Item 1A. Risk Factors. You should carefully review Investing in our securities involves significant risk. Our business, prospects, financial condition or operating results could be materially adversely affected by the risks identified below, as well as other risks not currently known to us or that we currently consider immaterial. Furthermore, these factors represent risks and uncertainties that could cause actual results to differ materially from those implied by forward-looking statements. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to other information regarding certain contained in this Quarterly Report on Form 10-Q and our other public filings with the SEC. The following risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. In the following discussion of risk factors, References to we, us, our and similar terms refer to TAO Synergies Inc. Risks Related to our Crypto Asset Strategy Our operating results are dependent on the price of TAO. If such price declines, our business, operating results, and financial condition would be adversely affected. Any declines in the volume of crypto asset transactions, the price of crypto assets, or market liquidity for crypto assets generally may adversely affect our operating results. We have significant investments in TAO. As of August 14, 2025, we held digital intangible assets of approximately $16.7 million. Thus, changes in the value of TAO will generally have a significant impact on our results. Our operating results will be impacted by the revenues and profits we generate from the purchase, sale, and trading of crypto assets. The market price of Bittensors TAO token has been highly volatile and could decline sharply at any time. For example, TAOs price experienced a rise of over 1000% in 2024, reaching a high above $767 in April 2024, and subsequently corrected by roughly 45% from that peak. Such extreme fluctuations could significantly increase or reduce the value of our TAO holdings within a short period. The market price of TAO can be driven by a variety of factors beyond our control, including speculative investor behavior, regulatory developments, changes in market liquidity, the adoption and performance of the Bittensor network, cybersecurity incidents, macroeconomic events, or negative publicity about digital assets generally or TAO specifically. Because we have invested a substantial portion of our treasury in TAO, a major downturn in TAOs market price could materially affect impair the value of our assets and even jeopardize our ability to meet cash needs or financial obligations. The price of crypto assets and associated demand for buying, selling, and trading of crypto assets have also historically been subject to significant volatility. For instance, in 2017 and 2021, the value of certain crypto assets, including bitcoin, experienced steep increases in value, followed by steep declines in 2018 and 2022. After recovering from the 2018 decline and reaching record highs in December 2021, the value of the total crypto market cap declined by approximately 64% in the twelve months ended December 31, 2022. The collapse of several companies in the crypto asset industry such as Celsius, Voyager, and FTX impacted crypto asset prices in 2022 and the majority of 2023. We believe that the approval and launch of spot-based Bitcoin ETFs in the U.S. in the first quarter of 2024 and the election of President Donald Trump in the fourth quarter of 2024 contributed to an increase in the crypto market capitalization during 2024. However, the crypto market subsequently experienced a general decline in the first half of 2025. The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, and may significantly decline in the future, without recovery. Such uncertainty and volatility depend on a number of factors, including: market conditions across the cryptoeconomy; changes in liquidity, volume, and trading activities; 45 trading activities on crypto asset trading platforms worldwide, many of which may be unregulated, and may include manipulative activities; investment and trading activities of highly active retail and institutional users, speculators, miners, and investors; the speed and rate at which cryptocurrency is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial asset worldwide, if at all; decreased user and investor confidence in crypto assets and crypto asset trading platforms; negative publicity and events relating to the cryptoeconomy; unpredictable social media coverage or trending of crypto assets; the ability for crypto assets to meet user and investor demands; the functionality and utility of crypto assets and their associated ecosystems and networks, including crypto assets designed for use in various applications; consumer preferences and perceived value of crypto assets and crypto asset markets; increased competition from other payment services or other crypto assets that exhibit better speed, security, scalability, or other characteristics; regulatory (including enforcement) or legislative changes and updates affecting the cryptoeconomy; the characterization of crypto assets under the laws of various jurisdictions around the world; the maintenance, troubleshooting, and development of the blockchain networks underlying crypto assets, including by miners, validators, and developers worldwide; the ability for cryptocurrency networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently; ongoing technological viability and security of crypto assets and their associated smart contracts, applications, and networks, including vulnerabilities against hacks and scalability; fees and speed associated with processing crypto asset transactions, including on the underlying blockchain networks and on crypto asset trading platforms; financial strength of market participants; the availability and cost of funding and capital; the liquidity of crypto asset trading platforms; interruptions in service from or failures of major crypto asset trading platforms; availability of an active derivatives market for various crypto assets; availability of banking and payment services to support cryptocurrency-related projects; level of interest rates and inflation; 46 monetary policies of governments, trade restrictions, and fiat currency devaluations; and national and international economic and political conditions. Furthermore, crypto asset prices may be subject to market manipulation or distortion, including pump-and-dump schemes, wash trading, spoofing, and front-running, particularly on unregulated exchanges. Such manipulation could significantly impact the perceived value and trading volume of TAO and undermine investor confidence in the crypto asset market, adversely affecting our business. There is no assurance that any crypto asset will maintain its value or that there will be meaningful levels of trading activities. In the event that the price of crypto assets or the demand for trading crypto assets decline, our business, consolidated operating results, and financial condition could be adversely affected. If we fail to successfully implement our crypto asset-related business strategy, or if our strategy proves ineffective, our business, financial condition and results of operations set forth could be materially and adversely affected. Our future performance depends significantly on the successful execution of our business strategy, which is focused, in part, on acquiring, holding and staking TAO and participating in the TAO ecosystem. This strategy is novel, involves exposure to emerging technologies and markets, and requires effective management of operational, technological, and financial resources. The successful implementation of this strategy will place substantial demands on our management team and infrastructure. Moreover, given the rapidly evolving regulatory and technological landscape surrounding crypto assets, there is no assurance that our strategy will be successful, or that it will result in improved financial performance or long-term shareholder value. We may, at any time, modify or abandon certain components of our business plan in response to market conditions, regulatory developments, or other factors. Additionally, our strategy is untested over extended market cycles, and unforeseen complications, operational failures, regulatory shifts, or insufficient demand for TAO could significantly impede