GNLN 10-K & 10-Q changes, risk factors and insider trading

Risks Related to Our Digital Asset Trading Strategy and Cryptocurrencies

We have recently adopted a digital asset treasury strategy with a focus on BERA, and we may be unable to successfully implement this new strategy.

We have recently adopted our Treasury Policy primarily dedicated to BERA, including potential investments in BERA, including through staking, validator activities and engaging in other DeFi strategies. There is no assurance that we will be able to successfully implement our Treasury Policy or operate BERA-related activities at the scale or profitability currently anticipated. BERA operates with a proof-of-liquidity consensus mechanism, which differs significantly from other consensus mechanisms, and will require specialized employee skillsets and novel treasury management practices tailored to the Berachain network. Further, there is ongoing scrutiny and limited formal guidance from regulatory agencies, including Nasdaq and the SEC, with respect to the treatment of public company digital asset strategies. Our inability to implement the Treasury Policy for whatever reason, could have a material adverse effect on our business and financial condition.

Our shift towards a BERA-focused strategy requires substantial changes in our day-to-day operations and exposes us to significant operational risks.

Our shift towards a BERA-focused strategy exposes us to significant operational risks. In connection with the implementation of our Treasury Policy, we intend to operate a validator to help secure the Berachain network, and we expect to allocate a portion of our BERA holdings to other onchain activities, including staking and certain DeFi strategies. If we serve as a validator, we may suffer slashing or forfeiture of rewards due to downtime, misconfiguration, or malicious software, materially reducing the number of BERA held in our treasury. In addition, the Berachain protocol is rapidly evolving, with frequent upgrades and protocol changes that may require significant adjustments to our operational setup and allocation strategy. The upgrades and protocol changes may require that we incur unanticipated costs and could cause temporary service disruptions. We may also need to employ third-party service providers in our operations, which may introduce risks outside of our control, including significant cybersecurity risks. In connection with our proposed activities, we intend to operate a validator to secure the Berachain network. If we choose to serve as a validator, we may suffer slashing or forfeiture of rewards due to downtime, misconfiguration, or malicious software, materially reducing the number of BERA held in our treasury. Any of these operational risks could materially and adversely affect our ability to execute our Treasury Policy, prevent us from realizing positive returns and severely hurt our financial condition.

A disruption of the internet may affect the operation of blockchain networks, which may adversely affect the digital asset industry and an investment in us.

Blockchain protocols rely on the internet. A significant disruption of internet connectivity could disrupt blockchain networks’ functionality until such disruption is resolved. A disruption in the internet could adversely affect an investment in us. In particular, some variants of blockchain protocols have experienced denial-of-service attacks, which have led to temporary delays in block creation and digital asset transfers.

Digital assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes are connected to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues.

Any internet failures or internet connectivity-related attacks that impact the ability to transfer or secure digital assets could have a material adverse effect on the price of digital assets generally, and BERA’s value specifically, and the value of an investment in us.

Blockchain technologies are based on theoretical conjectures as to the impossibility of solving certain cryptographical puzzles quickly. These premises may be incorrect or may become incorrect due to technological advances.

Blockchain technologies are premised on theoretical conjectures as to the impossibility, in practice, of solving certain mathematical problems quickly. Those conjectures remain unproven, however, and mathematical or technological advances could conceivably prove them to be incorrect. Blockchain technology companies may also be negatively affected by cryptography or other technological or mathematical advances, such as the development of quantum computers with significantly more power than computers presently available, that undermine or vitiate the cryptographic consensus mechanism underpinning Berachain and other blockchain protocols. If either of these events were to happen, markets that rely on blockchain technologies could quickly collapse, and an investment in our Common Stock may be adversely affected.

Technical shortcomings or defects in the BERA network, including changes to its validator structure, governance model, or core software, could diminish the utility and value of BERA and harm our business.

The BERA network is a public, open-source and decentralized blockchain protocol that is not under our or any single party’s control. Its ongoing viability depends on the continued consensus and cooperation of independent developers, validators, tokenholders, and other ecosystem participants. The existing Berachain protocol may be subject to significant alterations, including by way of community governance votes, and any such changes may have a material adverse effect on BERA and the viability of the Berachain protocol. If Berachain experiences a successful cyber-attack, a material software bug, a “hard fork” that fragments the network, or a prolonged outage, market confidence in BERA could be severely undermined. Similarly, decisions by influential validators to adopt protocol changes, modify transaction-fee structures, or alter other existing practices or network governance could adversely affect BERA’s economics and, therefore, the value of our holdings. Further, because the governance of decentralized networks, such as Berachain, is by voluntary consensus, a single party could gain majority control of the network, and enact changes or amendments to the network that are otherwise undesirable to other participants. Were this to happen, it could harm the value of BERA and therefore the value of the Common Stock.

If validators exit the BERA network, it could increase the likelihood of a malicious actor obtaining control.

Validators exiting the network could make BERA more vulnerable to a malicious actor obtaining control of a large percentage of staked BERA, which might enable them to manipulate the BERA network by censoring or manipulating specific transactions, or undermining the economic incentives underlying the Berachain ecosystem. If the BERA network suffers such an attack, the price of BERA could be negatively affected, and a loss of confidence in the BERA network could result. Any reduction in confidence in the transaction confirmation process or staking power of the BERA network may adversely affect an investment in the Common Stock.

