TAO Synergies Inc.

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 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 The following risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future.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 Media Platform

Our ownership and operation of The TAO Daily, an online news publication and data provider in the digital asset industry, presents a number of significant risks, including those arising from perceived or actual conflicts of interest.

We recently announced the launch of The TAO Daily, an online news publication and data provider in the digital asset industry focused on the Bittensor ecosystem. The TAO Daily plays a large role in aggregating, creating and disseminating news and other editorial content focused on TAO and the Bittensor ecosystem across the global digital asset industry. It is possible that The TAO Daily’s news coverage could influence trading prices and demand for TAO, and it is also possible that consumers of The TAO Daily’s content may not appreciate that The TAO Daily’s owner has substantial financial interests in TAO, despite information to that effect on The TAO Daily’s website. As a result, some consumers of The TAO Daily’s content may place greater weight on such content than they would if they were aware of TAO Synergies’ ownership stake, and this could cause the trading prices of TAO or our common stock to be higher than they would otherwise.

In addition, as a public company, we expect to have access to material non-public information regarding market activities, trading volumes and other proprietary information from other businesses that could influence trading decisions. The TAO Daily, while intended to provide objective news coverage, may inadvertently become privy to such material non-public information. The sharing of such material non-public information, whether intentional or inadvertent, could lead to allegations of insider trading, market manipulation or other claims if The TAO Daily broadcasts or leverages this information in a manner that could advantage certain investors in TAO Synergies, or advantage holders of TAO.

TAO Synergies’ ownership and operation of The TAO Daily may also create a perception among market participants that The TAO Daily is biased in favor of TAO Synergies. Information regarding TAO Synergies’ ownership of The TAO Daily is publicly disclosed on The TAO Daily’s homepage. Investors may question the integrity of The TAO Daily’s reporting, fearing that it may be influenced by TAO Synergies’ business objectives or to manage its public image, particularly during periods of heightened volatility in the prices of our common stock or digital assets generally, or during periods of operational challenges. Any perceived or actual conflicts of interest could damage TAO Synergies’ or The TAO Daily’s reputation and undermine investor confidence. Negative press and public opinion could adversely impact our business and the price of our common stock.

Furthermore, the dual operation of a public company and a news publication may attract heightened scrutiny from regulatory bodies. Regulators may closely monitor TAO Synergies’ compliance with securities laws and regulations governing the use and dissemination of material non-public information, which could lead to investigations or sanctions if TAO Synergies or The TAO Daily are alleged to have violated any applicable laws. While we are implementing policies and procedures to limit and mitigate such risks, including information barriers to ensure compliance with securities laws relating to material non-public information, there is no assurance that such policies and procedures will be effective, or that we will be able to manage such conflicts of interest adequately. If we fail to manage these conflicts of interests, or if any of the foregoing risks were to materialize or be perceived negatively by market participants, we may be exposed to adverse media coverage, regulatory investigations and legal proceedings, leading to adverse impacts on our reputation, business, financial position and share price.

Our strategy and focus on delivering high-quality, regulated, easy-to-use, and secure digital asset-related information through our media platform The TAO Daily may not maximize short-term or medium-term financial results.

We have taken, and expect to continue to take, actions that we believe to be in the best interests of our existing and potential investors and the long-term interests of our business, even if those actions do not necessarily maximize short-term or medium-term results. These may include expending significant managerial, technical, and legal efforts on complying with laws and regulations that are applicable to our products and services and ensuring that products are secure. Our public and regulated status may also limit our ability to expand our product and services offerings or extend such offerings to certain markets and locations, which may result in us missing material opportunities to generate revenue. We also intend to focus on driving long-term engagement with users through innovation and developing new products and technologies. We may also make acquisitions or investments that may be highly speculative in nature and in some cases, the costs of such acquisitions may be substantial, and there is no assurance that we will receive a favorable return on investment for our acquisitions. Additionally, management decisions regarding capital allocation may not always yield the expected economic benefits. These decisions may not be consistent with the short-term and medium-term expectations of our shareholders and may not produce the long-term benefits that are expected, which could have an adverse effect on our business, operating results, and financial condition.

Our success depends on our ability to effectively improve and scale our technical and data infrastructure.