our business objectives. If we are unable to effectively implement our strategy, or if the strategy does not yield the anticipated benefits, our business prospects, growth potential, and profitability could be materially and adversely impacted. We may lack effective tools to hedge against TAOs price volatility, as no established derivatives market exists for TAO and broader crypto hedging instruments are generally limited to major tokens like Bitcoin. This leaves us more exposed to adverse market swings and unable to mitigate downside risk through conventional strategies. Our concentrated TAO holdings also present liquidity challenges, as TAOs trading volume is limited and large sales could depress prices and trigger steep losses. These constraints are compounded by the small number of platforms supporting TAO, some of which are offshore or decentralized. In adverse market conditions, we may be unable to liquidate TAO at reasonable prices, potentially impairing our ability to meet financial obligations. These combined factors make our treasury strategy more volatile and less liquid than one based on traditional assets. Managing crypto assets like TAO also introduces operational complexities and control risks distinct from traditional treasury functions. Our limited experience in large-scale crypto custody increases the risk that our procedures may be inadequate to safeguard assets or accurately record transactions. Effective crypto asset management requires strict private key security, wallet controls, and transaction protocols; failures in these areas could result in irreversible losses. Even with third-party custodians, we must ensure proper oversight, reconcile blockchain data with financial records, and comply with evolving accounting standards. Human error, phishing attacks, or insider misconduct could also expose us to theft or fraud. Our finance team may experience a steep learning curve in navigating blockchain-based accounting, and weaknesses in our systems could lead to delays, errors, or regulatory issues. While we are investing in controls and personnel, there is no guarantee our risk management will remain effective as the crypto landscape evolves. Our crypto asset strategy also relies heavily on evolving blockchain technology, which is subject to rapid change, technical challenges, and potential obsolescence. Protocols underlying TAO, including but not limited to key subnets, could experience security vulnerabilities, errors in code, malicious attacks, or other technical failures. Any such incidents could undermine confidence in TAO, result in significant financial losses, and materially impair our business. Additionally, future technological advances, including quantum computing, could potentially compromise the cryptographic foundations of blockchain technology underlying TAO, posing additional risk to the security and long-term viability of our crypto asset holdings. 47 We will likely need to pursue additional equity or debt financings to meet our previously announced goal of acquiring $100 million of TAO. Based on our current balance sheet, we will likely need to pursue additional equity or debt financings in order to accumulate enough capital to acquire our previously stated target amount of TAO. With uncertainty in the capital markets and other factors, such financing may not be available on terms favorable to us or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, we could face significant limitations on our ability to invest in our operations and otherwise suffer harm to our business. Certain of our directors, officers, employees and independent contractors may hold crypto assets. Certain of our directors, officers, employees, and independent contractors may hold crypto assets, including the same crypto assets in which the Company invests, or have other crypto-related personal investments. Such persons may actively invest in crypto projects and crypto assets on their own behalf, which could incentivize them to take actions (or refrain from actions) that favor their personal crypto holdings or related business interests over the interests of the Company and its shareholders. Affiliates of the Company may also have substantial direct investments in crypto assets and are under Item 1A. Risk Factors no obligation to prioritize or consider the Companys interests when managing those investments, potentially leading to conflicts of interest. Certain of our directors, officers, employees, and independent contractors may have outside business ventures or participate in other crypto-related initiatives, potentially diverting their time, attention, and resources away from our Annual Report Company. The Companys internal policies and procedures may not fully eliminate these conflicts, and there is no assurance that the personal or outside interests of these individuals will consistently align with those of the Company or its shareholders. If such conflicts are not adequately managed, our decision-making processes, corporate governance, market perception, and overall financial performance may be adversely affected. Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our proposed holdings of crypto assets. Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling crypto assets. We will need to perform an analysis each quarter to identify whether events or changes in circumstances indicate that our crypto assets are impaired. As a result, volatility in our earnings may be significantly more than what we experienced in prior periods. The emergence or growth of other crypto assets, including those with significant private or public sector backing, could have a negative impact on Form 10-K the price of TAO and adversely affect our business. Our assets are concentrated in a single crypto asset, TAO. Accordingly, the emergence or growth of crypto assets other than TAO may have a material adverse effect on our financial condition. As of June 30, 2025, TAO remained significantly smaller than many other crypto assets by market capitalization and liquidity. TAOs success hinges, in part, on Bittensors ability to compete effectively in the decentralized AI ecosystem. Direct competitors include SingularityNET (AGIX), Fetch.ai (FET), Ocean Protocol, and others. If these platforms gain broader adoption, due to better performance, more user-friendly tools, or superior incentives, TAO could lose market share and relevance. In addition, there are numerous alternative crypto assets and many entities, including consortiums and financial institutions, that are researching and investing resources into private or permissioned blockchain platforms or crypto assets that do not rely on decentralized machine learning or proof-of-intelligence models like the Bittensor network. For example, in late 2022, the Ethereum network transitioned to a proof-of-stake mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. The Ethereum network has completed another major upgrade since then and may undertake additional upgrades in the fiscal year ended December 31, 2024. There future. If the mechanisms for validating transactions in Ethereum and other alternative crypto assets are perceived as superior to Bittensors or as more attractive due to increased utility beyond Bittensors narrower focus, those crypto assets could gain market share relative to TAO. Other alternative crypto assets that compete with TAO in certain ways include stablecoins, which are designed to maintain a constant price because of, for instance, their issuers promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. Treasury securities) equal to the total value of stablecoins in circulation. Stablecoins have grown rapidly as an 48 alternative to non-pegged crypto assets such as TAO as a medium of exchange and store of value, particularly on crypto asset trading platforms. Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, Chinas central bank digital currency (CBDC) project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been no discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, TAO and other crypto assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other crypto assets could cause the market price of TAO to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results. Our financial results are heavily dependent on TAO, significantly increasing our exposure to crypto asset market volatility, valuation uncertainty, and concentrated credit risks. Our holdings in crypto assets are focused on TAO, which subjects us to heightened risks related to asset concentration and market volatility. A substantial decline in demand for TAO, if not offset by interest in other assets, would materially and adversely impact our revenues and overall financial performance. This concentration also amplifies our vulnerability to downturns in the broader crypto market, exposing us to outsized losses, asset write-downs, liquidity constraints, and difficulties in meeting collateral obligations. Additionally, accurately valuing crypto assets, including TAO, can be challenging, especially during periods of market stress. Crypto assets trade globally across numerous exchanges, many of which are lightly regulated, causing significant price volatility and disparities across trading venues. The absence of a centralized market or definitive closing price means valuations can be unreliable or temporarily distorted due to liquidity shortages, market disruptions, or manipulation. Such valuation uncertainties complicate the accurate determination of our financial position and make it difficult for auditors to verify our asset values. Moreover, new accounting standards requiring adjustments to how we mark crypto assets to market values could introduce substantial fluctuations in our reported earnings. These valuation changes might also trigger unintended tax liabilities, resulting in increased tax expenses or additional compliance burdens. Our concentrated crypto asset holdings further expose us to credit risks. For instance, maintaining large asset balances with a single custodian or significant lending exposure to a single counterparty within the crypto industry could substantially increase the severity of an adverse event, as the failure or insolvency of such entities would directly jeopardize a major portion of our assets. We are highly dependent on James Altucher and other key personnel, and our inability to retain or attract experienced individuals could materially harm our business. We are highly dependent on the services of our TAO token consultant, James Altucher, for leading our TAO-based revenue generation strategy. Because we operate in a relatively new industry that requires highly skilled and technical personnel, our future success is highly dependent on the talents and contributions of Mr. Altucher. The loss of Mr. Altucher could disrupt our operations and have a material adverse effect on our business. Mr. Altucher is free to engage in activities outside of the Company, although he is obligated under his consulting agreement to devote his TAO-related activities exclusively to us. Moreover, his contract expires on June 8, 2026. While Mr. Altucher has entered into a consulting agreement with the Company, Mr. Altucher is not expected to devote his full time, attention or efforts to us. Mr. Altucher may continue to manage significant crypto assets outside of the Company, which may consume some of his time, attention and efforts. Additionally, our future growth and success depend on our ability to attract, retain, and motivate skilled employees and contractors in the crypto asset industry. Competition for qualified personnel in the crypto asset and blockchain industries is intense. The specialized nature of blockchain technology and crypto asset markets means there is limited availability of highly experienced personnel. Our growth strategy depends not only on retaining key individuals like Mr. Altucher but also on our ability to attract and retain additional experienced professionals. Any inability to secure or retain such personnel due to competitive pressures, reputational factors, regulatory uncertainty, or market conditions could adversely impact our ability to execute our strategic initiatives and could materially harm our business. 49 Our TAO holdings are likely to be less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Historically, the TAO market has been characterized by significant volatility in price, lower trading volumes, and less liquidity compared to major crypto assets like Bitcoin and traditional fiat currencies. During times of market instability, we may not be able to sell our TAO at favorable prices or at all. For example, TAO currently trades on a limited number of centralized and decentralized platforms, some of which may lack sufficient depth or infrastructure to support large-volume trades or institutional execution. As a result, our TAO holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered TAO or otherwise generate funds using our TAO holdings, particularly in times of market instability or when the price of TAO has declined significantly. If we are unable to sell our TAO, enter into additional capital raising transactions (including transactions using TAO as collateral), or otherwise generate funds using our TAO holdings, or if we are forced to sell our TAO at a significant loss in order to meet our working capital requirements, our business and financial condition could be negatively impacted. Additionally, we rely on third-party exchanges and custodians to facilitate transactions in TAO. These platforms may face operational disruptions, security breaches, regulatory enforcement, insolvency, or other issues beyond our control. Any impairment of our ability to access or transact on these platforms could limit our liquidity, force us into unfavorable asset sales, or prevent us from timely managing our crypto asset holdings, thereby materially affecting our operations and financial condition. Bittensors TAO token, generated via a decentralized Proof-of-Intelligence mining process, faces significant volatility, governance centralization risks, regulatory uncertainty, limited liquidity, and ongoing security vulnerabilities related to its AI-focused consensus model and underlying decentralized infrastructure. Bittensors native token, TAO, was launched via a fair launch mining process in January 2021 and, according to public reports, without a pre-sale, ICO, or pre-mined allocation. Circulating tokens were earned by miners, promoting decentralization but potentially resulting in wealth concentration among early participants. The project is managed by the Opentensor Foundation, a small team of developers, making it heavily dependent on their ongoing involvement. Until early 2024, governance power was concentrated in a small number of validators, posing centralization risks. Although a new dynamic governance system was introduced in 2025, it remains untested and could present unforeseen challenges and conflicts of interest. TAO tokens are generated through Bittensors Proof-of-Intelligence consensus mechanism, where validators assess AI contributions from miners to distribute rewards. This approach, however, introduces potential vulnerabilities such as subjective evaluations, collusion, and technical security risks. Notably, in July 2024, a supply-chain attack led to theft of private keys and prompted a temporary network shutdown, underscoring existing security concerns and highlighting the networks reliance on centralized emergency controls. TAO has a capped supply of 21 million tokens, with about 9 million mined as of mid-2025, and a halving of token issuance every four years, the next scheduled for August 2025. These dynamics could influence miner incentives and affect market liquidity. TAOs value is speculative and highly dependent on future adoption and ecosystem growth. Trading liquidity is limited and primarily concentrated on offshore exchanges, increasing price volatility and counterparty risks. Currently, derivatives markets for TAO are limited, and while products such as the Grayscale Bittensor Trust may enhance market accessibility, they carry additional liquidity and regulatory uncertainties. Bittensor, a decentralized AI blockchain network using a Proof-of-Intelligence consensus model tied to AI model performance, faces significant technical, operational, scalability, governance, and regulatory risks, including dependence on third-party off-chain infrastructure, potential vulnerabilities in AI validation processes, limited scalability, decentralized governance inefficiencies, and regulatory uncertainties, all of which could adversely impact the value and adoption of its native TAO token. TAO functions on the Bittensor network, which operates as a decentralized AI network built on a custom blockchain utilizing the Substrate framework and employs a novel consensus mechanism known as Proof-of-Intelligence, whereby blockchain validation and token rewards are directly tied to AI model performance. The complex architecture of this system introduces significant technical and operational risks. Given the sophisticated blockchain infrastructure and Bittensors specialized AI-focused subnets, there exists a heightened potential for software errors, system vulnerabilities, and unforeseen operational disruptions. Such events could result in extended network downtime, diminished user confidence, or even irreversible losses of digital assets. 