Berachain may not be able to compete with other blockchain networks. If Berachain is not able to compete successfully, the value of BERA would be significantly affected.

Berachain faces intense competition from a large number of established layer-1 blockchains, including Ethereum, Solana, and Binance Smart Chain, layer-2 scaling solutions, and emerging protocols, many of which currently maintain significantly larger active user bases, higher total value locked (“TVL”), more extensive developer communities, broader third-party tooling and wallet support, deeper liquidity across centralized and decentralized exchanges, and more robust cross-chain interoperability frameworks. These competing networks may offer lower transaction fees, faster finality, superior virtual machine performance, more advanced smart-contract languages, or more effective incentive programs that attract users, liquidity providers, dApp developers, and other participants away from Berachain. If Berachain fails to generate sufficient user interest relative to these alternatives, the network could experience reduced protocol adoption and diminished liquidity. Such outcomes may lead to lower user and transaction volumes, reduced fee revenue, impaired ability to fund ongoing development, and a downward spiral in token valuation, ultimately jeopardizing the long-term viability of the Berachain ecosystem.

The economic design underlying PoL may be flawed, may fail to gain adoption, or may be exploited. Any such events could undermine the growth and development of the Berachain network.

Berachain’s network security, incentive alignment, and ecosystem growth depend entirely on the proper functioning of its novel PoL consensus mechanism, including the recently introduced PoLv2 framework. Under this design, validators stake BERA to secure the network and earn BGT emissions through block production, then stake or delegate BGT to dApps to direct future reward allocation; dApps distribute BGT to users for providing liquidity or engaging in protocol activity; and users may burn BGT for BERA. As a new consensus mechanism, users may be reluctant or unable to understand the technical underpinnings and benefits of PoL, and may favor a more traditional consensus mechanism, such as proof of stake or proof of work. If validators delegate BGT to low-performing or malicious dApps, dApps distribute rewards inefficiently or in ways that favor short-term speculation over sustained usage, or liquidity suffers due to lack of actual or perceived alignment between different ecosystem parties, the intended incentive loop may break. Such failures could result in misaligned emissions, and if rewards are capture by a limited set of participants, or if there is insufficient liquidity in core DeFi primitives or declining BERA staking participation, the network effect intended by the PoL consensus mechanism may fail to be achieved. From time to time, the Berachain community may also make additional changes to the PoL mechanism, such as via the PoLv2 update, which introduces increased complexity through dynamic emission schedules, delegation weighting mechanisms, and customizable reward modules, any of which may contain latent design flaws, unintended economic consequences, or vulnerabilities not identified during testing or early deployment. Future iterations of PoL may introduce additional changes that disrupt existing incentives, and even a well-designed system remains susceptible to coordinated exploitation, front-running of reward signals, or sybil attacks. A breakdown in PoL functionality or adoption could lead to declining network activity, erosion of economic security, loss of developer and user confidence, and a decline of the Berachain ecosystem, any of which could have significant adverse consequences for BERA.

We and other users may suffer losses due to staking or validator slashing, which could make Berachain less attractive.

Berachain’s native staking protocol is relatively new and requires users to place BERA in a smart contract that is not under anyone’s control. Users who serve as validators also risk losing some or all of their BERA if they intentionally or unintentionally perform their duties poorly, for example, by double-signing a transaction or experiencing downtime, in a process known as slashing. Any cybersecurity attacks, security issues, hacks, penalties, slashing events, or other problems could damage validators’ willingness to participate in validation and stakers’ willingness to participate in staking, and this could further discourage existing and future validators and stakers from serving as such, thereby adversely impacting Berachain’s adoption and the price of BERA. Any disruption of validation on Berachain could interfere with network operations and cause Berachain to be less attractive to users and application developers than competing blockchain networks, which could cause the price of BERA to decrease. Further, the limited liquidity during the unbonding period of the staking process could cause Berachain to be less attractive to users and application developers than competing blockchain networks, which could cause the price of BERA to decrease. Any decrease in the price of BERA could have a material adverse effect on our business and financial condition.

We face risks relating to the potential compromise of Berachain’s and other blockchains’ network security by emerging technologies, including artificial intelligence and quantum computing, which may materially and adversely impact our operations and financial condition.

The security and integrity of Berachain and other blockchains’ network are fundamentally dependent on the robustness of its cryptographic algorithms. BERA and other cryptocurrencies’ protocol relies heavily on public key cryptography and hashing algorithms to secure transactions, safeguard private keys, and prevent double-spending. Advances in emerging technologies, particularly artificial intelligence (“AI”) and quantum computing may pose significant risks to Berachain and other blockchains’ network’s security and operational stability.

Quantum computing, in particular, presents a long-term threat to the cryptographic assumptions underpinning BERA and other digital assets. Should quantum computing achieve sufficient maturity, it could undermine the effectiveness of the cryptographic algorithms used to secure the blockchain. A sufficiently powerful quantum computer could potentially reverse-engineer private keys from public addresses or compromise the blockchain’s consensus mechanism, leading to the theft of digital assets, double-spending, and other forms of fraud. Although current quantum computing capabilities are not yet at this level, advancements in quantum technologies could materialize more rapidly than anticipated, creating significant systemic risks for the Berachain protocol and the BERA token.

