject to a maximum of 120 days after adoption of the Proposed Plan). |
| ● | Is established during a “closed” window period or a special “blackout” period, or the Insider is unable to represent to the satisfaction of the Compliance Officer that the Insider is not in possession of material nonpublic information regarding the Company. |
| ● | Would result in overlapping plans except in limited scenarios, such as two separate plans in which the second plan may not commence trading until the expiration of the first. |
| ● | Lacks appropriate mechanisms to ensure that the Insider complies with all rules and regulations, including Rule 144, Rule 701, Form S-8, and Section 16 of the Exchange Act, applicable to securities transactions by the Insider. |
| ● | Does not provide the Company the right to suspend all transactions under the Proposed Plan if the Compliance Officer, in his or her sole discretion, deems such suspension necessary or advisable, including suspensions to comply with any “lock-up” agreement the Company agrees to in connection with a financing or other similar events. |
| ● | Exposes the Company to liability under any other applicable state or federal rule, regulation or law; |
| ● | Creates any appearance of impropriety; |
| ● | Fails to meet guidelines established by the Company; or |
| ● | Otherwise fails to satisfy the Compliance Officer for any reason. |
B. Each 10b5-1 Plan must be established at a time when the trading window is open and the person is not in possession of material nonpublic information.
C. Each 10b5-1 Plan must provide appropriate mechanisms to ensure that the Insider complies with all rules and regulations, including Rule 144, Rule 701 and Section 16(b), applicable to securities transactions under the 10b5-1 Plan by the Insider.
D. Each 10b5-1 Plan must provide for the suspension of all transactions under such 10b5-1 Plan in the event that the Company, in its sole discretion, deems such suspension necessary and advisable, including suspensions necessary to comply with trading restrictions imposed in connection with any lock-up agreement required in connection with a securities issuance transaction or other similar events.
APPENDIX II-3
E. Any modifications to or deviations from a 10b5-1 Plan are deemed to be the Insider entering into a new 10b5-1 Plan and, accordingly, require pre-clearance of such modification or deviation pursuant to Section 2 of this Appendix II.
F. Any termination of a 10b5-1 Plan must be immediately reported to the Compliance Officer. If an Insider has pre-cleared a new 10b5-1 Plan (the “Second Plan”) intended to succeed an earlier pre-cleared 10b5-1 Plan (the “First Plan”), the Insider may not affirmatively terminate the First Plan without pre-clearance pursuant to Section 2 of this Appendix II, because such termination is deemed to be entering into the Second Plan.
G. None of the Company, the Compliance Officer, nor any of the Company’s officers, employees or other representatives shall be deemed, solely by their pre-clearance of a Proposed Plan, to have represented that it complies with Rule 10b5-1 or to have assumed any liability or responsibility to the Insider or any other party if the 10b5-1 Plan fails to comply with Rule 10b5-1.
H. Upon entering into or amending a 10b5-1 Plan, the director or officer must promptly provide a copy of the plan to the Company and, upon request, confirm the Company’s planned disclosure regarding the entry into or termination of a plan (including the date of adoption or termination of the plan, duration of the plan, and aggregate number of securities to be sold or purchased under the plan.
APPENDIX II-4
EXHIBIT A
INSIDER EMPLOYEES
(as of August 27, 2026)
| ● | All employees who are Vice Presidents or more senior. |
| ● | All Company employees in the finance department, including Investor Relations. |
| ● | All Company employees in the legal department. |
| ● | All administrative assistants to Company executives. |
| ● | The General Counsel and Chief Compliance Officer, the Secretary, and any other officer of the Company who is not a Section 16 Insider. |
A-1
EXHIBIT B
ACKNOWLEDGMENT
I hereby acknowledge that I have received and reviewed a copy of the Insider Trading Policy of Exascale Labs Holdings Inc. (the “Policy”), including Appendix I, Appendix II and Exhibit A thereto, and that I understand the Policy and agree to comply with its terms. I further acknowledge and agree that this acknowledgment constitutes my consent for the Company to impose sanctions for any violation of the Policy and to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with the Policy.