50 Moreover, Bittensor heavily depends on off-chain infrastructure for executing AI computations, leading to inherent trust and transparency issues. Users must rely on third-party providers to execute AI tasks accurately and securely. Any inaccuracies, misreporting, malicious actions, or operational failures in these off-chain processes could significantly damage the reliability and overall reputation of the Bittensor network and negatively impact the TAO tokens value. The decentralized nature of Bittensor further presents notable scalability challenges. As participation increases, the complexity and resource-intensiveness of validating and evaluating AI model contributions can create bottlenecks and degrade system performance. These scalability constraints could prevent Bittensor from effectively competing with centralized AI platforms, potentially limiting widespread adoption and constraining growth in demand for the TAO token. In addition, maintaining robust quality control and verifying AI outputs within the Bittensor ecosystem pose ongoing challenges. While the platform employs a competitive, reputation-based reward system to incentivize quality contributions, this structure remains vulnerable to risks such as validator collusion, sabotage among competing model providers, and manipulation of reputation or reward mechanisms. Without robust on-chain verification processes, incorrect or deceptive AI outputs may proliferate, eroding trust and undermining the perceived value of services provided through the network. The value and liquidity of the TAO token also depends substantially on its adoption among developers, researchers, and other users within decentralized AI markets. If Bittensor fails to expand beyond niche communities or becomes overshadowed by centralized AI alternatives, it may experience decreased demand for its services. This scenario would negatively impact the market price and liquidity of TAO, adversely affecting our financial position. The decentralized governance structure of Bittensor, managed through consensus among TAO token holders, also introduces additional risks related to decision-making delays, political friction, and governance inefficiencies. Regulatory ambiguity and increased scrutiny surrounding decentralized AI systems and crypto tokens further compound these governance challenges. Adverse regulatory actions, unclear legal interpretations, or new compliance obligations could impose substantial additional costs or operational restrictions, or potentially force cessation of certain business activities altogether. This regulatory uncertainty could also deter institutional adoption and broader acceptance of Bittensor, further limiting its potential growth and stability. Collectively, these technical, operational, market, governance, and regulatory risks could result in substantial volatility in the value of TAO, materially affecting our business strategy involving this asset. Blockchain networks like Bittensor can also undergo forks, splitting into separate networks due to planned upgrades, technical disagreements, or vulnerabilities. Forks can cause significant uncertainty, market volatility, and TAO price declines. Forks may also result in token holders having assets on multiple blockchains, creating confusion around market acceptance and token value. Service providers, custodians, or exchanges supporting TAO might refuse to accommodate forked tokens, complicating custody, liquidity, and valuation. Forks could also expose holders to cybersecurity threats, including replay attacks and fraudulent schemes. Such disruptions may materially affect the Companys treasury assets, financial condition, operational results, and market reputation. The open-source structure of crypto asset networks, including the Bittensor network on which the TAO crypto asset functions, exposes us to risks related to software development, security vulnerabilities, and potential disruptions. The open-source structure of the Bittensor network, on which the TAO crypto asset operates, exposes us to risks related to software development, security vulnerabilities, and potential disruptions. Bittensor is designed as a decentralized, open-source protocol for collaborative machine intelligence, and although key contributors and the Opentensor Foundation play significant roles, no single entity formally controls the network as a whole. Development, maintenance, and security depend heavily on voluntary contributions, community incentives, and ongoing engagement. Without mandated funding or guaranteed resources, efforts to address emerging issues, security updates, or network improvements may lag, exposing the protocol to risk. For example, the network faced a significant security incident in July 2024 when a malicious upload to PyPI led to a wallet exploit affecting users, prompting urgent mitigations by the Opentensor Foundation. If the Bittensor software is not properly maintained or updated, the network (and by extension the TAO token) could become vulnerable to security threats, operational inefficiencies, or loss of user confidence, which could reduce the long-term viability of TAO and negatively impact our business. 51 The irreversibility of crypto asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business. Crypto asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that crypto asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of crypto assets or a theft of crypto assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, crypto assets could be transferred in incorrect amounts or to unauthorized third parties. To the extent we are unable to seek a corrective transaction to identify the third party which has received our crypto assets through error or theft, we will be unable to revert or otherwise recover the impacted crypto assets, and any such loss could adversely affect our business, results of operations and financial condition. Decentralized AI networks, such as Bittensor, involve special risks related to unclear regulatory requirements, technical difficulties, limited transparency, intense competition, and complex intellectual property considerations. Regulatory oversight of AI remains fragmented, evolving, and lacking consistent standards or uniform frameworks. In the absence of clear global AI regulations, decentralized AI platforms, including Bittensor, face heightened uncertainty concerning compliance obligations, ethical governance standards, transparency, accountability, and intellectual property rights associated with AI model development and deployment. Decentralized AI technologies inherently face increased technical risks, including model inaccuracies, embedded biases, scalability constraints, and vulnerabilities arising from complex model evaluation and validation processes. Unlike centralized AI systems, decentralized networks lack unified oversight or consistent quality standards for model training data, increasing the risk factors disclosed that AI models produce biased, inaccurate, discriminatory, or otherwise controversial outputs. Such issues may lead to reputational harm, diminished user trust, public criticism, and possible regulatory inquiries specifically targeting AI ethics and fairness. Moreover, the inherent opacity of advanced decentralized AI models, such as deep neural networks, presents material transparency and explainability risks. As regulatory bodies increasingly demand clear interpretability and accountability of AI model decisions, particularly in high-risk or sensitive applications including healthcare, the inability to adequately explain or audit decentralized AI model behaviors could lead to regulatory