Our ability to attract, retain, and protect our users is dependent upon the reliable performance and increasing capabilities and integration of our platform and our underlying technical and data infrastructure. As our business continues to grow in size, scope and complexity, and as legal requirements and consumer expectations continue to evolve, we must continue to invest significant resources to maintain, integrate, improve, upgrade, scale and protect our platform and technical and data infrastructure, including some legacy systems. Our failure to do so effectively, or any significant disruption in our service or adverse impact on user experience, could damage our reputation, result in a potential loss of users or missed opportunities, subject us to fines and civil liability and/or adversely affect our financial results.

As we periodically augment and enhance our financial systems, we may experience disruptions or difficulties that could adversely affect our operations, the management of our finances and the effectiveness of our internal control over financial reporting, which in turn may negatively impact our ability to manage our business and to accurately forecast and report our results, which could harm our business.

Security incidents and other network and information systems disruptions could affect our ability to conduct our business effectively, cause us to incur significant costs, subject us to significant liability and/or damage our reputation.

Our operations depend on our ability to protect our information systems against interruption, breach or other damage. Our systems store and process confidential user, employee and other sensitive personal and Company data. In addition, we rely on the technology, systems and services provided by third-party vendors (including cloud-based service providers) for a variety of operations, including encryption and authentication technology, employee email, domain name registration, content delivery, administrative functions (including payroll processing and certain finance and accounting functions) and other operations.

We regularly face attempts to breach our security and compromise our information technology systems from a broad range of actors. These actors, whether internal or external to the Company, may use a blend of technology and social engineering techniques (including denial of service attacks, ransomware, phishing or business email compromise attempts intended to induce our employees, business affiliates and users to disclose information or unwittingly provide access to systems or data, and other techniques) to disrupt service, exfiltrate data or otherwise interfere with our business. Information security threats are constantly evolving in sophistication and volume and attackers may use generative AI and machine learning to launch more automated, targeted, sophisticated and coordinated attacks against targets, potentially increasing the difficulty of detecting and successfully defending against them. A successful breach could occur and persist for an extended period of time before being detected. We and the third parties with which we work may be more vulnerable to the risk from activities of this nature as a result of factors such as the high-profile nature of our business operations and the various jurisdictions in which we and our third-party providers operate; the use of generative AI tools; remote and hybrid working; employee use of personal devices, which may not have the same level of protection as Company devices and networks; and use of legacy software systems. Cybersecurity vulnerabilities can also arise from human error, fraud or malice on the part of our employees, other insiders or third parties, or from technology or product enhancements or the migration of information and data to new technology platforms, systems or applications. From time to time, we experience security incidents and other network and information systems disruptions. To date, no incidents have had a material adverse effect on our business, financial condition or results of operations. However, there is no assurance that incidents or disruptions will not have a material adverse effect in the future. There is also no guarantee that a series of related issues may not be determined to be material at a later date in the aggregate, even if they may not be material individually at the time of their occurrence.

In addition, our systems, and those of the third parties with which we work and on which we rely, may be vulnerable to interruption or damage that can result from the effects of power, systems or connectivity outages; natural disasters (including increased storm severity and flooding), which may occur more frequently or with more severity as a result of climate change; fires; human error, fraud or malice; public health conditions; acts of terrorism; or other similar events.

We have implemented controls and taken other preventative measures designed to strengthen our systems and to improve the resiliency of our business against such incidents and attacks, including measures designed to reduce the impact of a security incident at our third-party vendors. These efforts are expensive to develop, implement and maintain; require ongoing monitoring and updating as technologies change and as efforts to overcome security measures become more sophisticated; and may limit the functionality of or otherwise negatively impact our products, services and systems. Although the costs of the controls and other measures we have taken to date have not had a material effect on our financial condition, results of operations or liquidity, the costs and effort to respond to and recover from a security incident and/or to mitigate any security vulnerabilities that may be identified in the future could be significant. Additionally, any contractual protections with our third-party vendors, including our right to indemnification, if any at all, may be limited or insufficient to prevent a negative impact on our business from a security incident.

There can also be no assurance that the actions, measures and controls we have implemented will be effective or that they will be sufficient to prevent a future security incident or other disruption, and our disaster recovery planning cannot account for all eventualities. Such an event could result in a disruption of our services; improper access, use, alteration or disclosure of personal data or other confidential information; loss of information; or theft or misuse of our intellectual property. In addition, if we experience or are perceived to experience a security incident, or are perceived to fail to respond appropriately to any security incident that we may experience, it could divert management’s attention; require us to expend resources to investigate, respond to and recover from such a security incident or defend against further attacks; subject us to litigation, regulatory or other government inquiries or investigations and/or liability; harm our reputation; or otherwise adversely affect our business, financial condition or results of operations.