AI may also pose indirect security risks. AI-driven cyberattacks, including advanced phishing schemes, autonomous malware, and intelligent blockchain analysis tools, could increase the sophistication and success rate of attacks targeting Berachain and other blockchains’ users, exchanges, custodians, and node operators. The use of AI to exploit vulnerabilities in software, hardware, or network protocols could threaten the stability and reliability of Berachain and other blockchains’ ecosystems.

There can be no assurance that Berachain’s and other blockchains’ current cryptographic safeguards will be sufficient to protect against future technological advances. While research and development efforts are ongoing to develop quantum-resistant cryptographic protocols, Berachain’s and other blockchains’ networks may face challenges in adopting such technologies at scale, particularly given their decentralized governance structure. Any successful attack or perceived vulnerability arising from AI or quantum computing could materially and adversely affect the price, liquidity, and adoption of BERA and other digital assets and could negatively impact our business, financial condition and results of operations.

BERA is created and transmitted through the operations of the Berachain network, a decentralized network of computers running software following the Berachain protocol. If the Berachain network is disrupted or encounters any unanticipated difficulties, the value of BERA could be negatively impacted.

If the Berachain network is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the Berachain network may be disrupted, which in turn may prevent us from depositing or withdrawing BERA from our accounts or otherwise effecting BERA transactions. Such disruptions could include, for example: the price volatility of BERA; the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of network participants, custodians or others; the closing of trading platforms on which BERA is transacted due to fraud, failures, security breaches or otherwise; or network outages or congestion, power outages, or other problems or disruptions affecting the Berachain network.

We face risks relating to the custody of our BERA or other digital assets, including the loss or destruction of private keys required to access our BERA or other digital assets and cyberattacks or other data loss relating to our BERA or other digital assets.

We expect to self-custody our BERA using, in part, the Fireblocks Vault service. If we lose access to our private keys, we may not be able to recover all or any portion of our BERA, or any value thereof. BERA is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the BERA is held. While the blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the BERA held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, we will not be able to access the BERA held in the related digital wallet and such BERA will be irretrievably lost. While Fireblocks Vault service may be able to initiate a recovery if certain keys remain available, there can be no guarantee that not all keys will be lost or that a catastrophic error won’t occur that would prevent recovery. Furthermore, we cannot provide assurance that our digital wallets will not be compromised as a result of a cyberattack. Blockchain ledgers and blockchain technologies have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities.

Exploits, including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the future. Certain employees or vendors may also be vulnerable to physical or psychological coercion, commonly referred to as “wrench attacks,” as well as scams and social engineering tactics intended to obtain access to passwords or private cryptographic keys, in order to then effectuate the unauthorized transfer or theft of digital assets. A successful security breach or cyberattack could result in:

Attacks upon systems across a variety of industries, including industries related to BERA, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. More recently, Bybit was hacked by the Lazarus Group, a North Korean state-sponsored organization, resulting in the loss of $1.5 billion of customer assets. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the Berachain ecosystem, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.

We intend to deploy our BERA into DeFi applications, which are subject to a variety of risks and vulnerabilities.

As part of our treasury management strategy, we also intend to engage in staking, validating, and other permitted activities that involve the use of “smart contracts”, DeFi or dApps. DeFi protocols, wallets, and bridges have been frequent targets of sophisticated cyberattacks, including flash-loan attacks, cross-chain bridge exploits, and private key compromises. Losses from such incidents are often immediate, irreversible, and may not be covered by insurance or contractual recourse.

The use of smart contracts or dApps entails certain risks including risks stemming from the existence of an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or dApp, potentially leading to a loss of our BERA. Vulnerabilities or flaws in a smart contract could allow attackers to drain assets, prevent us from accessing our holdings, or manipulate protocol operations. Once deployed, smart contracts are difficult to amend, and in many cases cannot be modified at all without widespread validator or governance consensus.

Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the smart contract or dAPP. Smart contracts and dApps may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of BERA or other digital assets.

Certain DeFi protocols are also governed by decentralized communities through on-chain voting mechanisms, which may be subject to capture by a small number of participants. Protocol governance decisions could adversely affect our ability to use or recover assets. Additionally, protocols may change rules, fees, or parameters without advance notice. Moreover, the legal and regulatory treatment of DeFi remains highly uncertain. Regulators could impose restrictions or obligations on participants or on protocols themselves, which could adversely affect our ability to use, access or withdraw such platforms or the value of assets held in them.

If we lose key personnel, including our Chief Investment Officer and Strategic Advisors, or if we fail to recruit additional highly skilled personnel, our ability to operate and manage our digital asset treasury strategy will be impaired.

Our ability to operate and manage our digital asset treasury strategy depends upon our ability to attract and retain highly qualified personnel, including our Chief Investment Officer and members of our executive team, and other key personnel, including the Strategic Advisors. The loss of the services of any of our executive officers, key employees, and the Strategic Advisors, and our inability to find suitable replacements, could result in significant disruption in our operations and management of our digital assets.