scrutiny, litigation, or decreased consumer confidence. The rapidly evolving AI landscape also introduces substantial competitive and technological obsolescence risks. Emerging AI platforms, research initiatives, or large technology companies may achieve superior innovations, broader adoption, or set higher benchmarks for AI performance and ethical standards. Failure to rapidly adapt to these advancements could diminish the competitive relevance and perceived value of decentralized AI platforms and the value of our TAO holdings. Additionally, decentralized AI platforms present unique intellectual property (IP) risks due to the collaborative and open-source nature of model and data contributions. Ambiguity surrounding IP ownership, potential infringement of third-party rights, difficulties in licensing enforcement, and disputes over intellectual property rights could lead to litigation, financial liabilities, reputational harm, or disruption of network operations, adversely affecting the Bittensor network. Risks Related to the Custodian and Prime Broker We face additional risks related to our reliance on BitGo Prime LLC (the Prime Broker) and BitGo Trust Company, Inc. (the Custodian), which are affiliated entities, for trading, custody, and settlement of TAO. We rely on the Prime Brokers proprietary trading system and the Custodians custodial and settlement services for executing and settling transactions in TAO. The Prime Brokers trading system is subject to technical failures, operational errors, interruptions, or cyber-attacks that could lead to transaction failures, settlement delays, or loss of assets. Although the Prime Broker and the Custodian maintain policies and procedures to mitigate these risks, there is no guarantee these safeguards will prevent disruptions or losses. Any operational failures could materially harm our ability to conduct business operations. Additionally, transactions executed through the Prime Brokers trading system and settled via the Custodians settlement services are final and irreversible once completed. If an error occurs (whether through human mistake, operational failure, or fraudulent 52 activity) we may be unable to reverse or recover funds, resulting in potential significant losses. Except in cases involving fraud, gross negligence, or willful misconduct, the Custodians liability for direct damages arising from theft, operational errors, unauthorized access, or similar incidents may be limited to the fees paid or payable during the 6 months immediately preceding the incident. Both the Custodians and Prime Brokers liability for direct damages caused by their gross negligence or willful misconduct may be limited to the value of the affected digital assets or fiat currency. The Prime Broker otherwise may not be liable for losses relating to theft, operational errors, unauthorized access, or similar incidents. Consequently, the Companys recourse, including for losses of TAO held by the Custodian, Prime Broker, or their service providers, may be substantially limited. Neither the Custodian nor the Prime Broker is a banking institution or a member of the Federal Deposit Insurance Corporation (FDIC) or a broker-dealer and member of the Securities Investor Protection Corporation (SIPC). Therefore, deposits held with, or assets held by, the Custodian are not subject to the protections enjoyed by depositors with FDIC- or SIPC-member institutions. The Custodian has advised us that it maintains insurance policies in the amount of $250 million, in the aggregate, which are intended to cover the loss of client assets held by the Custodian. The insurance maintained by the Custodian may not be available or sufficient to protect the Company from all possible losses or sources of losses. The Custodians insurance may not cover the specific type of loss experienced by the Company. In addition, the TAO insurance markets are limited, and the level of insurance maintained by the Custodian may be substantially lower than the value of the assets of the Company. While the Custodian maintains certain capital reserve requirements based on the value of the assets under custody (which may provide additional means to cover client asset losses), the Company cannot be assured that the Custodian will maintain capital reserves sufficient to cover actual or potential losses with respect to the Companys crypto assets. Additionally, the security of crypto assets held by the Custodian depends significantly on how effectively the Custodian safeguards private cryptographic keys associated with such Form 10-K. assets. Although the Custodian uses both hot (online) and cold (offline) storage mechanisms designed to balance security and operational needs, any crypto assets stored in hot wallets may be at increased risk of theft, hacking, or unauthorized access compared to those held solely in cold storage. Furthermore, the Custodians private key management practices, security protocols, and operational controls may not fully prevent cybersecurity breaches, human errors, or other security failures, which could result in partial or total loss of the Companys crypto assets. Moreover, in the event of an insolvency or bankruptcy of the Custodian in the future, given that the contractual protections and legal rights of customers with respect to crypto assets held on their behalf by third parties are relatively untested in a bankruptcy of an entity such as the Custodian in the crypto asset industry, there is a risk that the Companys assets may be considered the property of the bankruptcy estate of the Custodian. The Company may be at risk of being treated as a general unsecured creditor of such entity and subject to the risk of total loss or significant impairment of the value of such assets. Furthermore, the Prime Broker may engage in trading activities strictly as principal, meaning it may act as our direct counterparty rather than as an agent, fiduciary, or financial advisor. The Prime Broker may simultaneously engage in hedging transactions or market-making activities, potentially creating conflicts of interest, including scenarios where the Prime Brokers market activities negatively impact pricing or liquidity in our transactions. We do not have full visibility into these market-making or hedging activities, and these activities could result in less favorable execution terms than we might obtain elsewhere. Additionally, the Custodians custodial and settlement services depend on complex proprietary technology platforms and APIs provided by affiliates and third-party service providers. We are entirely dependent on the reliability and security of this technology infrastructure. Any operational disruption at the Custodian, Prime Broker, or their third-party providers could lead to delays, transaction failures, asset losses, or increased vulnerability to security breaches. Regulatory scrutiny or enforcement actions directed at the Prime Broker or Custodian could also adversely impact their ability to offer services, force changes in business practices, or cause operational disruptions. Such events could materially impair our business activities, operations, and the value of our crypto assets held by the Custodian. 