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Item 1A. Risk Factors.
Except as set forth below, there have been no material changes to the risk factors set forth in Part I, Item 1A of the 2025 Form 10-K.
RISKS RELATED TO OUR HYPE TOKEN TREASURY STRATEGY
There may be no realized economic value of the Companys HPL tokens.
The HyperLend protocol is a liquidity, borrowing, and lending platform built on the Hyperliquid Layer 1 blockchain. In March 2026, the Company received 10,000,000 of HyperLends governance tokens called HPL. HPL gives holders voting rights to participate in HyperLend protocol decision-making, and may qualify holders for benefits and discounts when using the protocol. The maximum total supply of HPL is 1 billion, of which it is reported that 25.0% was distributed to participants through HyperLends token genesis event in January 2026, 30.1% was reserved for ecosystem growth and incentives, 22.5% has been allocated to core contributors (with a multi-year unlock schedule), strategic investors will receive 17.4% (through a multi-year unlock schedule), and 5% has been dedicated to liquidity provision. HPL has limited trading history, with a limited number of trading venues providing liquidity as of March 31June 30, 2026. There can be no assurance that the Company will be able to monetize these tokens for any material economic value.
The Companys liquid staking activities, including its holdings of HiHYPE, kHYPE, kmHYPE, and sKNTQ , and sHPL (each a digital intangible asset), expose the Company to additional risks and earnings volatility.
Hyperion Institutional iHYPE (HiHYPE), Kinetiq Staked , kHYPE (kHYPE) and Kinetiq Market HYPE (kkmHYPE) are HYPE liquid staking tokens (each, a HYPE LST); Staked KNTQ (s; sKNTQ) is a KNTQ LST; and, Staked HPL ( sHPL) is a HPL LST (together with each HYPE LST and KNTQ LST, LSTs). As of March 31June 30, 2026, all HYPE LSTs owned by the Company are designed by Kinetiq, the Companys KNTQ LSTs are designed by Kinetiq, and the Companys HPL LSTs are designed by HyperLend. The Companys LSTs enable the Company to access HyperEVM DeFi. Each of the Companys LSTs evidences ownership of the Companys deposited HYPE, KNTQ, or HPL (the underlying digital asset of such LST), and may accrue staking rewards denominated in the underlying digital asset. Liquid staking allows the Company to earn native staking rewards while maintaining access to liquidity on its digital assets that can be used for additional strategies on- and off-chain.
The risks involved with liquid staking differ from direct staking, including the following:
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| Liquid staking requires a certain level of technical expertise to manage the staking and un-staking process effectively. There is associated counterparty risk tied to the reliance on using the liquid staking providers smart contract platform. |
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| Disputes or compromise among the liquid staking providers core team may lead to the value of staking assets diverging from HYPE, KNTQ, or HPL or failure to exit the liquid staking position. |
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| The price of the staked derivative may decrease from its original price. This may happen because the new token has a lower market price. |
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| If we lose any of our LSTs, we will also lose access to our associated staked token. This can result from liquidations at lending protocols or other execution partners, the loss of private keys or other forms of access to the addresses that hold our LSTs, and mistaken or stolen asset transfers. |
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The Hyperliquid network is based, in part, upon the development and deployment of smart contracts, which are self-executing contracts with the terms of the agreement written into software code. Like any software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract. The smart contract is deployed on Hyperliquid and, as such, may contain a bug or other vulnerability that may lead to the loss of, or inability to access, digital assets held in the smart contract. The Company currently relies on Kinetiq and HyperLend for its liquid staking solution. The smart contract code written by Kinetiq was audited by Code4rena, Spearbit, Pashov Audit Group and Zenith, and HyperLends smart contracts have undergone third-party security reviews by Nethermind Security and Pashov Audit Group. Nevertheless, there is no guaranty against a bug or other vulnerability leading to a loss of digital assets.
In addition, the Company is also exposed to risk of losing HYPE, KNTQ, or HPL to system failure or hacking. As a result, LSTs do not confer an enforceable right to the underlying tokens, but only a claim. Further, the redemption of LSTs back into the underlying tokens may be subject to any protocol-defined lockup or unbonding periods.
LSTs are initially recognized at the fair value of the tokens exchanged and, due to their indefinite useful life, are not amortized but instead are subject to impairment testing. In contrast, HYPE, KNTQ and HPL are measured at fair value. The variances in valuation methods between HYPE, KNTQ, or HPL and LSTs may create material volatility in the financial statements depending on conversion and redemption activity between HYPE, KNTQ, or HPL and LSTs each period. In addition, any staking rewards earned on LSTs are not recognized until LSTs are redeemed.
The Companys deposits into the Rysk Institutional Volatility Income Vault and smart contract enabled options activity expose the Company to additional risks and earnings volatility.
