{"url_path":"/sec/snal/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors.**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1886894/0001493152-26-022718-index.html","accession_number":"0001493152-26-022718","cik":"0001886894","ticker":"SNAL","issuer_name":"Snail, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1886894/0001493152-26-022718-index.html","primary_entity_key":"0001886894","primary_entity_name":"Snail, Inc."},"word_count":4832,"has_tables":true,"body_markdown":"**Item\n1A. Risk Factors.**\n\n \n\nInvesting\nin our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risk factors\ndescribed below as well as under the “Risk Factors” section in Part I – Item 1A of our Annual Report on Form 10-K for\nthe year ended December 31, 2025 (the “2025 Annual Report”), and any other periodic or current report that we file with the\nSEC, together with all of the related financial statements and notes thereto. Other than as set forth below, we have not identified any\nmaterial changes to the risk factors previously disclosed in the Annual Report.\n\n \n\n**Risks\nRelated to Our Business and Industry**\n\n** **\n\n**Failure\nto meet Nasdaq’s continued listing requirements could result in the delisting of our Class common stock, negatively impact the\nprice of our Class A common stock and negatively impact our ability to raise additional capital.**\n\n \n\nOur\nClass A common stock is listed on the Nasdaq Stock Market (“Nasdaq”). If we fail to satisfy the continued listing requirements\nof The Nasdaq Capital Market such as the corporate governance requirements, the stockholder’s equity requirement or the minimum\nclosing bid price requirement, The Nasdaq Capital Market may take steps to de-list our Class A common stock.\n\n \n\nOn\nDecember 30, 2025, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq\nStock Market (“Nasdaq”) notifying us that, for thirty (30) consecutive business days from November 11, 2025 through December\n29, 2025, the bid price for our Class A common stock had closed below the minimum $1.00 per share requirement for continued inclusion\non the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq\nrules, we have a compliance period of 180 calendar days, or until June 29, 2026 (the “Compliance Date”), to regain compliance\nwith the Bid Price Rule. The Staff informed us that if, at any time before the Compliance Date, the bid price for our Class A common\nstock closed at $1.00 or more for a minimum of ten (10) consecutive business days (or such additional number of days as Nasdaq may require),\nthe Staff would provide written notification to us that it complied with the Bid Price Rule and the matter will be closed.\n\n \n\nWe\nintend to actively monitor the closing bid price of the Class A common stock and, as appropriate, will consider available options to\nregain compliance with the Minimum Bid Price Requirement, including considering seeking to effect a reverse stock split, if necessary.\nWhile we plan to review all available options, there can be no assurance that we will be able to regain compliance with the Minimum Bid\nPrice Requirement during the 180-calendar day compliance period. We will not be eligible for an extension of the compliance period. If\nat any time we do not satisfy the continued listing requirements of the Nasdaq, including compliance with the Bid Price Rule, within\nthe time frame granted by Nasdaq, our Class A common stock will be delisted from the Nasdaq. Any perception that we may not regain compliance\nor a delisting of our Class A common stock by Nasdaq could adversely affect our ability to attract new investors, decrease the liquidity\nof the outstanding shares of our Class A common stock, reduce the price at which such shares trade and increase the transaction costs\ninherent in trading such shares with overall negative effects for our stockholder. In addition, delisting of our Class A common stock\nfrom Nasdaq could deter broker-dealers from making a market in or otherwise seeking or generating interest in our Class A common stock,\nand might deter certain institutions and persons from investing in our Class A common stock. In addition, if our Class A common stock\nwas delisted, our Class A common stock would be subject to rules that impose additional sales practice requirements on broker-dealers\nwho sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from\neffecting transactions in our Class A common stock. This would adversely affect the ability of investors to trade our Class A common\nstock and would adversely affect the value of our Class A common stock. These factors could contribute to lower prices and larger spreads\nin the bid and ask prices for our Class A common stock.