53 Security threats to the Companys account at the Custodian could result in the halting of the Companys operations and a loss of the Companys assets or damage to the reputation of the Company, each of which could materially and adversely affect the Company. Security breaches, computer malware, and hacking attacks have been a prevalent concern in relation to crypto assets. The Company believes that its TAO held at the Custodian will be an appealing target to hackers or malware distributors seeking to destroy, damage, or steal the Companys TAO a threat that will only become more appealing if the Companys TAO grows in value. To the extent that the Company and Custodian are unable to identify and mitigate or stop new security threats or adapt to technological changes in the crypto asset industry, the Companys TAO may be subject to theft, loss, destruction, or other attack. The Company believes that the security procedures in place for the Custodian, including, but not limited to, offline storage (cold storage) and other measures, are reasonably designed to safeguard the Companys TAO. Nevertheless, no security procedure can guarantee the prevention of all loss due to a security breach, software defect, or act of God. Such events may have to be borne by the Company. Additionally, security procedures may not protect against all errors, software flaws, or other vulnerabilities in the technical infrastructure of the Company or Custodian, which could result in theft, loss, or damage of assets. The Company does not control the Custodians operations or their implementation of such security procedures, and there can be no assurance that such security procedures will work as designed or prove successful in safeguarding the Companys assets against all possible sources of theft, loss, or damage. Assets not held in cold storage, such as assets held in a trading account, are more vulnerable to security breaches, hacking, or loss than assets held in cold storage. The security procedures and operational infrastructure may be breached due to the actions of outside parties or error or malfeasance of an employee of the Company or Custodian. As a result, an unauthorized party may obtain access to the Companys account at the Custodian, the relevant private keys (and therefore TAO), or other data or property of the Company. Additionally, outside parties may attempt to fraudulently induce employees of the Company or the Custodian to disclose sensitive information in order to gain access to the Companys infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently (or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target), the Company and the Custodian may be unable to anticipate these techniques or implement adequate preventative measures. An actual or perceived breach of the Companys account at the Custodian could harm the Companys operations or result in partial or total loss of the Companys assets, resulting in a significant reduction or destruction in the value of the TAO. Risks Related to Staking Staking activities involve significant risks, including the risks of borrower default, operational failures and the potential loss of TAO, which could materially and adversely affect the Companys financial performance and the value of its crypto assets. Staking TAO tokens exposes us to a variety of operational, economic, technological, and regulatory risks. Although staking can generate rewards, the process involves locking or delegating our TAO tokens to a validator, thereby restricting our immediate liquidity and ability to freely trade or use these tokens. Any operational disruptions, cybersecurity breaches, or software errors affecting our staking providers, validators, or the underlying blockchain network may result in partial or total loss of our staked TAO. Unlike traditional financial instruments, staking transactions are final and irreversible once executed, increasing the risk associated with potential human errors, operational failures, or malicious activities. Additionally, the underlying validator operations and staking infrastructure may be subject to technical vulnerabilities or exploits. A failure, security breach, or operational deficiency in validator performance or infrastructure could significantly reduce or eliminate staking rewards or result in economic penalties that adversely affect our financial condition. We depend on third-party providers, such as our Custodian, and affiliated or independent validators, including Yuma, to facilitate and manage our staking activities. If our Custodian or validator experiences financial distress, insolvency, cybersecurity incidents, or other operational failures, we may experience significant delays or difficulty recovering staked tokens, lose expected staking rewards, or incur permanent loss of the underlying staked assets. Additionally, third-party staking providers, including our Custodian, may not maintain insurance coverage sufficient to protect us against all types of loss scenarios, leaving us potentially exposed to substantial economic risk. 54 Staking activities may also subject us to regulatory uncertainty and evolving interpretations of securities, commodities, and financial services laws. Regulators may impose licensing, registration, reporting, or other compliance requirements on our staking activities, leading to increased legal and operational burdens, costs, or interruptions. Furthermore, we may be required to alter, limit, or cease staking activities altogether in response to future regulatory or enforcement developments. With respect to staking activities, the Custodians or an affiliates liability for direct damages, including slashing penalties or missed staking rewards, is also limited. Specifically, liability for slashing penalties may be capped at staking service fees collected during the 6-month period prior to the relevant incident. Liability for missed rewards may be capped at staking service fees collected during the preceding 3-month period. The Custodian or an affiliate also may not be not liable for blockchain protocol malfunctions, software bugs, third-party validator errors, or any staking-related losses below $1,000 USD. The occurrence of any of these risks could materially impair our crypto asset holdings, adversely affect the financial performance of our business, and significantly diminish the value of our TAO tokens. Our reliance on the Custodian and its third-party validator for TAO staking activities creates concentration and related risks. We rely on the Custodian to facilitate our staking activities with respect to TAO tokens. Through its staking services, the Custodian holds and stakes our TAO through its third-party validator partner, Yuma. While we believe Yuma has been selected by the Custodian due to its reputation for security, reliability, and operational performance, neither the Custodian nor Yuma guarantees staking rewards, uninterrupted service, or protection against all operational or security risks. Our staked TAO could be subject to loss, reduction, or impaired liquidity due to validator performance issues, slashing-like economic penalties (in the form of reduced or eliminated rewards), cybersecurity breaches, network disruptions, regulatory actions, or technical failures affecting the Custodians staking infrastructure or the Bittensor blockchain itself. Moreover, we do not control Yumas operational practices or technical infrastructure, and we have limited visibility into or control over the processes by which staking rewards are generated and allocated. In addition, our reliance on a limited number of third-party providers, notably our primary Custodian and the validator Yuma, creates a concentration of operational risk. The failure, underperformance, insolvency, or malfeasance of any key provider could materially and adversely affect our assets and staking operations. Given our significant reliance on Yuma as our principal validator, disruptions affecting Yuma, such as downtime, operational deficiencies, cybersecurity breaches, or withdrawal from the market, could leave us unable to promptly identify or transition to an equivalent validator. This could result in our TAO tokens remaining unstaked, thereby causing us to forego anticipated staking rewards, or forcing us to hurriedly redelegate our tokens, potentially leading to suboptimal returns or additional costs. Furthermore, any material changes in the terms or fee structures imposed by our staking providers, including increased commission rates, more restrictive withdrawal conditions, or diminished service quality, may significantly reduce our net rewards, making our staking activities financially less attractive. Limited diversification among staking counterparties exacerbates our exposure to the operational, financial, and cybersecurity risks specific to these providers, analogous to counterparty risk factors in traditional financial services. Consequently, operational failures, security incidents, regulatory issues, or adverse business developments affecting our primary staking counterparties could significantly harm our business, financial condition, and the value of our crypto asset holdings. Our TAO staking relies on the Custodian and our validator, Yuma, who may utilize subnet automated market maker (AMM) pools, exposing us to additional liquidity, market, and operational risks beyond our direct control. We stake TAO tokens through arrangements facilitated and managed by the Custodian and its selected validator, Yuma. In connection with these staking arrangements, the Custodian