Despite our efforts to retain valuable members of our management, employees and consultants, such key personnel may terminate their employment with us on short notice. Although we have agreements with our key employees and consultants, these agreements provide for at-will employment, which means that any of our employees or consultants could leave our employment at any time, with or without notice. We do not maintain “key man” insurance policies on any of our employees or consultants.

If we are unable to raise additional capital on acceptable terms, our ability to implement and sustain our Treasury Policy may be compromised.

Our strategy contemplates the discretionary purchase of BERA and related yield-generating instruments. The capital required to acquire, stake, and actively manage BERA may exceed our existing cash resources and cash flows from operations. Market conditions, our share price performance, the volatility of digital assets, and regulatory uncertainties could impair our ability to access debt or equity capital on terms acceptable to us, or at all. Failure to obtain necessary financing could force us to curtail or abandon our digital asset strategy, which could materially harm our growth prospects and the value of our securities.

Our BERA holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

Historically, the digital asset markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our BERA at favorable prices or at all. Further, BERA we stake or otherwise deposit into dApps and DeFi protocols does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Further, any BERA staked or otherwise deployed in DeFi protocols could be subject to partial or total loss if any third-party developer or recipient of the staked or deployed BERA is subject to a cyberattack of any sort or is otherwise unable to repay the assets we’ve deployed. In addition, Berachain’s native staking protocol currently requires a 7-day unbonding period for withdrawing staked BERA tokens. During this period, staked BERA will not earn rewards and will not be liquid. The unbonding period may be subject to change with or without notice to us. Moreover, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered BERA or otherwise generate funds using our BERA holdings, including in particular during times of market instability or when the price of BERA has declined significantly. Furthermore, a certain portion of our BERA are under a contractual lockup from the Berachain Foundation (the “Foundation”), and we may continue to acquire locked BERA at a discount to market prices of unlocked BERA in order to generate value for stockholders. These locked BERA are significantly less liquid than cash and our unlocked BERA holdings. If we are unable to sell our locked or unlocked BERA, enter into additional capital raising transactions using locked or unlocked BERA as collateral, or otherwise generate funds using our locked or unlocked BERA holdings, or if we are forced to sell our locked or unlocked BERA at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.

We may be subject to regulatory developments related to digital assets and digital asset markets, which could adversely affect our business, financial condition, and results of operations.

As BERA and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of BERA, The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of BERA or the ability of individuals or institutions such as us to own or transfer BERA. Increased regulatory scrutiny may result in additional costs for us and may require our management team to devote increased time and attention to regulatory matters, change aspects of our business, or result in limits on the utility of digital assets. Due to the risk of a changing regulatory environment, we may be required to comply with new laws, regulations, or interpretations, which may result in heightened regulatory and compliance related costs, litigation, regulatory investigations, and enforcement or other actions. Adverse changes to, or our failure to comply with applicable laws may have an adverse effect on our reputation, brand, our business, operating results, and financial condition. Future regulatory developments regarding the treatment of digital assets, staking rewards, or digital asset treasury strategies for U.S. federal, state, or international tax purposes could materially affect the liquidity or value of BERA, or the way we account for, recognize, and report our BERA holdings and related income. The liquidity of digital assets may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for digital assets. The effect of any future regulatory change on the Company is impossible to predict, but such change could be substantial and adverse.

Moreover, the implementation of our Treasury Policy has created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.

The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of BERA or the ability of individuals or institutions such as us to own or transfer BERA. Regulatory authorities have been evolving in their approach to digital assets. It is not possible to predict whether, or when, any of these developments will lead to U.S. Congress granting additional authorities to the SEC or other regulators, or whether any other federal, state, or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and any BERA we hold specifically. The consequences of increased regulation of digital assets and digital asset-related activities could adversely affect the market price of any BERA we hold and in turn adversely affect the market price of our common stock.

There is a possibility that BERA tokens may be classified as a “security” under U.S. federal securities laws. If BERA tokens are classified as a “security,” that would subject us to additional regulation and could materially impact the operations of our treasury strategy and our business.

Neither the SEC nor any other U.S. federal or state regulator has publicly stated whether they agree that BERA tokens are a “security,” and BERA tokens have not yet been classified with respect to the U.S. federal securities laws. Although we believe that BERA tokens are not a “security” within the meaning of the U.S. federal securities laws, we acknowledge the uncertainty that a regulatory body or federal court may determine otherwise in the future. If BERA is deemed a security, we may face legal or regulatory action, even if our beliefs were reasonable under the circumstances.

As part of our ongoing review of applicable securities laws, we take into account a number of factors, including the various definitions of “security” under such laws, including but not limited to federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases. We also consider court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be a security for purposes of U.S. federal securities laws. We acknowledge, however, that the SEC, a federal court or another relevant entity could take a different view. The application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that BERA tokens, or any other digital asset we might hold, are a “security.” Therefore, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, penalties or other damages if BERA tokens were determined to be a security by a regulatory body or a court.

Further, if BERA tokens are viewed as a security, it may become more difficult to purchase and sell BERA tokens, as they could only be traded through SEC-registered broker-dealers or exchanges. This would make it more difficult for us to continue our BERA treasury strategy, or to monetize BERA tokens that we hold in the event we need to do so for working capital purposes. Such developments could adversely affect the fair value of BERA, our business, results of operations, financial condition, treasury operations and prospects.