In the three months ended On March 31, 2026, the Company launched in partnership with the Rysk protocol an Institutional Volatility Income Vault (IVIV)VIV, through which the Company owo execute HYPE options Hyperion Rysk Vault Shares specific to t(puts and calls) via smart-contracts on-chain. The Companys activity (such shar began executing on-chain put sales bearingon the name Wprice of HYPE-USDH-USDH-P-H-HL) which were received in exchange for in the three months ended March 31, 2026, pursuant to which the Companys deposits executed on-chain options in the price of USDH intoHYPE during the smart cix montracths enablded vault. The purpose of this vault is to executeJune 30, 2026. In order to collateralize these HYPE options (puts and calls) vi, the Company first creates a smart-contracts on-chain, and tandalone collateralization liquidity pool of the Company began executing on-chain put sales on the price of HYPE in the three months endeds assets. Until May 2026, the Companys liquidity pool was denominated in USDH; following Native Markets announcement on March 31y 14, 2026, collateralized by that it would cease supporting the USDH stablecoin, beginning in June 2026, the Companys Hyperion Rysk Vault Shares. Rysk designliquidity pool is denominated in USDC. When the Companys USDC is deposited tinto the IVIV, it receives in exchange Hyperion Rysk Vault Shares and manages the underlying smart contracts. When USDH i, which evidence ownership of the Companys deposited into USDC plus any income from the IVIV in exon-change for Hyperin HYPE option Rysk Vault Shares, ts execution in a matter akin to liquid staking tokens. The Company relinquishes control over theits underlying USDH. The Companys C when deposited into its liquidity pool. Any increase in the amount of underlying USDC within the IVIV is not recognized as income until the Hyperion Rysk Vault Shares evidence ownership of the Companysare redeemed for USDC.
Rysk depositsigned USDH pluthe Hyperion Rysk Vault Shares any income from d manages the IVIV on-chain HYPE options execution.
underlying smart contracts. Rysk has commissioned Dedaub for multiple comprehensive smart contract security audits covering different protocol versions and components over multiple years; in addition, Rysk uses Opyn Gammaderived smart contracts, which themselves are widely audited. Nevertheless, there is no guaranty against a bug or other vulnerability leading to a loss of the Companys Hyperion Rysk Vault Shares or USDHC. In addition, the Company is also exposed to risk of losing USDH toC through system failure or hacking. As a result, the Hyperion Rysk Vault Shares do not confer an enforceable right to the underlying deposited USDHC and IVIV assets, but only a claim. Further, the Hyperion Rysk Vault Shares are periodically locked into smart contracts to collateralize on-chain HYPE options activity. Therefore, the Companys ability to redeem Hyperion Rysk Vault Shares back to underlying USDHC is subject to smart contract risk and resolution of HYPE options activity on-chain.
The Hyperion Rysk Vault Shares are initially recognized at the fair value of the USDHC exchanged and, due to their indefinite useful life, are not amortized but instead are subject to impairment testing on the price of USDH. Any HYPE options income earned within the IVIV is not recognized until the Hyperion Rysk Vault Shares are redeemed. The variances in valuation methods between the Hyperion Rysk Vault Shares and the underlying pool of USDHC, including the delay of recognizing income from executiveed HYPE options strategies, may create material volatility in the financial statements depending on conversion and redemption activity between the Hyperion Rysk Vault Shares and USDHC each period.
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We may engage in distinct digital asset financing strategies in which we will leverage our digital asset holdings to acquire additional amounts of the same leveraged digital assets, and may do so on a compounded basis, which will increase our exposure to smart-contract, operational and counterparty risks. We may also lend amounts of digital assets (including stablecoins) to third parties through the use of third party on-chain lending platforms.
We may engage in digital asset leverage strategies to acquire additional amounts of HYPE or lend a portion of digital assets (including stablecoins). As part of this strategy, we may borrow digital assets by pledging our own HYPE holdings as collateral (including on a compounded basis), deploy these borrowed assets to acquire additional amounts of HYPE, and subsequently re-pledge the newly acquired HYPE to further engage in these leveraged transactions. We may also lend digital assets through a third-party loan facilitator, to a borrower under loan, security and third-party custodian agreements on-chain and off-chain. Since some of these transactions will be effectuated on-chain, the strategy may expose us to significant smart-contract vulnerabilities and operational risks. The smart contracts that are used for purposes of these transactions may contain undiscovered bugs, logical errors or economic vulnerabilities that could be exploited by malicious actors or that could cause the contracts to perform in unintended ways, resulting in partial or total loss of our collateral and borrowed assets. In addition, the strategy may subject us to counterparty risk through the platforms we utilize to facilitate leveraging strategies including, among others, insolvency of the platform, coding errors and cyberattacks. We may also be subject to the insolvency of the borrower and the value of the collateral they pledge may not be sufficient to wholly satisfy the outstanding debt obligations of the borrower. Finally, where we are a borrower (and conversely where we act as a lender), lenders customarily require that collateral ratios be maintained within narrowly defined thresholds and may exercise broad contractual discretion to impose additional margin requirements or to liquidate collateral without notice when those thresholds are breached. We may also incur losses if the interest that accrues on our borrowings significantly exceeds the revenue generated by the borrowed HYPE.