While we maintain cyber risk insurance, the costs relating to certain kinds of security incidents could be substantial, and our insurance may not be sufficient to cover losses related to any future incidents involving our data or systems, and we cannot be certain our insurance coverage will continue to be available to us on commercially reasonable terms (if at all) or that any insurer will not deny coverage as to any future claim.

We rely on information technology systems that we or our third-party providers operate to process, transmit and store electronic information in the operation of our media platform, The TAO Daily and in our day-to-day operations. In connection with the operation of The TAO Daily, and in our product discovery efforts we may collect and use a variety of personal data, such as name, mailing address, email addresses, phone number and clinical trial information. A successful cyberattack could result in the theft or destruction of intellectual property, data, or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations. Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, denial-of-service, social engineering fraud or other means to threaten data security, confidentiality, integrity and availability. A successful cyberattack could cause serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including financial information, trade secrets, financial loss and the disclosure of corporate strategic plans. Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance that our efforts will prevent information security breaches that would result in business, legal, financial or reputational harm to us, or would have a material adverse effect on our results of operations and financial condition. Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state (e.g., state breach notification laws), federal (e.g., HIPAA, as amended by HITECH), and international law (e.g., the GDPR) and may cause a material adverse impact to our reputation, affect our ability to conduct new studies and potentially disrupt our business.

Our failure to comply with data protection laws and regulations could lead to government enforcement actions, private litigation and/or adverse publicity and could negatively affect our operating results and business.

We are subject to data protection laws and regulations that address privacy and data security with respect to our new media platform, The TAO Daily. The legislative and regulatory landscape for data protection continues to evolve, and there has been an increasing focus on privacy and data security issues with the potential to affect our business. In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal consumer protection laws govern the collection, use, disclosure and protection of health-related and other personal data. Many U.S. states are also enacting consumer privacy statutes to enhance protections for personal data and to provide residents with more choices concerning their data collected by businesses, increasing compliance complexity and increasing risks of failures to comply.

In addition, foreign data protection, privacy, and other laws and regulations can be more restrictive than those in the United States. Data localization laws in some countries generally mandate that certain types of data collected in a particular country be stored and/or processed within that country. We could be subject to audits in Europe and around the world, particularly in the areas of consumer and data protection, as we operate our business. Legislators and regulators may make legal and regulatory changes, or interpret and apply existing laws, in ways that require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These changes or increased costs could negatively impact our business and results of operations in material ways. For example, the General Data Protection Regulation (“GDPR”) imposes requirements in the European Economic Area relating to, among other things, consent to process personal data of individuals, the information provided to individuals regarding the processing of their personal data, the security and confidentiality of personal data, notifications in the event of data breaches and use of third-party processors. GDPR also imposes restrictions on the transfer of personal data from the EEA to third countries like the United States.

Applicable data privacy and data protection laws may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we cannot be assured of compliance with the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not in the future. Furthermore, the number of government investigations related to data security incidents and privacy violations continues to increase and government investigations typically require significant resources and generate negative publicity, which could harm our business and reputation. Failure to comply with data protection laws may expose us to risk of enforcement actions taken by data protection authorities or other regulatory agencies, private rights of action in some jurisdictions, potential significant fines and penalties if we are found to be non-compliant, and/or adverse publicity, any of which could negatively affect our operating results and business.

Our business depends on continued and unimpeded access to the internet and cloud-based hosting services we utilize.

We currently utilize third-party subscription-based software services as well as public cloud infrastructure services to provide solutions for many of our computing, storage and bandwidth needs. Any interruptions to these services could result in interruptions in service to our users, advertisers and/or our critical business functions, notwithstanding business continuity or disaster recovery plans or agreements that may currently be in place with these providers. This could result in unanticipated downtime and/or harm to our operations, reputation and operating results. A transition of these services to different cloud providers would be difficult, time consuming and costly to implement. In addition, if hosting costs increase over time and/or if we require more computing or storage capacity as a result of subscriber growth or otherwise, our costs could increase disproportionately.

In addition, if we or those who engage with our content experience disruptions in internet service or if internet service providers are able to block, degrade or charge for access to our content, it could decrease the demand for, or the usage of, our content and products, increase our cost of doing business and adversely affect our operating results.

Our advertising revenues are affected by numerous factors, including market dynamics, evolving digital advertising trends and the evolution of our strategy.