\n\n \n\nOn\nMarch 26, 2026, we received a deficiency letter (the “Letter”) from the Nasdaq Staff notifying us that we are not in compliance\nwith the requirement to maintain a minimum of $500,000 in net income from continuing operations in the most recently completed fiscal\nyear, or two of the last three fiscal years (the “Net Income Requirement”). In our Annual Reports on Form 10-K for the year\nended December 31, 2023, 2024, and 2025, we reported net income from continuing operations in 2024 and net loss from continuing operations\nin 2025 and 2023. Additionally, we did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing\nRules, which include (i) a market value of listed securities of at least $35 million or (ii) a minimum stockholders’ equity requirement\nof at least $2,500,000 (collectively with the Net Income Requirement, the “Nasdaq Requirements”).\n\n \n\nIn\naccordance with Nasdaq rules, we had 45 calendar days, or until May 11, 2026, to submit a plan to the Staff to regain compliance (the\n“Compliance Plan”) with the Nasdaq Requirements, which Compliance Plan we submitted within the time provided. If the Compliance\nPlan is accepted, Nasdaq can grant an extension of up to 180 calendar days from the date of the Letter for us to evidence compliance.\nExecuting the Compliance Plan may include, but is not limited to, pursuing potential equity and/or debt financing arrangements or similar\ntransactions. However, there is no assurance that the Compliance Plan will be accepted by Nasdaq, or even if it is accepted, that we\nwill ultimately be able to regain compliance with the Nasdaq Requirements within the allotted extension period, which may be less than\n180 calendar days.\n\n \n\n47\n\n \n\n \n\nNasdaq\nhas recently proposed a new rule change to (i) adopt Listing Rules 5450(a)(3) and 5550(a)(6) to require issuers listed on the Nasdaq\nGlobal and Capital Markets, respectively, to maintain a minimum Market Value of Listed Securities (as defined in Nasdaq Listing Rule\n5005(a)(23)) of at least $5 million for a period of thirty (30) consecutive business days, and (ii) amend Rule5810 to suspend trading\nand immediately delist from Nasdaq securities of issuers that do not satisfy the proposed new requirements, and Rule 5815 to set forth\nthe procedures for requesting a hearing before a Hearings Panel and the scope of the Panel’s discretion (collectively, the “Proposed\n$5 Million MVLS Rule”). As of the date of the filing of this Quarterly Report the market value of our listed securities is less\nthan $5 million.\n\n \n\nThe\nNational Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the\nsale of certain securities, which are referred to as “covered securities.” Because our Class A common stock is listed on\nNasdaq, our shares of Class A common stock are “covered securities”. Although the states are preempted from regulating the\nsale of covered securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and,\nif there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case.\nFurther, if we were to be delisted from Nasdaq, our shares of Class A common stock would cease to be recognized as covered securities\nand we would be subject to regulation in each state in which we offer our securities.\n\n \n\nAs\nmentioned above, in the event of a delisting, we would take actions to restore our compliance with the Nasdaq listing requirements, but\nwe can provide no assurance that any such action taken by us would allow our Class A common stock to become listed again, stabilize the\nmarket price or improve the liquidity of our Class A common stock or prevent our Class A common stock from meeting the mandatory Nasdaq\nlisting requirements.\n\n \n\n**We\nare dependent on the future success of our ARK franchise, and we must continue to publish “hit” titles or sequels to such\n“hit” titles in order to compete successfully in our industry.**\n\n \n\n*ARK*is a “hit” product and has historically accounted for a substantial portion of our revenue. The *ARK* franchise\ncontributed 85.7% of our net revenue for the three months ended March 31, 2026, and our five best-selling franchises (including *ARK*),\nwhich may change year over year, in the aggregate accounted for 97.8% of our net revenue for the three months ended March 31, 2026. If\nwe fail to continue to develop and sell new commercially successful “hit” titles or sequels to such “hit” titles\nor experience any delays in product releases or disruptions following the commercial release of our “hit” titles or their\nsequels, our revenue and profits may decrease substantially, and we may incur losses. In addition, competition in our industry is intense\nand a relatively small number of hit titles account for a large portion of total revenue in our industry. Hit products offered by our\ncompetitors may take a larger share of consumer spending than we anticipate, which could cause revenue generated from our products to\nfall below our expectations. If our competitors develop more successful products or services at lower price points or based on payment\nmodels perceived as offering better value, or if we do not continue to develop consistently high-quality and well-received products and\nservices, our revenue and profitability may decline.\n\n \n\n**We derive a significant portion of our revenue from a limited number of customers, and therefore are subject to customer\nconcentration and collectability risks.