Regulatory change reclassifying BERA as a security could lead to our falling within the definition of “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”), and could adversely affect the market price of BERA and the market price of our Common Stock.

Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in the 1940 Act, and are not registered as an “investment company” under the 1940 Act as of the date of this Annual Report on Form 10-K.

While the SEC has not stated a view as to whether BERA is or is not a “security” for purposes of the federal securities laws, a determination by the SEC or a court of competent jurisdiction that BERA is a security could lead to our meeting the definition of “investment company” under the 1940 Act, if the portion of our assets that consists of investments in BERA exceeds the 40% limit prescribed in the 1940 Act, which would subject us to significant additional regulatory requirements that could have a material adverse effect on our business and operations and may also require us to change the manner in which we conduct our business.

We monitor our assets and income in order to conduct our business activities in a manner such that we do not fall within the definition of “investment company” under the 1940 Act or would qualify under one of the exemptions or exclusions provided by the 1940 Act and corresponding SEC rules. If BERA is determined to be a security for purposes of the federal securities laws, we would take steps to reduce our holdings of BERA as a percentage of our total assets. These steps may include, among others, selling BERA that we might otherwise hold for the long term and deploying our cash in assets that are not considered to be investment securities under the 1940 Act, in which case we may be forced to sell our BERA at unattractive prices. We may also seek to acquire additional assets that are not considered to be investment securities under the 1940 Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid meeting the definition of “investment company” under the 1940 Act and becoming subject to its requirements. If BERA is determined to constitute a security for purposes of the federal securities laws, and if we are not able to come within an available exemption or exclusion under the 1940 Act, then we would have to register as an investment company and require us to change the manner in which we conduct our business. In addition, such a determination could adversely affect the market price of BERA and in turn adversely affect the market price of our Common Stock.

We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.

Mutual funds, exchange-traded funds and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our Treasury Reserve Policy or our BERA strategy, our use of leverage, the manner in which our BERA is custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. For example, although a significant change to our Treasury Reserve Policy would require the approval of our Board, no stockholder or regulatory approval would be necessary. Consequently, our Board has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our BERA holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding BERA, See “Use of Proceeds.”

Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.

The regulatory regime for digital assets in the U.S. and elsewhere is uncertain. We may be unable to effectively react to proposed legislation and regulation of digital assets, which could adversely affect our business.

Business Transformation Overview

Fiscal year 2025 represents a significant strategic transition for the Company, as it shifted its primary capital allocation focus from wholesale and distribution operations to a digital asset treasury strategy centered on BERA.

Historically, operating results were driven by warehouse-based wholesale and direct-to-consumer sales. During 2025, the Company materially reduced that legacy footprint, substantially exited warehouse inventory, and transitioned the remaining commerce business to an asset-light, drop-ship model. While the Company continues to operate a scaled-down wholesale / distribution business, its financial profile is increasingly influenced by digital asset activity.

During 2025, the Company completed a reverse stock split to maintain compliance with Nasdaq listing requirements. All share and per share amounts presented herein reflect the impact of the reverse stock split for all periods presented.

In the fourth quarter of 2025, the Company completed a private placement with digital asset-focused investors. Transaction consideration consisted of cash, U.S. dollar-denominated stablecoins, and BERA, and the transaction established the capital base for the Company’s digital asset treasury strategy while also supporting residual legacy operations.

As a result, period-over-period comparability is impacted by both the decline in legacy operating activity and the introduction of fair value accounting for digital assets.

Greenlane Holdings, Inc. is a publicly traded digital asset treasury company with a digital asset treasury strategy focused on the acquisition, management, and strategic deployment of BERA, the native token of the Berachain blockchain network.

As of December 31, 2025, a substantial majority of the Company’s balance sheet consisted of digital assets and U.S. dollar cash and dollar-pegged stablecoins, which are classified within cash and cash equivalents on the consolidate balance sheets. The Company’s financial condition, liquidity profile, and results of operations are therefore significantly influenced by digital asset market conditions, including the fair value of its BERA holdings.

In addition to our digital asset treasury activities, the Company continues to operate a legacy lifestyle accessories commerce platform through vapor.com and related channels. Following the strategic transition in 2025, the legacy business was materially reduced in scale, warehouse operations were substantially exited, and the operating model shifted to an asset-light drop-ship structure.

Strategic Transformation

Greenlane historically operated as a distributor of lifestyle accessories and consumer products. Beginning in October 2025, management executed a strategic transformation following the closing of a $110.7 million private investment in public equity transaction led by crypto-native investors and supported by the Berachain Foundation (the “BERA Private Placement”).

The BERA Private Placement provided the capital foundation for the BERA Strategy. In connection with the transaction:

● The Company received cash and stablecoin proceeds and BERA tokens.

● The Board was reconstituted to include digital asset and capital markets expertise.

● A Digital Assets Committee was formed to oversee treasury strategy and risk management.

● The Company adopted a capital allocation model centered on BERA accumulation and deployment.

This transformation shifted the Company’s principal activity from a predominately operating distribution infrastructure to managing a digital asset treasury strategy. As of December 31, 2025, the Company no longer maintained warehouse inventory and had transitioned the remaining commerce business to a drop-ship operating model.