We may derive revenue from the sale of advertising on our media platform The TAO Daily. Our advertising revenue may be sensitive to the macroeconomic environment, as advertiser budgets can fluctuate substantially in response to changing economic conditions. Our ability to compete successfully for advertising budgets will depend on, among other things, our ability to engage and grow audiences, collect and leverage data, and demonstrate the value of our advertising and the effectiveness of our platform to advertisers. In determining whether to buy advertising with us, advertisers may consider factors such as the demand for our platform, focus of our coverage, size and demographics of our audience, public sentiment about our platform, advertising rates, targeting capabilities, results observed by advertisers, and perceived effectiveness of advertising offerings and alternative advertising options.

Companies with large digital platforms, which have greater audience reach, audience data and targeting capabilities than we do, command a large share of the digital advertising market, and we anticipate that this will continue. In addition, there is increasing demand for digital advertising in formats that are dominated by these platforms, particularly vertical short-form video and streaming, and we may not be able to compete effectively in these formats. The remaining market is subject to significant competition among publishers and other content providers, and audience fragmentation. These dynamics have affected, and will likely continue to affect, our ability to attract and retain advertisers and to maintain or increase our advertising rates and resulting revenues.

Digital advertising networks and exchanges with real-time bidding and other programmatic buying channels that allow advertisers to buy audiences at scale also play a significant role in the marketplace and represent another source of competition. They have caused and may continue to cause further downward pricing pressure and the loss of a direct relationship with marketers, especially during periods of economic downturn.

The evolving standards for delivery of digital advertising, as well as the development and implementation of technology, regulations, policies, practices and consumer expectations that adversely affect our ability to deliver, target or measure the effectiveness of advertising (including blocking the display of advertising, the phase-out of browser support for third-party cookies and of mobile operating systems for advertising identifiers, rapidly evolving privacy regulations and platform requirements providing for additional consumer rights), may also adversely affect our advertising revenues if we are unable to develop effective solutions to mitigate their impact.

Our digital advertising offerings include products that use proprietary first-party data to target and generate predictive insights and help inform our clients’ advertising strategies. Our ability to quickly and effectively evolve these products; the volume, quality, and price of competitive products; and continued changes to industry regulation all have the potential to impact the success of this strategy. Our digital advertising operations also rely on technologies (particularly ad servers) that, if interrupted or meaningfully changed, or if the providers leverage their power to alter the economic structure, could have an adverse impact on our potential advertising revenues, operating costs and/or operating results.

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 October 31, 2025, we held digital intangible assets valued at approximately $29.0 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 Bittensor’s TAO token has been highly volatile and could decline sharply at any time. For example, TAO’s 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 TAO’s market price could materially 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:

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, operating results, and financial condition could be adversely affected.

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 we invest, 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 our interests and the interests of our shareholders. Our affiliates may also have substantial direct investments in crypto assets and are under no obligation to prioritize or consider our 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 Company. Our 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 our interests or those of our shareholders. If such conflicts are not adequately managed, our decision-making processes, corporate governance, market perception, and overall financial performance may be adversely affected.

We may seek to raise additional capital in the future to support our digital asset treasury strategy, including the acquisition of TAO, and we cannot predict the timing of any such financing.

We may pursue additional financing to support our digital asset treasury strategy, which may involve acquiring, holding, or managing TAO, as part of our corporate treasury operations. These financing activities could include the issuance of equity or equity-linked securities in public offerings, as well as issuing equity or equity-linked securities in exchange for TAO, which may result in substantial dilution to existing stockholders. The timing, amount, and terms of any such financing will depend on market conditions and our strategic objectives, and we cannot predict when or if such financing will occur. Any such financing may not be available on favorable terms, or at all.

In addition, the value and volatility of digital assets like TAO may require us to maintain higher levels of liquidity or collateral, potentially increasing our need for capital. If we issue additional shares or securities convertible into or exercisable for shares of our common stock, our existing stockholders may experience dilution of their ownership interests, and the market price of our common stock may decline. There can be no assurance that any future financing will be available on acceptable terms, or at all, and any inability to raise capital when needed could adversely affect our financial condition and strategic initiatives.

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.

Moreover, a significant percentage of the TAO tokens in circulation is concentrated among a relatively small number of holders, including network validators, early participants, and large - scale staking entities. This concentration increases the risk that a small number of parties could exert outsized influence over governance decisions, validator selection, network upgrades, and the market for TAO. If large holders were to coordinate, they could act in ways that disadvantage us or smaller participants, including by influencing

the direction of protocol development, restricting access to certain subnets, or taking positions that destabilize the market price of TAO. Concentrated ownership also heightens the risk of large, sudden dispositions of TAO, which could adversely affect liquidity and price stability. Any of these developments could impair our ability to rely on the Bittensor network, reduce the value of its holdings, or otherwise adversely affect its business, financial condition, and results of operations.