I understand that my failure to comply with the Policy may subject me to disciplinary action by the Company, up to and including termination of my employment or other relationship with the Company, and may also subject me to civil and criminal penalties under applicable securities laws.
| Signature: | ||
| Printed Name: | ||
| Title/Position: | ||
| Date: |
B-1
Exhibit 21.1
EXASCALE LABS HOLDINGS INC.
LIST OF SUBSIDIARIES
The following is a list of the subsidiaries of Exascale Labs Holdings Inc. as of September 28, 2026:
| Name of Subsidiary | Jurisdiction of Incorporation or Organization | |
| Exascale Labs Inc. | Delaware | |
| Evana Alpha Pte. Ltd. | Singapore |
Exascale Labs Inc. is a wholly owned subsidiary of Exascale Labs Holdings Inc. Evana Alpha Pte. Ltd. is a wholly owned subsidiary of Exascale Labs Inc.
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Hoansoo Lee, Chief Executive Officer of Exascale Labs Holdings Inc., certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Exascale Labs Holdings Inc.; |
| 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 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 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 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: September 28, 2026 | /s/ Hoansoo Lee |
| Hoansoo Lee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Jake Carney, Chief Financial Officer of Exascale Labs Holdings Inc., certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Exascale Labs Holdings Inc.; |
| 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 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 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 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: September 28, 2026 | /s/ Jake Carney |
| Jake Carney | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Exascale Labs Holdings Inc. (the “Company”) on Form 10-K for the fiscal year ended June 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the knowledge of each of the undersigned:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 28, 2026
| /s/ Hoansoo Lee | |
| Hoansoo Lee | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
| /s/ Jake Carney | |
| Jake Carney | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 97.1
EXASCALE LABS HOLDINGS INC.
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
| I. | OVERVIEW |
In accordance with the applicable rules of Nasdaq (the “Nasdaq Rules”), Section 10D and Rule 10D-1 (“Rule 10D-1”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act), the Board of Directors (the “Board”) of Exascale Labs Holdings Inc. (the “Company”) has adopted this Policy (this “Policy”) to provide for the recovery of erroneously awarded Incentive-Based Compensation from Executive Officers.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section VIII, below.
| II. | RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION |
| 1. | In the event of an Accounting Restatement, the Company will reasonably promptly recover the Erroneously Awarded Compensation Received in accordance with Nasdaq Rules and Rule 10D-1 as follows: |
| 1.1. | After an Accounting Restatement, the Compensation Committee of the Board (if composed entirely of independent directors, or in the absence of such a committee at the time of the Accounting Restatement, a majority of independent directors serving on the Board) (the “Committee”) shall determine the amount of any Erroneously Awarded Compensation Received by each Executive Officer and shall promptly notify each such Executive Officer with a written notice containing the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable. |
| 1.1.1. | For Incentive-Based Compensation based on (or derived from) the Company’s stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable Accounting Restatement: |
| 1.1.1.1. | The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the Accounting Restatement on the Company’s stock price or total shareholder return upon which the Incentive-Based Compensation was Received; and |
| 1.1.1.2. | The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to Nasdaq. |
| 1.2. | The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the particular facts and circumstances. For example, under appropriate facts and circumstances, it may be reasonable to promptly establish a deferred payment plan that allows the Executive Officer to repay owed erroneous compensation as soon as possible without unreasonable economic hardship to the Executive Officer, subject to applicable disclosure requirements of Item 402 of Regulation S-K. Under appropriate circumstances, it may also be reasonable for recovery to be obtained by forfeiture or cancellation of equity awards or reduction of future compensation. Notwithstanding the foregoing, except as set forth in Section II(2) below, in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer’s obligations hereunder. |
| 1.3. | To the extent that the Executive Officer has already reimbursed the Company for any Erroneously Awarded Compensation Received under any duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy. |
| 1.4. | To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall take all actions it deems reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Executive Officer. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence. Any action by the Company to recover Erroneously Awarded Compensation under this Policy from an Executive Officer shall not, whether alone or in combination with any other action, event or condition, be deemed (i) “good reason” for resignation or to serve as a basis for a claim of constructive termination under any benefits or compensation arrangement applicable to such Executive Officer, or (ii) to constitute a breach of a contract or other arrangement to which such Executive Officer is party |
| 2. | Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section II(1) above if the Committee determines that recovery would be impracticable and either of the following two conditions are met: |
| (i) | The Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before making this determination, the Company must make a reasonable attempt to recover the Erroneously Awarded Compensation, documented such attempt(s) and provided such documentation to Nasdaq; or |
| (ii) | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and regulations thereunder. |
| III. | DISCLOSURE REQUIREMENTS |
The Company shall file all disclosures with respect to this Policy required by applicable Securities and Exchange Commission (“SEC”) filings and rules.