The BERA Strategy

The Company has implemented a Treasury Policy that sets guidelines for digital asset diversification, liquidity, and risk management, and is overseen by the Board’s Digital Asset Committee. The Company’s digital asset treasury strategy, subject to these guidelines, consists of five core components:

1. Capital Deployment

The Company seeks to deploy capital raised through equity offerings and other transactions to acquire BERA through open market purchases or negotiated transactions. Capital deployment is governed by a disciplined strategy aimed at increasing long-term BERA-per-share.

2. Network Participation

The Company participates in Berachain’s Proof of Liquidity (“PoL”) consensus mechanism through staking and validator infrastructure. These activities may generate staking rewards denominated in BERA, which are variable and not guaranteed.

3. Governance Participation

Through ongoing participation in the Berachain ecosystem, the Company may earn Berachain Governance Token (“BGT”), a non-transferable governance token. BGT may provide governance influence within the ecosystem, subject to protocol rules. The Company does not control protocol governance and cannot assure that BGT will confer any anticipated influence or economic benefit.

4. Risk-Adjusted Yield Participation

The Company may selectively deploy BERA or stablecoins into decentralized finance (“DeFi”) protocols within the Berachain ecosystem, subject to internal risk controls. Such activities involve smart contract risk, liquidity risk, counterparty risk, and regulatory uncertainty.

5. Capital Allocation Discipline

The Company may pursue strategic initiatives aligned with its digital asset treasury model, including validator partnerships, infrastructure investments, and capital markets transactions intended to enhance net asset value per share. There can be no assurance that such initiatives will generate positive returns.

BERA and the Berachain Ecosystem

Berachain is a decentralized, open-source, EVM-compatible layer-1 blockchain engineered for high throughput, low latency, and full compatibility with Ethereum tooling, smart contracts, and infrastructure. Berachain utilizes a novel proof of liquidity consensus mechanism (“PoL”) that integrates network security with active liquidity provisioning. BERA is the native digital asset of the Berachain network and is used for transaction fees, staking, validator participation, and ecosystem incentives.

BERA is not legal tender, is not backed by any government or central bank, and may be subject to significant price volatility, regulatory uncertainty, and technological risk.

The Berachain ecosystem includes decentralized exchanges, lending protocols, liquidity pools, validator infrastructure providers, and governance mechanisms. The Company does not control the Berachain protocol, validator selection outcomes, or governance decisions. Protocol parameters, incentive structures, and token mechanics may change over time.

The Company’s strategy assumes continued ecosystem development and network adoption. There can be no assurance that the Berachain ecosystem will achieve sustained adoption or that the PoL mechanism will perform as intended.

Treasury Holdings and Liquidity

The Company’s liquidity is primarily derived from cash and cash equivalents on hand and is supplemented by digital asset holdings, which are subject to market volatility and liquidity constraints.

As of December 31, 2025, the Company’s treasury holdings consisted of BERA, cash, and U.S. dollar-denominated stablecoins.

Stablecoins that are readily convertible into U.S. dollars are classified as cash equivalents. Stablecoins deployed into DeFi protocols are not classified as cash equivalents.

In connection with the October 2025 PIPE transaction, the Company agreed to certain contractual transfer restrictions on a portion of its BERA holdings. As of December 31, 2025, while these contractual provisions were in place, no operational lockup mechanism had been implemented, and the Company retained the ability to utilize such BERA, including for staking activities. An operational lockup mechanism was implemented in mid-February 2026, with restrictions scheduled to expire on April 23, 2026. Management concluded that, as of December 31, 2025, these contractual provisions did not impact the fair value measurement or classification of the Company’s BERA holdings.

Legacy Distribution Business

The Company’s legacy business consists of lifestyle accessories and consumer products historically distributed through wholesale and direct-to-consumer channels.

Revenue from the legacy segment declined significantly during fiscal 2025 and is expected to represent a decreasing proportion of overall Company activity.

The legacy business is currently managed to preserve liquidity and fulfill contractual obligations. The Company does not currently prioritize expansion of this segment. As of December 31, 2025, the Company no longer maintained warehouse inventory and had transitioned the remaining business to a drop-ship operating model supported by its existing e-commerce platform, vapor.com.

Regulatory Considerations

The regulatory framework for digital assets remains evolving and uncertain. For a discussion of the risks related to digital assets and the Company’s operations, see “Risk Factors” in Section 1.A of this Form 10-K. The Company’s legacy business continues to be subject to federal, state, and local regulation governing consumer products, vaporization devices, and related accessories.

If an amendment to the Nasdaq continued listing standards approved pursuant to delegated authority takes effect following Commission review, our Class A common stock could be subject to delisting without a compliance or cure period, accompanied by an immediate suspension of trading.