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.

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 Bittensor’s 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.

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 token’s 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.

In addition, Subtensor currently uses a proof-of-authority model under which a small, permissioned set of validators operated by the Opentensor Foundation produces and finalizes blocks; by contrast, Yuma Consensus is an on-chain emissions algorithm that computes rewards from validator rankings of model performance and does not provide consensus or finality. Reliance on this authority set centralizes transaction ordering and finality and increases the risk of network halts, delayed processing, or selective censorship if operators fail, are compromised, or change policies. Compromise or misuse of authority signing keys, software defects, or misconfiguration may require emergency coordination or restricted operating modes and could disrupt our ability to acquire, transfer, or dispose of TAO, potentially triggering exchange or custodian pauses, reduced liquidity, wider spreads, and price volatility. Concentration at the authority layer also creates a single point of operational and regulatory leverage: legal orders, sanctions, or jurisdictional restrictions directed at the Foundation or authority operators could compel blocking, reordering, or exclusion of transactions or participants. The composition, permissions, and parameters of the authority set may change on short notice, and elevated security and key-management demands increase the risk of downtime or reorganizations; authority control can also amplify governance disputes. Collectively, these factors may impair network reliability and perceived decentralization, reduce adoption and TAO liquidity, and adversely affect our business, financial condition, and results of operations.

The open-source and decentralized design of crypto asset networks, including the Bittensor network on which the TAO crypto asset functions, exposes us to risks related to forks, air drops, incidental rights, and related technological and operational disruptions.

Blockchain networks like Bittensor can also undergo “hard forks,” splitting into separate networks due to planned upgrades, technical disagreements, or vulnerabilities. In addition, events such as air drops or the granting of incidental rights may occur, resulting in the distribution of new or derivative digital assets. These events can create or duplicate assets and raise practical and legal considerations regarding whether, and how, holders are able to receive, claim, or use such assets.

In the event of an airdrop, hard fork, or the granting of incidental rights, we will decide how to proceed using its best judgment and, where required, after obtaining advice from legal, tax, accounting, and cybersecurity professionals. Public blockchain events such as airdrops and hard forks may create new assets or duplicate existing assets. We may lack the technical capability, private keys, or custodial support to receive, claim, hold, transfer, or secure these assets. Hard forks can enable replay of transactions and may require changes to key management and software. Claiming mechanisms and unsolicited token transfers can expose us to phishing, malicious smart contracts, dusting, and other cyber threats. Exchanges, custodians, and payment processors may pause or refuse support for a new asset or chain, which can disrupt our products and increase costs. In addition, receipt of airdropped or forked assets may be treated as taxable income upon our ability to exercise control, even if we cannot promptly monetize the asset, which could result in tax liabilities that exceed any related proceeds. Valuation and timing for tax purposes are uncertain and may be challenged by tax authorities. Regulators may also determine that certain airdropped or forked assets are securities, derivatives, or otherwise subject to registration, licensing, or compliance obligations, which could restrict our ability to hold, transfer, or monetize such assets and expose us to enforcement risk. The accounting treatment of these assets is complex and unsettled, and any misjudgment in recognition, valuation, or disclosure could lead to misstatements, restatements, or disagreements with our auditors. In addition, our custodians or other service providers may reserve contractual rights to retain or decline to support airdropped or forked assets, which could prevent us from realizing any economic benefit from these events. Any of these events could result in loss or theft of assets, unexpected tax obligations, service interruptions, or reduced revenue, and could adversely affect our business, financial condition, and results of operations.

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 Broker’s proprietary trading system and the Custodian’s custodial and settlement services for executing and settling transactions in TAO. The Prime Broker’s 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 Broker’s trading system and settled via the Custodian’s settlement services are final and irreversible once completed. If an error occurs (whether through human mistake, operational failure, or fraudulent 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 Custodian’s 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 Custodian’s and Prime Broker’s 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, our 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 us from all possible losses or sources of losses. The Custodian’s insurance may not cover the specific type of loss experienced by us. 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 our assets. 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), we cannot be assured that the Custodian will maintain capital reserves sufficient to cover actual or potential losses with respect to our 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 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 Custodian’s 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 our 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 our assets may be considered the property of the bankruptcy estate of the Custodian. We 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 Broker’s 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 Custodian’s 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.