and Yuma may choose to convert our TAO tokens into subnet-specific Alpha tokens using subnet AMM pools. The Custodian and Yuma would control decisions regarding which subnet pools to use, how tokens are allocated among those pools, and the timing and extent of token conversions. As a result, we are indirectly exposed to significant risks associated with subnet AMM pools, including liquidity constraints, volatile exchange rates, operational failures, cybersecurity vulnerabilities, and potential market disruptions. Because decisions regarding subnet AMM pools and staking strategies are made by the Custodian and Yuma, we have limited visibility into or control over these decisions and the underlying operational safeguards. The economic viability of subnet AMM pools remains largely unproven, and these pools are subject to experimental and rapidly evolving technological and regulatory environments. Any adverse event affecting these AMM pools or Yumas or the Custodians selection and use of such pools, including but not limited 55 to unfavorable market conditions, liquidity shortages, smart contract vulnerabilities, cybersecurity breaches, or operational failures, could result in significant financial losses, impairment of the liquidity or value of our staked TAO, or even total loss of our crypto assets. We must also rely upon the Custodians and Yumas operational due diligence, technical expertise, and risk management practices, without the ability to independently verify or control these measures. Consequently, failures in the Custodians or Yumas decision-making or operational processes, or the AMM pools they choose, could materially and adversely impact our business operations, financial condition, and results of operations. Crypto Asset Regulatory Risks We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds, or to obligations applicable to investment advisers or other regulated entities. Mutual funds and other registered investment companies are subject to extensive federal regulation as investment companies under the Investment Company Act of 1940, as amended (the Investment Company Act). Additionally, firms that manage the assets of registered investment companies generally must register as investment advisers under the U.S. Investment Advisers Act of 1940, as amended (the Advisers Act). These regulatory regimes impose stringent requirements relating to custody of assets, restrictions on transactions with affiliated parties, limits on investment activities, mandated governance structures, and detailed disclosure obligations designed to protect investors. We are not an investment company and do not manage third-party assets. Therefore, we are neither registered nor required to register as an investment company or investment adviser. Although one of our key treasury reserve assets is a crypto asset (TAO) and we engage in activities such as staking, we conduct these activities solely for our own corporate treasury management and not on behalf of external investors. Consequently, our operations involving TAO, including custody arrangements, transactions with affiliates, investment decisions, and general business practices, are not subject to the extensive regulatory framework applicable to mutual funds and registered investment advisers. Investors in our company therefore do not benefit from the heightened protections provided under the Investment Company Act or the Investment Advisers Act. For example, although significant changes to our crypto asset strategy require approval by our board of directors, these changes do not necessitate shareholder votes or regulatory approvals mandated for registered investment companies. As a result, our board retains broad discretion regarding investment and cash management policies, including the authority to modify, suspend, or expand our strategy of acquiring, holding, or staking TAO, without being subject to regulatory procedures applicable to investment companies. If crypto assets held by the Company are determined to be securities under U.S. federal or state law, the Company would become subject to significant regulatory burdens, which may materially and adversely affect its business, operations, and financial condition. The legal characterization of crypto assets under U.S. securities laws remains unsettled and continues to evolve. If the U.S. Securities and Exchange Commission (SEC), another federal agency, or a state regulator determines that TAO or any other crypto asset held by the Company constitutes a security under the Securities Act of 1933, as amended (the Securities Act), or the Investment Company Act, the Company could become subject to extensive regulatory obligations. These obligations may include registration requirements, enhanced disclosure and reporting, restrictions on business activities, and compliance with corporate governance and custody standards. The SEC has taken the position that certain crypto assets, depending on their characteristics, method of distribution, and functional use, may be classified as investment contracts or otherwise fall within the definition of a security. Although we do not believe that our current activities, including the holding and staking of TAO, involve investment securities or cause us to be an investment company within the meaning of the Investment Company Act, there can be no assurance that regulators will agree with our assessment, particularly as new guidance, enforcement actions, or legal precedents develop. If the Company were required to register as an investment company, or if the crypto assets it holds were deemed to be unregistered securities, we could be forced to significantly alter, limit, or cease certain operations, including staking or other network participation activities. In such a scenario, the Company may also become subject to enforcement actions, penalties, or other remedial measures, any of which could result in reputational harm, legal liability, or the inability to continue its current business model. In addition to federal law, the Company may be subject to regulation under state securities laws, some of which apply broader definitions of a 56 security than those used by the SEC. As a result, the Company could face additional regulatory scrutiny, registration requirements, or enforcement exposure at the state level, even if federal regulators do not classify its crypto assets as securities. Regulatory uncertainty surrounding the classification of crypto assets presents a continuing risk to the Companys operations. Any determination that the crypto assets held or activities conducted by the Company fall within the scope of U.S. securities laws could impose significant costs, create legal obstacles to continued operations, or materially impair the value of the Companys assets and the returns available to its investors. If we decide to cease certain operations in response to new regulatory obligations, such actions could occur at a time that is unfavorable to investors. Engaging in certain activities involving crypto assets classified as commodities, such as offering futures, derivatives, leveraged transactions, or providing trading advice or brokerage services, could subject us to additional regulation by the Commodity Futures Trading Commission (CFTC), and potentially oversight by the National Futures Association (NFA). If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. For example, depending on our activities, we could be required to register a commodity pool, commodity pool operator, and/or commodity trading advisor with the CFTC through the NFA. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our securities. If we determine not to comply with such regulations, we may be forced to cease certain operations, which could negatively impact our investors. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could impact how crypto assets are classified and traded. Potential classification of our crypto asset activities including staking as money transmission could subject us to additional regulatory requirements, resulting in significant compliance costs or the cessation of certain operations. If regulatory changes or interpretations require us to register as a money services business (MSB) with the Financial Crimes Enforcement Network (FinCEN) under the U.S. Bank Secrecy Act (BSA), or as a money transmitter (an entity licensed to transfer money or monetary value between parties) under applicable state laws, we may become subject to extensive regulatory obligations, including anti-money laundering (AML) programs, reporting, recordkeeping, licensing, and periodic examinations. Compliance with these requirements could result in significant expenses and operational burdens. If such requirements apply, we may incur extraordinary costs to maintain compliance, or alternatively, we may determine that continuing certain business activities is no longer economically viable. Regulatory scrutiny or shifting enforcement priorities could subject our crypto asset activities to significant compliance costs, legal liabilities, and operational disruptions, even absent formal classification as securities or commodities. Our crypto asset activities are subject to a rapidly evolving and uncertain regulatory environment involving multiple jurisdictions and regulatory authorities, including the SEC, CFTC, FinCEN, and various state and foreign regulators. Regulatory authorities across different countries often adopt inconsistent or conflicting approaches toward cryptocurrencies and related services, leading to uncertainty in regulatory application. Even absent formal classification of our crypto assets as securities, commodities, or other regulated products, shifting regulatory interpretations or enforcement priorities could significantly increase scrutiny of our activities. Recent enforcement actions in the cryptocurrency industry illustrate the potential for rapid and unforeseen changes in regulatory stances. Should regulators assert jurisdiction over our crypto asset activities, we may face substantial compliance costs, legal liabilities, operational disruptions, reputational harm, or be compelled to substantially alter or discontinue certain activities altogether. In particular, the regulatory status of specific crypto assets, including TAO, remains unclear, and if regulators classify TAO as a security or other regulated instrument, we could be subject to regulatory inquiries and penalties. This regulatory uncertainty elevates the risk of inadvertent violations, potentially resulting in enforcement actions, sanctions, or cease-and-desist orders requiring immediate changes to our business operations. Furthermore, new legislation or regulatory actions could ban, restrict, or impose stringent licensing or operational requirements on crypto asset activities. Given the interconnected nature of global regulatory oversight, regulatory developments in one jurisdiction can prompt similar actions elsewhere, amplifying the compliance burdens we face and further increasing operational complexity and costs. 57 We may also face litigation or regulatory enforcement actions related to crypto asset transactions, custody, disclosures, staking, or compliance practices. Regulatory agencies, including the SEC, CFTC, state regulators, or private plaintiffs, could assert claims alleging violations of securities laws, fraud, fiduciary breaches, or other misconduct. Defending such actions would involve significant costs, consume substantial management resources, and could result in adverse judgments, regulatory fines, cease-and-desist orders, forced operational modifications, or reputational damage that materially impact our business. Companies that adopt crypto asset treasury or similar activities have also historically been subject to increased scrutiny from regulators, investors, and the public. Some transitions have triggered enforcement actions, investigations, and litigation relating to inadequate or misleading disclosures, potential insider trading, regulatory noncompliance, and operational deficiencies. We may similarly face heightened regulatory oversight and investor scrutiny, increasing the risk of litigation or regulatory investigations. Additional Crypto Asset Risks Changes in tax law or adverse positions by tax authorities regarding crypto assets could result in increased tax burdens, reporting requirements, or other negative consequences. The tax treatment of cryptocurrencies and related transactions, including staking rewards, is an evolving area of law characterized by rapid changes, regulatory uncertainty, and ongoing debate. Currently, the U.S. Internal Revenue Service (IRS) classifies cryptocurrencies, such as Bitcoin, as property rather than currency, meaning transactions involving crypto assets are generally treated as dispositions subject to capital gains taxation. However, this classification and related tax positions could abruptly change as lawmakers, regulators, or courts respond to the increasing adoption and use of crypto assets. New legislation, regulatory interpretations, or judicial rulings may significantly alter the existing tax framework, including any changes to reporting requirements. For instance, reclassification of cryptocurrencies as currencies or introduction of new transaction taxes, withholding requirements, or stringent reporting obligations could materially increase our tax liabilities and compliance costs. Due to the complexity and continuously changing nature of crypto taxation, we could inadvertently incur unexpected tax obligations, reporting deficiencies, or penalties for non-compliance, negatively affecting our financial position, operational efficiency, and reputation. Moreover, uncertainty surrounding crypto taxation could deter users from engaging in crypto transactions, indirectly reducing demand and adversely impacting our business. Specifically, the taxation of staking rewards remains subject to significant uncertainty. Under IRS guidance provided in Revenue Ruling 2023-14 (the 2023 Revenue Ruling), staking rewards are taxable as income at the time a cash-method taxpayer gains dominion and control over newly received tokens. However, the applicability of the 2023 Revenue Ruling to accrual method taxpayers, particularly those taxpayers with applicable financial statements, is currently unclear. Consequently, we may incur immediate tax liabilities denominated in USD upon receipt of staking rewards, such as TAO tokens, irrespective of whether those tokens are liquidated or converted into cash. During periods of significant staking activity, we may face substantial tax obligations payable in USD, potentially necessitating the liquidation of holdings under unfavorable market conditions. Sudden declines in token values after the recognition of taxable income could create disproportionate tax liabilities relative to current token values, adversely affecting our liquidity and financial stability. Furthermore, ongoing litigation is challenging the IRSs position on staking rewards taxation. Judicial decisions or future filings regulatory interpretations resulting from such cases could alter the timing, characterization, or taxable amounts related to staking income. Such changes would further complicate our accounting and tax planning, requiring rapid adjustments to internal procedures. We must maintain rigorous processes for accurately tracking, valuing, and reporting staking rewards, which is particularly challenging due to crypto market volatility. Any inaccuracies or process failures could lead to underpayment penalties, financial restatements, or adverse audit findings, materially impacting our financial results. If our operations expand internationally, we may encounter additional complexities related to international taxation. Exposure to multiple foreign tax regimes, each with distinct approaches to crypto taxation, would significantly increase our compliance burdens, risks of double taxation, and the SEC. potential for inadvertent non-compliance. 58 Environmental and social risks associated with crypto assets could lead to negative market perceptions of TAO and materially harm its value. Growing regulatory and public scrutiny regarding the environmental and energy consumption impact of blockchain technologies could negatively affect our reputation and operational freedom. Although TAOs consensus mechanism differs significantly from energy-intensive proof-of-work models, broader industry-wide environmental criticisms may negatively influence market perceptions and lead to restrictive regulations or reduced investor appetite for crypto assets. Any resulting decline in public acceptance or regulatory tightening could materially harm TAOs market value and our business prospects.