On July 22, 2026, the staff of the SEC, acting pursuant to delegated authority, approved an amendment to the Nasdaq listing standards that would establish a minimum market value of listed securities requirement of $5.0 million for continued listing on the Nasdaq Capital Market. Petitions seeking review of the approval order by the Commission were subsequently filed and, on July 29, 2026, the approval order was stayed pursuant to Rule 431(e) of the SEC’s Rules of Practice pending review by the Commission. Absent the stay, our current market value of listed securities would be below the $5.0 million threshold under the amended rule, and we have not received a deficiency notice or Staff Delisting Determination as of the date of this Quarterly Report. The amended rule, as approved, does not provide a compliance or cure period. If the amended rule takes effect following Commission review and we do not then satisfy it, we could receive a Staff Delisting Determination following a period of 30 consecutive business days of noncompliance, which would be accompanied by an immediate suspension of trading in our Class A common stock, and a request for review by a Nasdaq Hearings Panel would not stay the suspension. Delisting would materially and adversely affect the liquidity and market price of our Class A common stock, our ability to issue securities, including under the ATM Offering, our ability to access the capital markets, and our visibility with investors, and could impair our ability to execute our digital asset treasury strategy.

Adverse outcomes in pending legal proceedings, including matters for which we have not recorded an accrual, could materially and adversely affect our liquidity and financial condition.

We are subject to various legal proceedings and claims arising in the ordinary course of business and otherwise, including the matters described in Note 5 to our condensed consolidated financial statements included elsewhere in this Quarterly Report. For certain of these matters, including the direct purchaser antitrust actions related to CCELL products, we have concluded that a loss is probable but are currently unable to reasonably estimate the amount or range of any such loss, and accordingly have not recorded an accrual with respect to these matters. If any of these matters is ultimately resolved against us for amounts that are material, whether through settlement, judgment, or otherwise, we may be required to make unbudgeted cash payments or incur other costs that could materially and adversely affect our liquidity, financial condition, and results of operations. Our assessment of these matters, including the probability and estimability of any loss, may change as these matters develop, and any resulting accrual or payment obligation could arise or become determinable with limited advance notice.

The Company’s legacy business operates through vapor.com as an asset-light drop-ship referral service. The Company holds no inventory and does not handle or manufacture physical goods; revenue is earned on a referral basis as orders are fulfilled directly by third-party suppliers.

Nasdaq Market Value of Listed Securities Requirement

On July 22, 2026, the staff of the SEC, acting pursuant to delegated authority, approved an amendment to the Nasdaq listing standards (Release No. 34-105971; SR-NASDAQ-2026-004) that would establish a minimum market value of listed securities requirement of $5.0 million for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(6). Petitions seeking review of the approval order by the Commission were subsequently filed and, on July 29, 2026, the approval order was stayed pursuant to Rule 431(e) of the SEC’s Rules of Practice, 17 C.F.R. 201.431(e), pending review by the Commission. As a result, the ultimate effectiveness and timing of the amended rule remain subject to Commission review.

Absent the stay, the Company’s current market value of listed securities would be below the $5.0 million threshold under the amended rule. The amended rule, as approved, does not provide a compliance or cure period, and, if the amended rule takes effect following Commission review and the Company does not then satisfy it, the Company could receive a Staff Delisting Determination following a period of 30 consecutive business days of noncompliance, which would be accompanied by an immediate suspension of trading in the Common Stock; a request for review by a Nasdaq Hearings Panel would not stay the suspension. As of the date of this Quarterly Report, the Company has not received a deficiency notice or Staff Delisting Determination from the Nasdaq staff. The Company is monitoring its market value of listed securities, the status of the Commission’s review, and communications from the Nasdaq staff, and is evaluating alternatives to increase its market value of listed securities. If the Common Stock were delisted from Nasdaq, the Company expects that the Common Stock would be quoted on an over-the-counter market, which would adversely affect the liquidity and market price of the Common Stock, the Company’s ability to issue securities, including under the ATM Offering, and the Company’s ability to access the capital markets.

In preparing the financial statements for the quarter ended June 30, 2026, and based on information available through the issuance date of the financial statements, management determined that a loss associated with certain direct purchaser antitrust actions was probable, but concluded that the amount or range of loss could not be reasonably estimated at this time, and accordingly no accrual was recorded. This determination reflects significant judgment, including consideration of the Board's settlement authorization, the assessment of litigation counsel, and other information available to management, and may change as the matter develops.

The following table presents gross margin for Wholesale and Distribution operations for the three months ended June 30, 2026 and 2025, respectively:

Beginning in October 2025, the Company transitioned to a digital asset treasury strategy following a $110.7 million private investment in public equity transaction, which included cash, stablecoins, and BERA, the principal token of the Berachain ecosystem. During the remainder of 2025 and the six months ended June 30, 2026, the Company deployed a portion of its cash and stablecoin balances to acquire additional BERA.

During the fourth quarter of 2025 and into the first and second quarters of 2026, digital asset markets experienced broad-based volatility and price declines. The Company’s BERA holdings were also impacted by market volatility. For the three months ended June 30, 2026, the Company recognized a fair value loss on digital assets of approximately $19.1 million. The Company also recognized approximately $0.3 million of staking and yield revenue during the period.

The following table presents gross margin for Digital Asset operations for the three months ended June 30, 2026 and 2025, respectively:

Gross margin for the Wholesale and Distribution Segment was approximately 39.0% for the three months ended June 30, 2026, compared to approximately 0.3% for the same period in 2025. The Wholesale and Distribution Segment reported net revenue of approximately $82 thousand and cost of sales of approximately $50 thousand for the three months ended June 30, 2026. The Digital Asset Segment reported staking and yield revenue of approximately $0.3 million for the three months ended June 30, 2026, presented below gross profit (loss) and excluded from gross margin. The Digital Asset Segment does not currently have associated cost of revenue. See “Note 11 — Segment Reporting” for additional information.