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 our financial performance and the value of our 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 and, for 18 months from November 5, 2025, limiting our ability to diversify validators for root subnet staking because we agreed to delegate at least 90% of TAO subject to root subnet staking to Yuma. Any operational disruptions, cybersecurity breaches, or software errors affecting our staking providers, validators, or the underlying blockchain network, including failures of the protocol to effect on-chain staking distributions, may result in partial or total loss of our staked TAO. In addition, the Yuma Agreement limits our recourse to a sole remedy for missed rewards, which does not include reward optimization, and generally caps Yuma’s aggregate liability at $5,000.

Unlike traditional financial instruments, staking and on-chain reward distrubtions are often 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. Under our agreement with Yuma, our primary contractual remedy for service shortfalls is recovery of missed rewards, subject to an aggregate $5,000 cap and an exclusion of consequential and similar damages.

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 and Yuma, may not maintain insurance coverage sufficient to protect us against all types of loss scenarios, leaving us potentially exposed to substantial economic risk. For a discussion of our staking program, see the section titled “—Our Cryptocurrency Asset Strategy—Our Staking Program” elsewhere in this Quarterly Report on Form 10-Q.

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. Our agreement with Yuma permits immediate termination if services cannot be performed in compliance with applicable law or due to heightened regulatory risk or changes in law that render continued involvement undesirable, illegal, or impracticable, which could result in sudden disruption or cessation of our their staking services. Disputes are subject to confidential, binding arbitration with a class-action waiver, which may limit judicial remedies.

With respect to staking activities, the Custodian’s or an affiliate’s 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. Separately, our agreement with Yuma generally caps Yuma’s aggregate liability at $5,000, and Yuma disclaims consequential damages and is not liable for protocol-wide malfunctions or force-majeure events related to the blockchain.

Moreover, if any on-chain or implied protocol terms conflict with the Yuma Agreement, the agreement prevails. As the Bittensor protocol evolves, this “paramountcy” may cause frictions with network norms or expectations and may limit our ability to rely on protocol-level terms if they diverge from our contract.

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 ability to recover losses may be further limited by contractual liability caps, exclusive remedies, and arbitration provisions in our agreements with key providers.

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 facilitates the staking of our TAO through third-party validators including Yuma. While we believe Yuma and any other validator have been selected by the Custodian due to their reputation for security, reliability, and operational performance, neither the Custodian nor any validator 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 Custodian’s staking infrastructure or the Bittensor blockchain itself. Moreover, we do not control Yuma’s operational practices or technical infrastructure, and we have limited visibility into or control over the processes by which staking rewards are generated and allocated. Yuma may terminate services immediately due to changes in law or heightened regulatory risk, which could disrupt our staking without advance notice.

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. In addition, for 18 months from November 5, 2025, the Yuma Agreement requires us to delegate at least 90% of TAO subject to root submet staking to Yuma, which increases our concentration risk and may limit our ability to diversify or migrate quickly in response to performance or pricing changes. Yuma may assign its obligations to an affiliate or in connection with a change of control without our consent, which could change our counterparty risk profile. 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 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 Validators, 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 validators, tao5 and Yuma (together, the “Validators”). We do not currently engage in subnet staking or participate in AMM pools, but may do so in the future. Should we do so in the future, 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, including but not limited 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.

Crypto Asset Regulatory Risks

If crypto assets held by us are determined to be securities under U.S. federal or state law, we 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 us constitutes a security under the Securities Act of 1933, as amended (the “Securities Act”), or the Investment Company Act, we 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.

We use a risk-based approach to evaluate whether TAO should be treated as a security under the U.S. federal securities laws. Our approach is informed by case law, SEC guidance, and evolving industry practices, and includes ongoing monitoring of regulatory

developments and consultation with external legal and other advisors. However, the application of the securities laws to digital assets remains highly uncertain and subject to change. Our assessments could be challenged by regulators or courts, and a determination that TAO is, in fact, a security could subject us to significant regulatory, compliance, and enforcement risks, including potential restrictions on our ability to hold, transfer, or use TAO, registration or licensing obligations, or rescission rights for counterparties. Even if our policies and procedures are followed in good faith, they may not prevent adverse regulatory outcomes, and the process of defending our determinations could be costly and disruptive.

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 we 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, we 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, we may be subject to regulation under state securities laws, some of which apply broader definitions of a “security” than those used by the SEC. As a result, we 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 our operations. Any determination that the crypto assets held or activities conducted by us 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 our assets and the returns available to our 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.