**\n\n \n\nWe had two customers as of March 31, 2026 and December 31, 2025, who accounted for approximately 71% and 73% of our\nconsolidated gross receivables, respectively. Among the two customers as of March 31, 2026, one accounted for 53% and another accounted\nfor 18%, of the consolidated gross receivables. Among the two customers as of December 31, 2025, one accounted for 56% and another accounted\nfor 17%, of the consolidated gross receivables outstanding. We had two customers in the three months ended March 31, 2026 and four customers\nas of March 31, 2025, that accounted for 62% and 11% and 44%, 14%, 14% and 12% of our net revenue, respectively. Management monitors customer\ncreditworthiness and payment trends on an ongoing basis; however, there can be no assurance that such measures will fully mitigate the\nrisks associated with customer concentration. We continue to evaluate opportunities to diversify our customer base, although there can\nbe no assurance that these efforts will be successful.\n\n \n\n**We\nrely on license agreements to publish certain games, including games in our ARK franchise. Failure to renew our existing content licenses\non favorable terms or at all or to obtain additional licenses would impair our ability to introduce new games, improvements or enhancements\nor to continue to offer our current games, which would materially harm our business, results of operations, financial condition and prospects.**\n\n \n\nWe\nlicense certain intellectual property rights from third parties, including related parties, and in the future, we may enter into additional\nagreements that provide us with licenses to valuable intellectual property rights or technology. In particular, we license intellectual\nproperty rights related to our *ARK* franchise from SDE, the parent company of Studio Wildcard, which is also an entity that is\nowned and controlled by the spouse of our Founder, Chief Executive Officer, Chief Strategy Officer and Chairman, Mr. Shi. We entered\ninto an original exclusive software license agreement with SDE in November 2015, for the rights to *ARK: Survival Evolved*, which\nARK1 License Agreement was subsequently amended and restated ARK1 License in December 2022 and further amended on multiple occasions.\nAs amended, the ARK1 License Agreement expires in 2035, with provisions for automatic renewal for three-year terms unless either party\nelects not to renew. The ARK 1 License Agreement may also be terminated early for material breach or insolvency by either party. The\nterms of our license agreements with SDE may differ from those terms which would be negotiated with independent parties. In addition,\nwe may have disputes with SDE that may impact our business, results of operations, financial condition and/or prospects. The *ARK*\nfranchise contributed 85.7% of our net revenue for the three months ended March 31, 2026. Even if our games that are dependent on third-party\nlicense agreements remain popular, any of our licensors could decide not to renew our existing license agreements or not to license additional\nintellectual property rights to us and instead license to our competitors or develop and publish its own games or other applications,\ncompeting with us in the marketplace. Moreover, many of our licensors develop games for other platforms and may have significant experience\nand development resources available to them should they decide to compete with us rather than license to us. For additional information\nconcerning our license arrangements, including licensing agreements with affiliated third parties, see Item 1 of Part I, “Business — Intellectual\nProperty,” included in the Annual Report.\n\n \n\n48\n\n \n\n \n\nFailure\nto maintain or renew our existing material licenses or to obtain additional licenses could impair our ability to introduce new games\nand new content or to continue to offer our current games, which could materially harm our business, results of operations and financial\ncondition. If we breach our obligations under existing or future licenses, we may be required to pay damages and our licensors may have\nthe right to terminate the license or change an exclusive license to a non-exclusive license. Termination of our license agreements by\na material licensor, such as SDE, would cause us to lose valuable rights, such as the rights to our *ARK* franchise, and would inhibit\nour ability to commercialize future games, which would harm our business, results of operations and financial condition. In addition,\ncertain intellectual property rights may be licensed to us on a non-exclusive basis. The owners of nonexclusively licensed intellectual\nproperty rights would be free to license such rights to third parties, including our competitors, on terms that may be superior to those\noffered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property rights\nthat have not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or\notherwise violating the licensor’s rights. In addition, the agreements under which we license intellectual property rights or technology\nfrom third parties and related parties are generally complex, and certain provisions in such agreements may be susceptible to multiple\ninterpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope\nof our rights to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations\nunder the relevant agreement. Any of the foregoing could harm our competitive position, business, financial condition, results of operations\nand prospects.