| IV. | PROHIBITION OF INDEMNIFICATION |
The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid or awarded to an Executive Officer from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the Effective Date of this Policy).
| V. | ADMINISTRATION AND INTERPRETATION |
This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected individuals.
The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy and for the Company’s compliance with Nasdaq Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or interpretation of the SEC or Nasdaq promulgated or issued in connection therewith.
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| VI. | AMENDMENT; TERMINATION |
The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in this Section VI to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC rule or Nasdaq rule; provided, however, that this Policy may be terminated if and when the Company is no longer subject to such rules.
| VII. | OTHER RECOVERY RIGHTS |
This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or Nasdaq, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms of this Policy. Such right of recovery is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the Company under any applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity award agreement, compensatory plan, agreement or other arrangement.
| VIII. | DEFINITIONS |
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
| 1. | “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. |
| 2. | “Clawback Eligible Incentive Compensation” means all Incentive-Based Compensation Received by an Executive Officer (i) on or after August 27, 2026, (ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the applicable performance period relating to any Incentive-Based Compensation (whether or not such Executive Officer is serving at the time the Erroneously Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a national securities association, and (v) during the applicable Clawback Period (as defined below). |
| 3. | “Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date (as defined below), and if the Company changes its fiscal year, any transition period of less than nine (9) months within or immediately following those three completed fiscal years. |
| 4. | “Erroneously Awarded Compensation” means, with respect to each Executive Officer in connection with an Accounting Restatement, the amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the restated amounts, computed without regard to any taxes paid. |
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| 5. | “Executive Officer” means each individual who is currently or was previously designated as an “officer” of the Company as defined in Rule 16a-1(f) under the Exchange Act. For the avoidance of doubt, the identification of an executive officer for purposes of this Policy shall include each executive officer who is or was identified pursuant to Item 401(b) of Regulation S-K, as well as the principal financial officer and principal accounting officer (or, if there is no principal accounting officer, the controller). |
This Policy shall apply to all Executive Officers regardless of whether each individual has attested to receipt and understanding of this Policy as set forth in Exhibit A attached hereto.
| 6. | “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall, for purposes of this Policy, be considered Financial Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company’s financial statements or included in a filing with the SEC. |
| 7. | “Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure. |
| 8. | “Nasdaq” means The Nasdaq Stock Market. |
| 9. | “Received” means, with respect to any Incentive-Based Compensation, actual or deemed receipt, and Incentive-Based Compensation shall be deemed received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation to the Executive Officer occurs after the end of that period. |
| 10. | “Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement. |
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EXHIBIT A
ATTESTATION AND ACKNOWLEDGEMENT OF POLICY FOR THE RECOVERY OF
ERRONEOUSLY AWARDED COMPENSATION
By my signature below, I acknowledge and agree that:
| (i) | I have received and read the attached Policy for the Recovery of Erroneously Awarded Compensation (the “Policy”). |
| (ii) | I am and will continue to be subject to the Policy and that the Policy will apply both during and after my employment with Exascale Labs Holdings Inc. and its direct and indirect subsidiaries. |
| (iii) | I hereby agree to abide by all of the terms of the Policy both during and after my employment with the Company, including, without limitation, by promptly repaying or returning any Erroneously Awarded Compensation to the Company as determined in accordance with this Policy. |
| By: | ||
| Name: | ||
| Date: |
A-1