The gross loss in the Wholesale and Distribution Segment for the six months ended June 30, 2026 was primarily attributable to the liquidation of remaining legacy inventory at discounted prices during the first quarter of 2026, in connection with the Company’s continued transition to an asset-light, drop-ship operating model.

Depreciation and amortization expense was approximately $0.1 million for the three months ended June 30, 2026, compared to approximately $0.2 million for the same period in 2025, a decrease of approximately $0.1 million or 37.3%. The decrease was primarily attributable to the reduction in fixed assets associated with the reduced-scale legacy operations.

Impairment of investments

Impairment of investments was $1.8 million for the three months ended June 30, 2026, compared to $0 for the same period in 2025. During the three months ended June 30, 2026, the Company identified impairment indicators for its investment in Airgraft Inc. and recorded an impairment charge of approximately $1.8 million to reduce the carrying value of the investment to its estimated fair value. The Company did not identify any impairment or observable price changes requiring adjustment in the three months ended June 30, 2025.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

The following table presents operating results for the six months ended June 30, 2026 and 2025, respectively:

Wholesale and Distribution Operations

The Company continued to operate its wholesale and distribution business at a reduced scale during the six months ended June 30, 2026, consistent with its transition to an asset-light, drop-ship model, compared to the same period in 2025.

The following table presents gross margin for Wholesale and Distribution operations for the six months ended June 30, 2026 and 2025, respectively:

Digital Asset Operations

During the six months ended June 30, 2026, the Company deployed approximately $11.3 million in cash and stablecoin balances to acquire additional BERA as part of its digital asset treasury strategy. During the first half of 2026, digital asset markets continued to experience broad-based volatility and price declines. For the six months ended June 30, 2026, the Company recognized a fair value loss on digital assets of approximately $32.0 million and recognized approximately $0.7 million of staking and yield revenue.

The following table presents gross margin for Digital Asset operations for the six months ended June 30, 2026 and 2025, respectively:

Net Revenue

For the six months ended June 30, 2026, net revenue was approximately $0.1 million, compared to approximately $2.3 million for the same period in 2025, representing a decrease of approximately $2.1 million, or 95.2%. Net revenue in both periods consisted entirely of net sales from the Wholesale and Distribution Segment. Staking and yield revenue of approximately $0.7 million earned by the Digital Asset Segment is presented separately below gross profit (loss) in the condensed consolidated statements of operations and comprehensive loss and is not included in net revenue. See “Note 11 — Segment Reporting” for additional information.

Cost of Sales and Gross Margin

For the six months ended June 30, 2026, cost of sales was approximately $0.3 million, compared to approximately $1.5 million for the same period in 2025, representing a decrease of approximately $1.3 million, or 81.6%. Cost of sales for both periods related exclusively to the Wholesale and Distribution Segment and did not include costs associated with staking and yield revenue from the Digital Asset Segment.

The Wholesale and Distribution Segment generated a negative gross margin of approximately 158.7% for the six months ended June 30, 2026, compared to a positive gross margin of approximately 32.0% for the same period in 2025. The Wholesale and Distribution Segment reported net revenue of approximately $0.1 million and cost of sales of approximately $0.3 million for the six months ended June 30, 2026, compared to net revenue of approximately $2.3 million and cost of sales of approximately $1.5 million for the same period in 2025. The Digital Asset Segment reported staking and yield revenue of approximately $0.7 million for the six months ended June 30, 2026, presented below gross profit (loss) and excluded from gross margin. See “Note 11 — Segment Reporting” for additional information.

Salaries, Benefits and Payroll Taxes

Salaries, benefits and payroll taxes were approximately $2.2 million for the six months ended June 30, 2026, compared to approximately $2.4 million for the same period in 2025, a decrease of approximately $0.2 million, or 9.0%. The decrease was primarily attributable to lower legacy headcount, partially offset by approximately $0.8 million of personnel costs associated with the newly established Digital Asset Segment, which did not exist in the prior year comparative period.

Stock-based compensation – strategic advisory warrants

Stock-based compensation expense related to strategic advisory warrants was approximately $0.5 million for the six months ended June 30, 2026, compared to $0 for the same period in 2025. These awards are accounted for under ASC 718, and the related grant-date fair value is recognized over the applicable service periods. The expense is non-cash in nature and is presented separately within operating expenses.

General and Administrative Expenses

General and administrative expenses were approximately $6.5 million for the six months ended June 30, 2026, compared to approximately $4.8 million for the same period in 2025, an increase of approximately $1.8 million, or 36.7%. The increase was primarily attributable to approximately $3.7 million of costs incurred by the newly established Digital Asset Segment and approximately $1.8 million of higher legal, professional and advisory fees, together with higher bad debt expense and a loss on lease termination recognized in the first quarter of 2026. These increases were partially offset by lower rent expense following the wind-down of legacy facilities, lower public company costs, a gain on the disposal of fixed assets, and the non-recurrence of restructuring costs incurred in the prior-year period.

Depreciation and Amortization Expense