\n\n \n\n**We\nrely on third-party platforms, such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, the\nApple App Store and the Google Play Store, to distribute our games and collect revenues generated on such\nplatforms and rely on third-party payment service providers to collect revenues generated on our own platforms.**\n\n \n\nOur games are primarily purchased, accessed and operated through Xbox Live\nand Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, and in the case of our mobile games, the Apple App Store\nand the Google Play Store. Substantially all of the games, DLC and in-game virtual items that we sell are purchased using the payment\nprocessing systems of these platforms and, for the three months ended March 31, 2026, 96.8% of our revenues were generated through Xbox\nLive and Game Pass, PlayStation Network, Steam, Epic Games Store, My Nintendo Store, the Apple App Store, and the Google Play Store. Consequently,\nour expansion and prospects depend on our continued relationships with these providers, and any other emerging platform providers that\nare widely adopted by our target players. In addition, having such a large portion of our total net revenues concentrated in a few counterparties\nreduces our negotiating leverage. We are subject to the standard terms and conditions that these platform providers have for game developers,\nwhich govern the content, promotion, distribution, operation of games and other applications on their platforms, as well as the terms\nof the payment processing services provided by the platforms, and which the platform providers can change unilaterally on short notice\nor without notice. As such, our business would be harmed if:\n\n \n\n \n●\nthe platform providers\ndiscontinue or limit our access to their platforms;\n\n \n \n \n\n \n●\ngovernments or private\nparties, such as internet providers, impose bandwidth restrictions, increase charges or restrict or prohibit access to those platforms;\n\n \n \n \n\n \n●\nthe platforms increase\nthe fees they charge us;\n\n \n \n \n\n \n●\nthe platforms modify their\nalgorithms, communication channels available to developers, respective terms of service or other policies;\n\n \n \n \n\n \n●\nthe platforms decline in\npopularity;\n\n \n \n \n\n \n●\nthe platforms adopt changes\nor updates to their technology that impede integration with other software systems or otherwise require us to modify our technology\nor update our games in order to ensure players can continue to access our games and content with ease;\n\n \n \n \n\n \n●\nthe platforms elect or\nare required to change how they label free-to-play games or take payment for in-game purchases;\n\n \n \n \n\n \n●\nthe platforms block or\nlimit access to the genres of games that we provide in any jurisdiction;\n\n \n \n \n\n \n●\nthe platform experiences\na bankruptcy or other form of insolvency event; or\n\n \n \n \n\n \n●\nwe are unable to comply\nwith the platform providers’ terms of service.\n\n \n\n49\n\n \n\n \n\nMoreover,\nif our platform providers do not perform their obligations in accordance with our platform agreements or otherwise meet our business\nrequirements, we could be adversely impacted. For example, in the past, some of these platform providers have experienced outages for\nshort periods of time, unexpectedly changed their terms or conditions, or experienced issues with their features that permit our players\nto purchase games or in-game virtual items. In addition, if we do not adhere to the terms and conditions of our platform providers, the\nplatform providers may take actions to limit the operations of, suspend or remove our games from the platform, and/or we may be exposed\nto liability or litigation. For example, in August 2020, Epic Games, Inc. (“Epic Games”), attempted to bypass Apple and Google’s\npayment systems for in-game purchases with an update that allowed users to make purchases directly through Epic Games in its game, Fortnite.\nApple and Google promptly removed Fortnite from their respective app stores, and Apple filed a lawsuit seeking injunctive relief to block\nthe use of Epic Games’ payment system and sought monetary damages to recover funds made while the updated version of Fortnite was\nactive.\n\n \n\nIf\nany such events described above occur on a short-term or long-term basis, or if these third-party platforms and online payment service\nproviders otherwise experience issues that impact the ability of players to download or access our games, access social features, or\nmake in-game purchases, it would have a material adverse effect on our brands and reputation, as well as our business, financial condition\nand results of operations.\n\n \n\n**Our\nbusiness is subject to our ability to develop commercially successful products for the current video game platforms, which may not generate\nimmediate or near-term revenues, and as a result, our business and operating results may be more volatile and difficult to predict during\nconsole transitions than during other times.**\n\n \n\nWe\nderive most of our revenue from publishing video games on third-party platform providers, such as Xbox Live and Game Pass,\nPlayStation Network, Steam, Epic Games Store, the Apple App Store, the Google Play Store and My Nintendo Store, which, in the aggregate, comprised 96.8% of our net revenue by product platform for the three months ended March 31, 2026.\nThe success of our business is subject to the continued popularity of these platforms and our ability to develop commercially\nsuccessful products for these platforms.\n\n \n\nHistorically,\nwhen next generation consoles are announced or introduced into the market, consumers have typically reduced their purchases of products\nfor prior-generation consoles in anticipation of purchasing a next-generation console and products for that console. During these periods,\nsales of the products we publish may decline until new platforms achieve wide consumer acceptance. Console transitions may have a comparable\nimpact on sales of DLC, amplifying the impact on our revenues. This decline may not be offset by increased sales of products for the\nnext-generation consoles. Moreover, it typically takes time before we have products available on next generation consoles. In addition,\nas console hardware moves through its life cycle, hardware manufacturers typically enact price reductions, and decreasing prices may\nput downward pressure on software prices. During console transitions, we may simultaneously incur costs both in continuing to develop\nand market new titles for prior-generation video game platforms, which may not sell at premium prices, and also in developing products\nfor next-generation platforms, which may not generate immediate or near-term revenues. As a result, our business and operating results\nmay be more volatile and difficult to predict during console transitions than during other times.\n\n \n\n**Tax\nlaw or tax rate changes could affect our effective tax rate and future profitability.**\n\n \n\nOur\neffective tax rate was 5% and 43% for the three month periods ended March 31, 2026 and 2025, respectively. In general, changes in applicable\nU.S. federal and state and foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive\neffect, could affect our tax expense. In addition, taxing authorities in many jurisdictions in which we operate may propose changes to\ntheir tax laws and regulations. These potential changes could have a material impact on our effective tax rate, long-term tax planning\nand financial results.\n\n \n\n**Tariffs\nmay cause cost increases and disruptions in technical R&D operations.**\n\n \n\nWe\nrely substantially on third-party providers located in China and Europe to support our technical research and development initiatives.\nAs a result, a significant portion of our R&D functions, including critical technical development and software engineering, are outsourced\ninternationally. Recent and potential future trade policy changes, including the imposition or extension of tariffs on imported goods\nand services from China and Europe pose a material risk to our cost structure. Such tariffs may increase the costs of components, services,\nand skilled labor sourced from these regions, potentially resulting in higher operating expenses and reduced profit margins. In addition,\ntariff-induced supply chain disruptions could delay project timelines and necessitate a re-evaluation of our global outsourcing strategy,\nthereby adversely affecting our competitive position and financial performance.\n\n \n\n50\n\n \n\n \n\n**We\nmay require additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of\nsubsequent financings may adversely impact our stockholders.**\n\n \n\nWe\nhave issued convertible notes to certain investors in the aggregate principal amount of $6.6 million, and we may seek to issue an additional\n$4.4 million in convertible notes to such investors in the future. In addition, on August 7, 2025, we entered into an At The Market Offering\nAgreement (the “Sales Agreement”) with H.C. Wainwright & Co. as sales agent to sell shares of our Class A common stock\nfrom time to time in an at the market offering (“the ATM Offering”). Pursuant to a prospectus supplement, dated August 7,\n2025, and accompanying base prospectus, we may offer and sell shares of our Class A Common Stock from time to time under the Sales Agreement\nhaving an aggregate offering price of up to $4,500,000 in the ATM Offering.\n\n \n\nEven\nif we issue an additional $4.4 million in convertible notes, we may still need additional capital to finance our future plans and working\ncapital needs, and we may have to raise funds through the issuance of equity or debt securities. Depending on the type and the terms\nof any financing we pursue, stockholders’ rights and the value of their investment in our Class A common stock could be reduced.\nA financing could involve one or more types of securities including Class A common stock, convertible debt, or warrants to acquire Class\nA common stock. These securities could be issued at or below the then prevailing market price for our Class A common stock. If the issuance\nof new securities results in diminished rights to holders of our Class A common stock, the market price of our Class A common stock could\nbe negatively impacted. The Securities Purchase Agreements applicable to the convertible notes prohibit us from entering into certain\nvariable rate transactions so long as the convertible notes remain outstanding and provide that. To the extent we require additional\nfunding, we will therefore be limited in the types of fundraising that we are able to pursue in compliance with these Securities Purchase\nAgreements so long as the convertible notes are outstanding.\n\n \n\nSubject\nto certain limitations in the sales agreement and compliance with applicable law, we have the discretion to deliver placement notices\nto the Sales Agent in the ATM Offering at any time throughout the term of the sales agreement. The number of shares of Class A common\nstock that are sold by the Sales Agent as our Sales Agent after we deliver a placement notice will fluctuate based on the market price\nof the Class A common stock and the trading volume of our Class A common stock during the sales period and limits we set with the Sales\nAgent. In addition, we may issue and sell shares of our Class A common stock having aggregate gross proceeds of up to $4,500,000 from\ntime to time in the ATM Offering. Because there is no minimum offering amount required as a condition of the ATM Offering, the actual\ntotal offering amount in such offering, commissions and proceeds to us, if any, are not determinable at this time. The amount of proceeds\nfrom the ATM Offering will depend upon the number of shares of our Class A common stock sold and the market price at which they are sold.\nThere can be no assurance that we will be able to sell any shares of our Class A common stock under or fully utilize the Sales Agreement\nwith the Sales Agent as a source of financing.\n\n \n\nShould\nthe financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences\ncould be a material adverse effect on our business, operating results, financial condition, and prospects.\n\n \n\n**Risks\nrelating to Stablecoins**\n\n \n\n**We\nmay require additional capital to support our strategic digital asset initiative, and implementing such initiative may subject us to\nvarious licensing requirements and significant compliance costs.**\n\n \n\nWe\nrecently announced our intention to explore a strategic digital asset initiative that includes the evaluation and feasibility of our\nown proprietary stablecoin backed by U.S. dollars.\n\n \n\nThe\nregulatory environment for stablecoins and digital assets is rapidly evolving in the United States and globally. There is a significant\nuncertainty regarding how federal and state regulators will apply existing laws, implement Guiding and Establishing National Innovation\nfor U.S. Stablecoins Act of 2025 (GENIUS Act of 2025) or adopt new regulations with respect to stablecoin issuances. Changes in laws,\nregulations, or interpretations could require us to modify or cease our strategic digital asset or stablecoin initiative, subject us\nto possible enforcement actions, or result in significant compliance costs.\n\n \n\nWe\nmay be required to seek additional capital to implement our strategic digital asset and stablecoin initiative as we may be required to\nbe licensed as a money transmitter, payment services provider, bank, financial institution, custodian, broker-dealer, exchange, or otherwise\nin the United States or other jurisdictions which could result in significant costs and have a negative impact on our business, operational\nresult and financial condition.\n\n \n\n**Any\nnegative publicity regarding stablecoins or the broader digital asset industry may have an outsized negative effect on consumer confidence\nin our proposed proprietary stablecoins.**\n\n \n\nAs\nin the case with other novel technology, compared to more established and well-known industries, any negative publicity regarding blockchain\ntechnology and digital assets companies could have an outsized negative effect on confidence in blockchain technology in general and\nour proposed proprietary stablecoins in particular. For example, since the inception of blockchain technology, there have been incidents\nof smart contract developers acting maliciously and misappropriating funds, and numerous digital assets businesses and platforms have\nbeen sued, investigated, or shut down due to fraud, illegal activities, the sale or issuance of unregistered securities, manipulative\npractices, business failure, and cyberattacks or security breaches. In addition, the energy usage and environmental impact of certain\nblockchains have attracted considerable attention, which could potentially create a negative consumer sentiment and perception of digital\nassets and delay a wider acceptance and use of our proposed proprietary stablecoins, whether or not our proposed stablecoins are available\non those blockchains.\n\n \n\n51"}